Chattanooga, TN Cap Rate: 4.07% — Rental Property Analysis
Chattanooga is a mid-range market in the South with a mid-sized city of 185,881. At a 4.07% estimated cap rate, this is a moderate market where rents of $1,500/mo lag behind home prices. With a median home price of $315,000 and steady population growth supports long-term rental demand, Chattanooga offers opportunities for investors who source deals carefully.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
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Moderate — source deals carefully
Based on $315,000 median price and $1,500/mo median rent
Est. Cap Rate
4.07%
1% Rule
0.48%
Fails
GRM
17.5x
Price / Income
6.5x
Market Data
Median Home Price$315,000
Median Monthly Rent$1,500
Property Tax Rate0.54%
Population185,881
Population Growth1% / yr
Median Household Income$48,200
Vacancy Rate5.4%
Annual Appreciation3.3%
2026 Market Update: Chattanooga
Chattanooga's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $315,000, the $1,500/mo rent produces only $1,067/mo in NOI. Investors here need to target below-median properties or pursue value-add strategies to make the numbers work.
At current rates, a 20% down conventional loan ($63K at 7%) would result in approximately $-609/mo cash flow — negative at median prices. Larger down payments, seller financing, or buying 15–25% below median are strategies to turn the numbers positive.
The 17.5x gross rent multiplier and 5.4% vacancy rate position Chattanooga as a balanced market. With annual appreciation at 3.3%, total returns (cash flow + equity growth) run approximately 7.4% before financing leverage.
Cap Rate Calculator — Chattanooga
Pre-filled with Chattanooga medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.54% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
3.44%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$10,824
net operating income
Gross Rent Multiplier
17.5x
High (>15)
1% Rule
0.48%
✗ Fails
Monthly Cash Flow
$902
before debt service
Annual Breakdown
Gross Rental Income$18,000
Less Vacancy−$972
Effective Income$17,028
Less Operating Expenses−$6,204
Net Operating Income$10,824
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Factor in financing to see your actual return on invested capital in Chattanooga.
$
$78,750
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-9.12%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$88,200
$78,750 down + $9,450 closing
Monthly Mortgage
$1,540
on $236K loan
Monthly Cash Flow
$-670
after all expenses
Annual Cash Flow
$-8,042
before taxes
Cash Flow Breakdown
Monthly Rent$1,500
Less Expenses−$630
Less Mortgage−$1,540
Monthly Cash Flow$-670
Is Chattanooga a Good Place to Invest in Rental Property?
Chattanooga, TN has a population of 185,881 and has been growing at 1% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $315,000 paired with median rents of $1,500/mo produces an estimated cap rate of 4.07%.
Property taxes at 0.54% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 5.4% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 6.5x, homes cost about 6.5 times the local median income of $48,200. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. Home values have appreciated at roughly 3.3% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Chattanooga presents moderate opportunities. Cap rates near 4.07% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.
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