If you’re familiar with real estate investing, then you know just how important a location is. After all, the three most important factors in real estate are location, location, and location. Since an investment property’s location is of the utmost significance, it’s crucial to ask two questions: “Should I invest in real estate in this market?” and “Where exactly should I invest?” So, if you’re planning on buying a rental property in the Tennessee real estate market, we have the answers to these questions right here!
Related: Location, Location, Location: What Makes for the Best Place to Invest in Real Estate?
Tennessee Real Estate Market: State-Level Data
So, how is the Tennessee real estate market performing? The best way to answer this question is to analyze its long-term rental and short-term rental data. Here is Tennessee’s data, according to Mashvisor’s investment property calculator (Learn more about this tool here):
- Median Property Price: $292,170
- Price-to-Rent Ratio: 20
Traditional
- Rental Income: $1,211
- Cap Rate / Cash on Cash Return: 2%
Airbnb
- Rental Income: $2,207
- Cap Rate / Cash on Cash Return: 4%
- Airbnb Occupancy Rate: 53%
Two highlights catch the eye when analyzing Tennessee’s real estate data. The first is its affordability, with the typical Tennessee real estate investment listed as less than the US median. Most of the Tennessee houses for sale across the state are even lower than the median price. Even with such cheap real estate, renting out a property is more affordable for residents, as showcased by the price-to-rent ratio of 20. As a result, a Tennessee real estate investor will find enough demand for long-term rentals. The second highlight of the Tennessee real estate market is its profitability. Buying a rental property for traditional or Airbnb real estate investing yields high rental income and return on investment.
So, what are the best cities in the Tennessee real estate market? According to Mashvisor’s investment calculator, the best cities for traditional investing are Williston, Auburntown, and Erin. The best cities for Airbnb real estate investing are Knoxville and Nashville.
The Best Cities in the Tennessee Real Estate Market: Traditional Rental Strategy
Williston
- Median Property Price: $69,900
- Price-to-Rent Ratio: 5
- Traditional Rental Income: $1,190
- Traditional Cap Rate / Cash on Cash Return: 10%
Williston is a small town in the Tennessee real estate market, but it provides big investment opportunities for long-term rentals. The average Tennessee real estate investment in Williston is extremely profitable. The average rental income is about $1,200 and the average ROI is a whopping 10%. The median property price is one of the lowest in the state, at just $69,900. Williston maximizes on Tennessee’s top two features to be the best place to invest in real estate for traditional TN rentals.
Auburntown
- Median Property Price: $85,000
- Price-to-Rent Ratio: 6
- Traditional Rental Income: $1,180
- Traditional Cap Rate / Cash on Cash Return: 7%
Much like Williston, Auburntown is a top location for investing in long-term rentals in the Tennessee housing market. The town’s median property price is $85,000, well below the state and national median. Profitability is high in Auburntown, with an average rental income of $1,180 and ROI of 7%.
Erin
- Median Property Price: $126,225
- Price-to-Rent Ratio: 8
- Traditional Rental Income: $1,318
- Traditional Cap Rate / Cash on Cash Return: 7%
While more expensive than the median property prices of the previous two cities, Erin still offers an affordable investing experience in the Tennessee real estate market. Even with a higher property price, it is still two times lower than the state median. Its cost of living is affordable as well, being 17.60% lower than the US average. This helps to attract tenants and increase demand for rental property. Profitability is superb in Erin, with an average ROI of 8% and an average rental income of $1,318.
Related: Airbnb Investment or Traditional Investment: How to Determine the Optimal Rental Strategy
Is Airbnb Legal in Tennessee?
The Best Cities in the Tennessee Real Estate Market: Airbnb Rental Strategy
Knoxville
- Median Property Price: $280,519
- Price-to-Rent Ratio: 22
- Airbnb Rental Income: $2,272
- Airbnb Cap Rate / Cash on Cash Return: 5%
- Airbnb Occupancy Rate: 58%
Knoxville is arguably the best place to invest in real estate for Airbnb Tennessee. The city’s average Airbnb rental income is very high. Its Airbnb return on investment fares even better, as it is among the highest in the state. It is also among the most affordable of the larger cities in the Tennessee housing market. The city attracts tourists from all over the country. With locations such as the Great Smoky Mountains National Park, World’s Fair Park, and the Market Square, there will be no shortage of Airbnb guests to rent out to.
Nashville
- Median Property Price: $431,497
- Price-to-Rent Ratio: 21
- Airbnb Rental Income: $3,089
- Airbnb Cap Rate / Cash on Cash Return: 5%
- Airbnb Occupancy Rate: 59%
Nashville has been one of the best locations in the Tennessee real estate market for some time. This trend will continue, especially with its Airbnb market. Nashville’s tourism is top-notch in the state. The city is a huge hub for country music, Civil War history, and bachelor and bachelorette parties. These events draw thousands every year, and the success is reflected in the Airbnb Nashville statistics.
Related: Why Nashville Investment Properties Are Hot
To sum it all up in one sentence, it’s safe to say that the Tennessee real estate market is among the top-performing markets in the country. Profitability and affordability are the key highlights of the market, and these features are emphasized in its best cities.
If you’re ready to buy an investment property in Tennessee, or anywhere else in the US, click here to start your search.