Disclaimer: These are my own views and experiences, not financial or legal advice. Talk to your own advisors before investing.
A few investors have asked me some version of this: “You spent years in Dallas-Fort Worth. Why are you buying in East Tennessee?” The short answer is price, and it shows up clearly in the numbers.
What Dallas Looked Like
When we started in DFW after the 2008 crash, we could buy Class C multifamily for $20,000 to $30,000 per door, at cap rates around 9-10%.
By 2022, similar properties in the same submarkets were selling for around $200,000 per door, and they were ten years older. Cap rates had compressed to around 4% and lower. One 256-unit deal we underwrote in Irving priced at $211K per door, a 3.72% cap rate on a 1980 property. We couldn’t make the numbers work, so we passed.
When you pay a very low cap rate, you’re betting the market keeps rising. I’d rather buy for cash flow.
Where Things Stand Today
| North Texas | Knoxville | Jefferson City | |
|---|---|---|---|
| Price per door | Higher | Similar to North Texas a few years ago | $20-30K less than Knoxville |
| Cap rates | n/a | 6.5%-7.0% | 7.0%-8.0% |
| Rent growth (YoY) | Flat to down 1%-2% | Flat | Up about 1% |
| Vacancy | 10-15% | 7.6% | 5-6% |
In February 2026, we bought a 1982-1996 property for around $130K per door. That is well under what we saw in DFW in 2022, with cap rates that are roughly double.
Why the Gap Exists
- Fewer big buyers. Large funds mostly chase big properties in big metros. Smaller markets see less competition, so prices haven’t been bid up as far.
- Smaller deal sizes. A property like Maplecrest Square, our 34 units in Jefferson City, is too small for many institutional buyers. That leaves room for hands-on owners.
- Steadier demand. While North Texas vacancy sits at 10-15%, Jefferson City is at 5-6%. Three things drive that: the local job market remains strong, we’re close to Knoxville and Carson-Newman, and there is relatively little conventional housing in the area.
The Trade-offs
Small markets aren’t free money:
- Fewer exit buyers. There are fewer people to sell to, so plan your hold period carefully.
- Slower rent growth. Expect steady, about 1% a year, not spectacular.
- Local knowledge matters. Court schedules, contractors, and submarkets all work differently than in Dallas.
What This Means for Investors
If you’re a passive investor, don’t just chase the biggest market. Ask two questions:
- What am I paying relative to the income the property produces?
- Does the operator actually know this market?
We spent years learning Texas. In Tennessee, we’re doing it again by showing up locally, joining the Tennessee and Knoxville apartment associations, and managing on-site.
That gives us two views. The associations give us the macro view: laws, trends, and what other operators are seeing. Being on-site gives us the micro view: what our residents care about day in and day out. You need both to run a property well.