As the capital of Tennessee, Nashville is known for its rich music history, vibrant downtown, and friendly southern hospitality. The city is home to numerous music venues, museums, and historical sites, making it a popular tourist destination. Yet, for investors, the question remains—is the burgeoning city a good place to invest in real estate?
In recent years, Nashville has seen significant growth in its population and job market. At the start of 2023, the current metro area population measured 1,315,000, a 1.62% rise from 2022. In fact, for the past four years, Nashville had an average of 1.8% population growth year-over-year.
Aside from that, Music City has also become a hub for various industries, including healthcare, music, and technology. This growth has led to an increase in demand for housing, making it an attractive market for rental property investors.
In this article, let’s take a deeper look at the city’s current rental market and the pros of investing in rentals in the area. This will help you determine if Nashville is a good place to invest in real estate.
Nashville’s Rental Market
Nashville is currently experiencing high demand, low vacancy rates, and rising prices on rental units. According to Zillow, the median rent price in Nashville is $2,200, which is an increase of 12.8% over the past year.
The average rental prices for different types of properties in Nashville are as follows:
- Studio unit: $1,691
- 1-bedroom unit: $1,802
- 2-bedroom unit: $1,985
- 3-bedroom unit: $2,220
- 4-bedroom unit: $2,885
Among the neighborhoods with the highest rental prices found in the city at a cumulative average of $2,454 are the following:
- 8th Avenue South
- Demonbreun Hill
- Elliston Place
- Marathon Village
- The Gulch
- Watkins Park
Whereas, the following are the most affordable neighborhoods with a cumulative average rental price of $1,366 per month:
- Cobblestone Corners
- Gra-Mar Acres
When compared to other cities in the region, Nashville’s rental market is relatively expensive. For example, the average rental price in Memphis, the second largest city in Tennessee, is $1,063 and $1,324 in nearby Louisville. Nashville has a stronger job market and a growing population, which account for the higher rental prices. Additionally, Nashville has a strong tourism industry, which contributes to the high demand for rental properties.
Pros of investing in Nashville rental properties
Strong job market and economic growth
Nashville has a diverse and growing economy, with industries such as healthcare, music, and technology driving job growth. This leads to high demand for rental properties as people move to the city for job opportunities.
Aside from these industries, employment opportunities in Music City are also found in professional and business services, education, health, and manufacturing sectors. Growth is being driven by the leisure and hospitality, logging, mining, and construction industries as well. Last but not least, financial companies are moving to town and providing opportunities to job seekers like bankers, budget analysts, and accountants.
Because of this trend, Nashville has the lowest unemployment rate in any metropolitan area with at least one million residents. And as many job hunters move to town, rental demand soars, making Nashville a good place to invest in.
Nashville’s quality of life might just be the reason behind its continuous population growth. U.S. News ranked Nashville as the best place to live in Tennessee and the 25th best place to reside in the entire U.S. This indicates that people are moving to the city not only for job opportunities but also just to relocate for the sake of it, a trend spurred by the pandemic and not relenting.
Another important factor to note is that the average age of residents in Music City is 33, much younger than the national average age of 40. Since Nashville has a strong job market and a larger younger population, these factors will contribute to high rental demand and low vacancy rates for the years to come.
As long as you have a rental license, there are many benefits you can take advantage of as a landlord operating in Nashville. First is that a written lease is not necessary unless the rental agreement lasts more than three years. Additionally, the grace period for late payments you must provide is limited, and you are not obligated to provide receipts for rent and deposit payments. Charging fees for late payments is also legal, although this has to be indicated in a written lease.
In addition, the strong job market and growing population in Nashville create a favorable environment for rental properties. The still relatively affordable home price in the city projects the potential for high cash flow. A rapid appreciation of property values is also very likely since the housing market has become increasingly competitive.
The Nashville rental market is a thriving and attractive market for real estate investors. Some of the main pros of investing in Nashville rental properties include strong population growth, a robust economy, and continuously rising demand for rental properties. Additionally, Nashville has a landlord-friendly environment, which makes it a good place to invest in real estate.
For investors looking to enter the Nashville rental market, it is important to conduct thorough research and due diligence on the area, from analyzing local demographics to housing market trends and economic indicators. It’s also essential to have a well-defined strategy and a realistic budget in place. Networking with other investors, agents, and professionals in the industry can also be beneficial.
Consider also some additional resources like local real estate investment groups, online forums and discussion boards, and local market reports and statistics. Additionally, consulting with a local real estate agent or a property management company can provide valuable insights and information.