Nashville is the capital and most populous city of Tennessee. Nashville enjoys an ethnically diverse population of 690,000 residents, which makes it the 24th largest city in the US. The sizeable population combined with the fact that 48% of the residents rent rather than own a home is a good indicator for those considering investing in the Nashville real estate market, especially when it comes to traditional rental properties.
Located in northern Middle Tennessee, Nashville features a strong, diverse economy. This is a very positive indicator for real estate investors regardless of the strategy they are interested in. Indeed, POLICOM ranked Nashville as the strongest Metropolitan area economy in the US as a result of the consistent long-term growth. The largest industry in the Athens of the South is health care as the city hosts over 300 health care companies. The automotive industry has been gaining importance in recent years. Moreover, nicknamed “Music City”, Nashville is the second largest music recording and production center (after New York City) and is considered the home of country music. Other major industries include finance, insurance, and publishing. The diverse economy is another positive signal for Nashville real estate investors.
Nashville is a busy tourist destination with over 14 million visitors per year. The main attractions comprise of country music-related events, performances, and buildings as well as historic sites and arts centers and museums. Furthermore, Nashville is home to a full-scale replica of the Parthenon, which is one of the reasons why the city is often called the Athens of the South.
The Nashville real estate market is a strong one with a positive outlook. PWC named Nashville as the 5th most important US Market to Watch in terms of overall real estate perspectives. Some of the factors creating the favorable conditions in the Nashville housing market include the fundamental demographic and economic shifts as well as the relocation of a major financial services company there.
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Nashville has witnessed strong real estate appreciation in recent years. According to data from NeighborhoodScout, Nashville property values have increased by 114% since 2000, which amounts to an average annual growth of 4.1%. This exceeds significantly the rate of appreciation in both the State of Tennessee and the US housing market as a whole. In 2017, the Nashville real estate market experienced the 3rd largest increase in home values nationwide at a rate of 12.5%. Zillow reported a growth in property prices of 8.2% in 2018, which is still very high. ATTOM Data Solutions contributes this strong natural appreciation mainly to the migration of people from high-cost housing markets.
In 2018, the Nashville real estate property inventory started slowing catching up with demand. As a result, home values are increasing at a slower pace, and the Nashville real estate market is starting to favor buyers rather than sellers.
The fact that Nashville is turning into a buyer’s market combined with the affordable property prices makes Music City one of the best locations for real estate investing in 2019 and beyond.
The Airbnb rentals business has been booming in Nashville, as a result of the city’s position as a hot tourist destination. The local authorities have been fighting this phenomenon in recent years, issuing a number of different regulations and restrictions. In January 2018 the Nashville Metro Council approved a bill to phase out non-owner occupied short-term rentals from residential zoned neighborhoods in the next three years. The ban applied mostly to single-family homes and duplexes. Meanwhile, owner-occupied single-family homes, housing units in multi-family properties, and rentals in commercial zones were not affected. Subsequently the discussion reached the House and the Senate, where two different bills were passed. Eventually a conference committee passed a final legislation according to which existing Nashville Airbnb rentals can continue to operate. However, a permit to operate as a short-term rental cannot be passed on when selling a property in the Nashville real estate market.
Furthermore, short-term rentals in the city are tightly regulated. Operating an Airbnb Nashville rental property requires a permit which needs some detailed documentation and which must be renewed every year. A violation can lead to a monetary fine as well as a revocation of the permit. In addition, Nashville Airbnb hosts are required to collect and remit hotel occupancy tax to the State Finance Department no later than the 20th day of the month following collection.