Are you wondering what a “good” cash flow looks like on a Soddy-Daisy single-family rental? You are not alone. With rates still affecting monthly payment math, you need clear targets and a simple way to underwrite deals quickly and confidently. In this guide, you’ll learn what cap rates and cash-on-cash returns to aim for, which local data to pull, and how to run a quick screen before you deep dive. Let’s dive in.
Why Soddy-Daisy
Soddy-Daisy sits just north of Chattanooga, which means you can tap a steady tenant pool driven by healthcare, manufacturing, and logistics jobs in the metro. Entry-level SFRs here are often more affordable than core neighborhoods, which can improve rent-to-price ratios. Secondary suburban markets like Soddy-Daisy typically require higher cap rates than primary metros. For stabilized entry-level properties in the Chattanooga area, reasonable targets often fall between 6 and 9 percent depending on condition and risk.
The two data streams you need
To price a deal and forecast rent correctly, you need parallel data sets.
- Sales comps and market stats for ZIP 37379 and Hamilton County. Pull the last 6 to 12 months of closed sales for 2 to 3 bedroom homes. Use Chattanooga Area Association of REALTORS/MLS, the Hamilton County Assessor/Trustee, and market pages that track price per square foot and days on market. Key fields: price, date, DOM, price per square foot, year built, lot size, and sale condition.
- Live rent comps for like-kind homes. Use Rentometer, major rental listing sites, HUD Fair Market Rents for Hamilton County, and feedback from local property managers. Track monthly rent, bed/bath mix, square footage, lease terms, included utilities, and pet policies.
When you compare rent comps, control for commute to Chattanooga, yard and parking, and school zones to keep apples-to-apples.
Build rent ranges
Create a rent comp set by both bedroom count and condition.
- Segment by condition: A (remodeled/move-in), B (good), C (needs work).
- Gather 8 to 12 comps per segment within a 1-mile radius when possible.
- Adjust for square footage, garage/driveway, outdoor space, and proximity to major employers.
Your goal is a realistic rent range, not a single number. Use the low end for underwriting and the high end for upside scenarios.
Quick screening rules
Use screens to cut time, then verify with a full pro forma.
- 1% Rule: Target monthly rent equal to 0.8 to 1.0 percent of purchase price in many secondary markets. This is a filter, not a decision tool.
- GRM: Price divided by annual gross rent. A practical screening band for entry-level SFRs is 8 to 16, with many secondary markets landing near 10 to 12.
- 50% Rule: Older or higher-maintenance homes can see operating expenses near 50 percent of gross rent. For newer or lower-maintenance, plan 40 to 50 percent. Always replace with local tax and insurance quotes.
Expense benchmarks
Your cash flow hinges on accurate operating expenses. Use these ranges as a starting point, then plug in local quotes.
- Property taxes: Pull the Hamilton County tax bill. Many investors budget between 0.5 and 1.5 percent of assessed value. Verify with the county trustee.
- Insurance: Landlord policies often range from $700 to $2,000 per year depending on age, coverage, and flood exposure. Get multiple quotes.
- Property management: 8 to 12 percent of collected rent for full service in the Chattanooga area. Volume or limited-service arrangements may be lower. Self-managing can reduce cost and add time and risk.
- Vacancy and turnover: Budget 5 to 8 percent in stable areas; higher in weaker submarkets or during downturns.
- Maintenance and repairs: 5 to 10 percent of gross rent, with $800 to $1,200 per year common for newer homes and $1,500 or more for older homes.
- Capital expenditures: 3 to 8 percent of gross rent for items like roofs, HVAC, and appliances. Increase for older properties.
- Utilities and HOA: Confirm lease norms. Tenants often pay water, electric, and garbage in SFRs. Include HOA fees if present.
- Other: Small annual amounts for legal, accounting, and marketing if not covered in management.
Typical operating expense ratios:
- Clean, low-maintenance, owner-managed: roughly 30 to 40 percent of gross rent.
- Professionally managed, average age: roughly 40 to 50 percent.
- Older or high-tax property: 50 to 60 percent or more.
Cap rate and CoC targets
Know the two return metrics you will use most.
- Cap rate: NOI divided by purchase price. Use this first to value the asset without financing.
- Cash-on-cash: Annual pre-tax cash flow divided by cash invested. This reflects your leveraged return.
Benchmark guidance for Soddy-Daisy entry-level SFRs:
- Conservative or core, low-risk: roughly 5.0 to 6.5 percent cap rate.
- Typical entry buy-and-hold: roughly 6.0 to 8.5 percent cap rate.
- Value-add or higher risk: 8.5 percent and up to compensate for risk.
With 20 to 25 percent down at recent mortgage rates, many investors aim for about 6 to 12 percent cash-on-cash in year one for buy-and-hold. If rate costs are high, prioritize higher cap rate assets or lower purchase multiples.
