Since you are visiting our website, you must be thinking about investing in real estate. In this case, you should definitely give some thought to Nashville investment properties. Below we tell you why.
One of the most important factors driving the real estate market as well as real estate investments in any location is the economy. Nashville’s economy is doing quite well. Indeed, Forbes ranked Nashville 4th among all 421 metropolitan areas in the Best Big Cities for Jobs 2016 ranking, with job growth of 3.4% in 2015. Moreover, Credit Sesame, a personal finance website, identified the top 10 18-hour cities, and Nashville emerged as #5. This means that Nashville offers similar lifestyle and opportunities as the 24-hour cities, like New York and San Francisco, but remains more affordable and even more enjoyable. The 2016 Kauffmann Index ranked Nashville 5th among metro areas for entrepreneurship growth, 4 positions up from 2015, which demonstrates the further potential of Nashville. The Index placed Nashville as the metro area with the highest density of high-growth companies in two industries: business products and services and health.
All this means that Nashville’s economy is stable and growing, which is one of the major forces pulling in people. A strong labor market and a stable industry affect both traditional and Airbnb rental positively. This suggests that real estate investors should be looking at Nashville investment properties.
Nashville’s Real Estate Market
You should take advantage of Nashville investment properties now because Nashville’s real estate market is still considered a secondary one, like Austin, Memphis, San Diego, Minneapolis, Portland, and San Antonio. The sharp growth in secondary markets as 24-hour cities are getting too overcrowded was one of the dominant 2016 real estate market trends, which is likely to continue in 2017 and beyond. While cities in such markets have a strong urban appeal, they benefit from lower living costs, especially in real estate. The Emerging Trends in Real Estate: United States and Canada 2016 report, produced by PricewaterhouseCoopers in cooperation with Urban Land Institute, positioned Nashville as #7 among US markets to watch based on overall real estate perspectives. Importantly, Nashville is ranked before San Francisco, Los Angeles, Boston, New York, San Diego, and Chicago. With regards to Nashville investment properties, the report highlights that now is the time to buy rather than sell or hold. Nashville made it into top 10 for the first time in 2016 in this annual report, which means that it will be one of the hot locations for income properties in the upcoming period. So hurry up and explore Nashville investment properties now before prices become unaffordable as a result of the increase in demand.
Related: 8 Real Estate Market Trends in 2016
Data on Nashville Investment Properties
Now let’s look at a Mashvisor summary of the most important numbers for the Nashville real estate market.
- Median Property Price: $376,000
- Traditional Monthly Rental Income: $1,620
- Airbnb Monthly Rental Income: $3,240
- Traditional Cash on Cash Return: 2.5%
- Airbnb Cash on Cash Return: 9.9%
- Traditional Cap Rate: 5.7%
- Airbnb Cap Rate: 13.6%
Mashvisor data confirms that Nashville investment properties are highly affordable, compared to the national level, with a median property price of less than $400,000. All three major indicators of income properties’ profitability– rental income, cash on cash (CoC) return, and cap rate – show that Aribnb is the preferred rental strategy in Nashville. The monthly rental income you can expect from Airbnb is double the amount for traditional renting. The CoC return and cap rate – 9.9% and 13.6%, respectively – associated with Airbnb make Airbnb Nashville highly recommended, while traditional is much less profitable with a CoC return of 2.5% and a cap rate of 5.7%.
Related: Rental Income from Airbnb
Legislation on Airbnb Nashville Investment Properties
Since Airbnb is the optimal strategy for Nashville investment properties, it is important to take a look at the Airbnb legislation in the city. As in most thriving Airbnb destinations – in September Nashville had over 3,000 active listings on Airbnb – Nashville has experienced a push to limit short-term rentals. Citing fear from too many strangers coming to the neighborhoods as the main reason, in 2015 the Metropolitan Council issued new legislation to reduce Airbnb activity. The new restrictions required a maximum of 3% of all homes in any single neighborhood to be offered for Airbnb and limiting the number of guests who can stay in a property in addition to obliging short-term renters to obtain permits from the city government and pay hotel taxes. Needless to say, such measures were expected to have a negative impact on the perspectives for Nashville investment properties though it was hard to estimate the size of this impact.
