The Nashville real estate market presents some of the best indicators for a hot market. From a higher housing demand than supply to property value appreciation, it’s clear why Nashville has been ranked one of the best places to invest in a rental property.
For starters, Nashville is the capital city of Tennessee and the state’s most populous city. Its strategic position within the country makes it a hub of shipping and manufacturing. Many people refer to Nashville as “Music City” due to the significant role it plays in the music scene. Its tourism and business potential translate to high housing and rental demand—and that presents an opportunity for the smart investor.
Keep reading for in-depth insight into why Nashville should be on every investor's radar.
Promising Economic Indicators
Employment is one of the most vital indicators of an economy. A low unemployment rate means the market’s population can afford to rent your property.
Nashville’s economy is one of the fastest-growing economies in the US. The high employment rate has been brought about by business expansion and relocations. Consequently, there’s a solid in-migration to the city as it continues to absorb residents from nearby states.
As of October 2021, the unemployment rate in Nashville was down to 2.8%. The city’s population mainly works in information, leisure and hospitality, professional and business services, and financial activities. These sectors have experienced the highest percentage of growth.
As the employment rate grew, the median household incomes increased by 6.6% over the same period. A growing median household income suggests potentially higher rental rates.
Booming Real Estate Market
The most recent real estate trends show that Nashville is one of the ten fastest-growing markets in the country. Though the population growth and employment rates are on an upward trajectory, the housing in Nashville remains relatively affordable compared to other top U.S. cities.
Generally speaking, buyers get more property for the price in Nashville than they would in coastal cities like Los Angeles and New York City. Investors looking to expand their portfolios can own more properties without taking on too much debt.
As we’ve already mentioned, the demand for housing in this city is greater than the supply. This explains where many investors have been warming up to this market. Also, home prices in Nashville have grown by 22.3% in the past year.
Let’s look at some of Nashville's rental property valuation statistics from Mashvisor, a real estate data analytics company:
- Median Property Price: $782,199
- Average Price per Square Foot: $465
- Days on Market: 30
- Average Monthly Rental Income for Long-Term Rentals: $1,935
- Average Cash on Cash Return for Long-Term Rentals: 1.16%
- Average Cap Rate for Long-Term Rentals: 1.18%
- Average Monthly Airbnb Rental Income: $4,431
- Average Airbnb Cash on Cash Return: 3.72%
- Average Airbnb Cap Rate: 3.78%
- Average Airbnb Daily Rate: $262
- Average Airbnb Occupancy Rate: 56%
Looking at the data above, you can see that the return on investment indicators—cash on cash return and cap rate—indicate that Airbnbs in Nashville have a higher return on investment than traditional rentals. The monthly Airbnb Nashville rental income is more than double the monthly traditional rental income.
Increasing Population of Renters
Nashville is among the top 10 cities experiencing the highest rate of inbound growth. This has resulted from residents migrating from other overpopulated and expensive cities to this affordable city.
One of the major hotspots for rental properties in Nashville is the downtown area along the Cumberland River. Most of the properties in Downtown Nashville are rented. The rest of the older commercial buildings are repurposed into shopping and nightlife spots.
As of December 2021, the median rent for a 3-bedroom property in Nashville was $1,985 per month, increasing by 10% from the previous year. 72% of the Nashville investment property rentals go for $1,001 to $2,000 per month.
With an average rent of $1,067 per month, the most affordable neighborhoods in Nashville include Village By The Creek, Hadley Park, and Glengarry. On the other hand, the most expensive neighborhoods are Historic Waverly, Woodland in Waverly, and Bellmont-Hillsboro, where the average rent can go as high as $3,825 per month.
Desirable Culture & Quality of Life
Nashville isn’t ranked among the fastest-growing cities and most-preferred places to retire for nothing. The quality of life in the city attracts those coming to work, start a family, or retire.
Nashville is known as “Music City” or the “Country Music Capital,” with over 180 music studios and 5,000 working musicians. Residents can experience different genres of live music every night of the week.
There’s more to the city than just music. The city hosts unique architecture and museums. The metro area has a vast park system, pro sports teams, and various famous attractions.
The weather in Nashville isn’t as extreme as in some cities. Residents experience mild winters and warm summers.
Robust Student Population
If you’re an investor considering targeting the student market, the Nashville real estate market provides you with the perfect environment. Local universities in the city include Belmont University, Tennessee State University, Aquinas College, Lipscomb University, and Vanderbilt University. Other institutions include Welch College, Trevecca Nazarene University, American Baptist College, Nashville State Community College, and Meharry College.
The presence of many public and private universities and colleges presents an excellent market for student and academic professionals' housing.
Ready to Invest in Nashville Real Estate?
It’s evident why every investor should invest in the Nashville real estate market, and your Nashville realtor will be a great resource for investment information. It has significant economic indicators, such as a low unemployment rate. The real estate market has been growing while properties remain relatively affordable. Nashville also has a high demand for housing which isn’t met by the supply, creating an excellent opportunity for investors.
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