Nashville, Tennessee — famously known as Music City — is not just a cultural hotspot but also one of the most promising cities for rental property investment. With its booming population, vibrant tourism sector, and business growth, Nashville offers ample opportunities for beginners looking to earn passive income through rental properties. This guide covers the best strategies, legal obligations, and financial tips to help you start generating rental income in Nashville.
Why Invest in Rental Property in Nashville?
- Population Growth: One of the fastest-growing U.S. cities, attracting students, artists, healthcare professionals, and tech workers.
- Tourism Hotspot: Over 14 million tourists visit Nashville each year, creating a booming short-term rental market.
- No State Income Tax: Tennessee doesn’t tax personal income, allowing landlords to retain more of their rental profits.
- Strong Rent Growth: Limited housing supply and rising demand have led to consistent rental price increases across many neighborhoods.
Top Rental Income Strategies in Nashville, TN
1. Long-Term Residential Rentals
Purchase single-family homes or duplexes in areas like East Nashville, Donelson, or Antioch and lease to long-term tenants. This strategy is ideal for steady income with less management hassle.
2. Short-Term Rentals (Airbnb, Vrbo)
Nashville is a top Airbnb destination. Short-term rentals near Broadway, Midtown, or The Gulch can command premium nightly rates. However, strict licensing and zoning laws apply — make sure your property is in an approved STR zone.
3. Student Rentals
With several universities including Vanderbilt, Belmont, and Tennessee State, student housing offers high occupancy and above-average returns. Renting by the room increases income potential.
4. House Hacking and ADUs
Live in one part of your property and rent out another (e.g., a duplex, finished basement, or garage apartment). Accessory Dwelling Units (ADUs) are also permitted in certain zones with permits.
5. Corporate & Furnished Rentals
Fully furnished units rented to traveling professionals, healthcare workers, or entertainment crews are in demand for stays of 30+ days — especially near hospitals, studios, or downtown.
Legal Requirements & Permits for Nashville Landlords
- Short-Term Rental Permit: Required for all properties rented for under 30 days. Two types exist:
- Owner-Occupied STR (Type I)
- Non-Owner Occupied STR (Type II – only allowed in specific commercial/mixed-use zones)
- Zoning Restrictions: STRs are banned in many residential zones. Always confirm with the Metro Codes Department.
- Hotel Occupancy Tax: STR operators must collect and remit state (7%) and local (6%) occupancy taxes.
- Business License: Required for all rental businesses earning over $3,000 annually. File with the Davidson County Clerk’s Office.
- Rental Property Safety: Ensure compliance with local codes, including smoke detectors, egress windows, and minimum living standards.
Rental Property Cost Estimates in Nashville
| Expense Category | Estimated Monthly Cost |
|---|---|
| Property Taxes | $150 – $600 |
| Landlord Insurance | $50 – $100 |
| Repairs & Maintenance | $100 – $300 |
| Property Management | 8% – 12% of rental income |
| STR Permit Fees | $313 – $500/year |
Best Neighborhoods in Nashville for Rental Investment
- East Nashville: A trendy, artsy district popular among young professionals and tourists.
- The Gulch: High-end condos and short-term rentals near downtown nightlife.
- Donelson: Affordable homes near the airport and Opryland, ideal for long-term or mid-term rentals.
- Germantown: Historic charm with luxury rental appeal and walkability.
- South Nashville: Diverse, growing area with affordable entry points for first-time investors.
Tax Benefits for Nashville Landlords
Though Tennessee has no income tax on wages or rental income, landlords can still deduct many federal expenses, including:
- Mortgage interest
- Depreciation
- Maintenance and repairs
- HOA fees and property taxes
- Insurance and legal costs
- Property management expenses
Short-term rental owners must remit Hotel Occupancy Tax (13%) and file returns quarterly or monthly, depending on revenue.
Tips to Maximize Rental Income in Nashville
- Stay Legally Compliant: Apply for STR permits early and verify zoning restrictions to avoid fines.
- Furnish Smartly: For STRs or corporate rentals, invest in quality furniture and amenities like Wi-Fi, smart TVs, and kitchen basics.
- Screen Tenants Thoroughly: Use background checks, credit checks, and verify employment/income.
- Maintain High Property Standards: Well-maintained units reduce turnover and increase occupancy rates.
Conclusion
Whether you’re buying your first duplex near Vanderbilt or launching a boutique Airbnb in East Nashville, the city’s economic vitality and cultural appeal make it a profitable location for real estate investment. With proper planning, licensing, and property management, beginners can generate consistent rental income and build long-term wealth in Music City.
Need help with STR permits, tax registration, or property investment consulting in Tennessee?
Get in touch with PEAK Business Consultancy Services — your expert partner for real estate business setup, compliance, and rental income strategy in Nashville, TN.