If your cap rate is below your mortgage rate, expect thin or negative cash flow unless you increase down payment or forecast rent growth.
Illustrative underwriting example
The numbers below are examples to show how rent, price, and expenses combine to produce returns. Replace all figures with actual Soddy-Daisy comps, Hamilton County taxes, and insurance quotes before acting.
Scenario A: Lower price, solid yield (illustrative)
| Line item | Amount |
|---|---|
| Purchase price | $160,000 |
| Monthly market rent | $1,300 |
| Annual gross rent | $15,600 |
| Operating expenses (45% of gross) | $7,020 |
| Estimated NOI | $8,580 |
| Cap rate (NOI/price) | 5.36% |
Debt service will determine actual cash flow and cash-on-cash return.
Scenario B: Mid-price, average yield (illustrative)
- Purchase price: $230,000
- Monthly rent: $1,600
- Annual gross rent: $19,200
- Expenses at 45 percent: NOI about $10,560
- Cap rate: about 4.6 percent
Use these to see how rent-to-price and expense ratio drive the cap rate. Then model several loan scenarios to see year-one cash flow.
Local drivers and risks
Before you finalize your buy box, weigh the local context.
- Demand drivers: Proximity to Chattanooga’s healthcare, manufacturing, and logistics hubs supports the tenant pool. Relative affordability versus core neighborhoods can improve rent-to-price.
- Risks: Small-city markets can feel single-employer changes more quickly. Some micro-neighborhoods may experience higher vacancy or maintenance. Always check FEMA flood maps and confirm drainage on a parcel level.
- Tenant profile: Expect working households and service professionals who value commute access to Chattanooga. Validate with local property managers.
Underwriting checklist
Follow a simple, repeatable process for every property.
- Pull the property’s recorded sales history and the current Hamilton County tax bill.
- Collect 8 to 12 rent comps within about 1 mile with the same bed/bath and similar condition.
- Get landlord insurance quotes and note HOA fees if any.
- Scope immediate repairs or rehab if buying below market or as-is.
- Build your monthly operating schedule:
- Market rent
- Vacancy allowance at 5 to 8 percent
- Management at 8 to 10 percent if using a manager
- Maintenance at 5 to 10 percent of rent
- Capex reserves at 3 to 7 percent
- Taxes, insurance, utilities, HOA
- Calculate NOI and cap rate.
- Model financing options and compute debt service and cash-on-cash return.
- Run sensitivities: rent down 5 to 10 percent, maintenance up 10 to 20 percent, mortgage rate up 100 to 200 basis points.
- Decide accept or reject thresholds and stick to them.
Set your buy box
Put your targets in writing so you can act quickly when a good listing hits the market.
- Cap rate filter: Many Soddy-Daisy buy-and-hold investors pass on stabilized deals below about 6 percent unless a value-add plan exists.
- Cash-on-cash: Aim near 6 to 12 percent in year one with 20 to 25 percent down, adjusting for loan terms.
- Expense ratio: Expect 40 to 50 percent for professionally managed, average-age SFRs, and higher for older homes. Confirm taxes and insurance from local sources.
- GRM: Keep an eye on 10 to 12 as a practical screen in secondary markets. Lower is better for buyers.
Revisit your buy box quarterly as rates, taxes, and rents move.
Partner with Grace Frank
If you want investor-grade underwriting with neighborhood-level insight, you are in the right place. Our team pairs 25 years of Greater Chattanooga experience with institutional-level acquisitions and dispositions, including 1031 exchanges and portfolio transactions. We can help you source rent comps, line up local quotes, and structure a clean pro forma so you can move with confidence. Start a conversation with Grace Frank to refine your Soddy-Daisy buy box or evaluate a property today.
FAQs
What cap rate should you target for Soddy-Daisy SFRs?
- For entry-level, stabilized homes, many investors underwrite roughly 6 to 8.5 percent, with 5.0 to 6.5 percent for lower-risk core homes and 8.5 percent plus for value-add.
What is a good first-year cash-on-cash return in this market?
- With 20 to 25 percent down at recent rates, many buyers aim near 6 to 12 percent in year one, adjusting for loan terms and property condition.
How do you find accurate rent comps in ZIP 37379?
- Pull 30 to 90 days of listings and recent leases for similar bed/bath homes and condition, and confirm with local property managers and HUD Fair Market Rents.
What operating expense ratio should you plan for?
- Professionally managed, average-age SFRs often run around 40 to 50 percent of gross rent, higher for older homes or higher-tax areas and lower for owner-operators.
Do tenants usually pay utilities for single-family homes?
- In many SFR leases, tenants pay water, electric, and garbage; confirm local norms and include any landlord-paid utilities in your underwriting.