The good news for short-term renters looking for Nashville investment properties is that a few weeks ago a judge ruled that the restrictions imposed by the Metro Council were unconstitutional, thus giving back the freedom to rental property owners. This happened in a lawsuit filed by the Beacon Center of Tennessee – a non-profit think tank – in August 2015 on behalf of P.J. and Rachel Anderson. As a result of the new legislation of 2015, the family was no longer able to rent out their home on Airbnb to supplement their income while traveling, so they decided to file a suit against the Metro Council and actually won it.
Top 5 Nashville Investment Properties Neighborhoods
Now it’s time to take a look at the top neighborhoods for Nashville investment properties. The top factor in our ranking is profitability as predicted by Mashvisor-calculated CoC return and cap rate. As the data below shows, the optimal strategy in all Nashville neighborhoods is Airbnb.
1. Barclay Drive
- Median Property Price: $315,000
- Traditional Monthly Rental Income: $1,550
- Airbnb Monthly Rental Income: $5,410
- Traditional Cash on Cash Return: 2.3%
- Airbnb Cash on Cash Return: 14.5%
- Traditional Cap Rate: 5.4%
- Airbnb Cap Rate: 18.3%
- Airbnb Occupancy Rate: 62.3%
Mashvisor data shows that Barclay Drive is the top neighborhood for Nashville investment properties. While the median property price is slightly below the average for Nashville, the expected rental income, CoC return, and cap rate are significantly higher. The Airbnb CoC return and cap rate reach 14.5% and 18.3%, respectively. So, as a real estate investor, you should look into Barclay Drive for your next income property.
- Median Property Price: $387,000
- Traditional Monthly Rental Income: $1,180
- Airbnb Monthly Rental Income: $4,600
- Traditional Cash on Cash Return: 0.7%
- Airbnb Cash on Cash Return: 10.4%
- Traditional Cap Rate: 3.6%
- Airbnb Cap Rate: 13.9%
- Airbnb Occupancy Rate: 59.4%
According to Mashvisor data, Eastwood is the second most profitable neighborhood for Airbnb Nashville investment properties, while traditional rentals are not recommended here. You would like to know that earlier in the year Redfin, a real estate broker, named Eastwood the second hottest neighborhood in the US, after Chicago’s Ukrainian Village. Eastwood is attracting millennials and real investors alike, who buy income properties for short rentals. In addition to being an attraction itself, the area is only a short distance from downtown.
3. Paragon Mills
- Median Property Price: $160,000
- Traditional Monthly Rental Income: $1,380
- Airbnb Monthly Rental Income: $1,540
- Traditional Cash on Cash Return: 6.0%
- Airbnb Cash on Cash Return: 7.2%
- Traditional Cap Rate: 10.4%
- Airbnb Cap Rate: 11.5%
- Airbnb Occupancy Rate: 52.7%
Paragon Mills is another top neighborhood for real estate investing in Nashville. Most properties in this urban neighborhood are small to medium sized single-family homes in addition to apartment complexes. The population is a mix of home-owners and renters.
- Median Property Price: $525,000
- Traditional Monthly Rental Income: $2,650
- Airbnb Monthly Rental Income: $4,470
- Traditional Cash on Cash Return: 3.2%
- Airbnb Cash on Cash Return: 7.0%
- Traditional Cap Rate: 6.1%
- Airbnb Cap Rate: 10.1%
- Airbnb Occupancy Rate: 56.4%
Real estate properties in Germantown are more expensive than in most other parts of Nashville but still offer good profitability with 7.0% Airbnb CoC return and 10.1% Airbnb cap rate. The neighborhood is mostly inhibited by white-collar professionals working in management, sales, business, and finance.
5. Music Row
- Median Property Price: $399,000
- Traditional Monthly Rental Income: $1,730
- Airbnb Monthly Rental Income: $3,070
- Traditional Cash on Cash Return: 1.7%
- Airbnb Cash on Cash Return: 5.0%
- Traditional Cap Rate: 4.6%
- Airbnb Cap Rate: 8.1%
- Airbnb Occupancy Rate: 65.6%
Music Row is a neighborhood located to the southwest of downtown, which hosts hundreds of businesses in country music, gospel music, and Contemporary Christian music. No surprise, this is considered the heart of Nashville’s entertainment industry. Airbnb can bring reasonable profits in this neighborhood.
Now you know the reasons why you should think about buying one of Nashville investment properties and the neighborhoods on which you should focus. When searching for your next income property in Nashville and beyond, don’t forget to check out Mashvisor. It will provide you with ready-to-use information on numerous available properties and allow you to compare between properties, neighborhoods, and cities.