Are Tennessee’s low property taxes a good enough reason for investors to explore the opportunities of Airbnb Nashville with greater interest?
Table of Contents
- Tennessee Real Estate Market Trends for 2022
- What Should You Know About Property Taxes in TN?
- Nashville TN: A Strong Renter’s Market
- Why Should You Consider Investing in Airbnb Nashville?
- Top 3 Neighborhoods in Nashville
- Airbnb Nashville: The Final Verdict
In the real estate business, the main idea is that information should constantly be circulating and providing investors with new possibilities. There’s been an evident increase in interest in buying rental property in Nashville—primarily due to low property taxes.
Although it gives more room for profit to investors who want to generate a steady passive income, the low-tax environment should not be viewed as the only one. There are other factors that will substantially affect your decision and long-term plans.
Therefore, it would be best to look at the situation from a slightly broader angle. Let’s try to assess whether looking a bit deeper into the matter of buying rental property in Nashville, Tennessee, is something you should add to your investment portfolio.
With that said, be sure to stick with us for the final verdict.
Tennessee Real Estate Market Trends for 2022
Before you make your way to the Airbnb Nashville listings, it would be helpful to look at the current situation on the Tennessee housing market and try to determine how things could play out in the foreseeable future.
Here’s a piece of advice for real estate investors-to-be:
When you’re in the process of buying an investment property, you must always be at least two steps ahead of the competition while also keeping in mind all the potential drawbacks of investing.
So, without further ado, we’d like to jump over to the two significant predictions that might be seen in the Nashville area over the course of the next few months.
Home Appreciation
If you had been following the real estate market situation last year, you had the opportunity to come across a fascinating figure of 22% in the real estate appreciation segment. That is, staggeringly enough, just how much property prices have risen in just a year.
According to experts, it is said that property appreciation for Airbnb Nashville TN will not stop in 2022. However, it’s likely not going to experience the same boom it did in 2021.
While it is not possible to come up with a specific percentage you can stick to, what you can expect is an increase of approximately 6% to 18% by the end of December.
Home appreciation allows real estate investors space for more profit. How? By increasing their monthly rent.
Nevertheless, it would be best to be cautious when changing costs because you could easily lose your tenants due to the significantly higher expenses. Sometimes, it’s better not to risk it.
On the other hand, home appreciation is a window of opportunity for home-flippers. And with proper assistance, real estate agents can expect a high return on investment.
Increase in Interest Rates
Another factor to mention is interest rates, which play a vital role when it comes to paying off your mortgage. In real estate, they are the numbers that the lender assigns to the one who borrows the funds.
High interest rates are a good thing if you are a seller, as they may allow you a bigger return on investment. However, if you are a buyer navigating the real estate market, then you should be aiming for low interest rates.
High interest rates automatically imply more debt and tend to slow down the entire consumer demand on the real estate market. So, keeping track of the numbers is undoubtedly something you should do, especially if you are a first-time homebuyer.
What is the situation with Nashville Airbnb?
For now, all we can say is that the situation appears stable. As of mid-March, Tennessee’s average mortgage interest rate is 4.34% for a 30-year fixed mortgage rate.
In the foreseeable future, experts predict a 1% increase. Since it is not official yet, investors are advised to monitor the situation and keep their eyes open so as not to rush into buying a property they cannot pay off.
Related: 2022 Real Estate Market Forecast: Top 10 Predictions
What Should You Know About Property Taxes in TN?
In addition to interest rates and home appreciation that can significantly affect and dictate the success of your Airbnb Nashville investment, you should also be familiar with property taxes.
For starters, you need to know the definition of a transfer tax.
In a nutshell, it is the tax imposed by the state whenever a real estate property changes its ownership. The tax percentage is generally determined based on either the appraised value or the sales price of the property.
As for payment, it can be paid by either the buyer or the seller, depending on the location of your investment property.
Calculating property taxes can be confusing for real estate investors, especially for first-time homebuyers. Using investment tools that do the math for you helps a lot in that department.
And since you’re interested in the Tennessee real estate market, you should know that home values are assessed over a period of four to six years. Let’s bring the issue closer by using an example related to investment property in Nashville:
Suppose that a particular home whose value is estimated at $250,000 in Nashville is subject to a property tax of 1%. It would then turn out to be $2,500. That’s simple math right there.
However, you should not take these percentages—or anything related to taxes—lightly.
It’d be best to consult with a real estate agent so that they can guide you through all the specifics of the real estate market when the time comes to pay your taxes.
Related: The Seller’s Guide to Closing Costs in Tennessee
Nashville TN: A Strong Renter’s Market
Recently, Airbnb Nashville placed among the top 10 cities with leading numbers in population growth.
With new residents emerging and finding their way to Nashville, the city is slowly but surely turning into a strong renter’s market—and one that offers countless benefits to anyone who wants to take a break from other urban cities in Tennessee.
One of the most significant advantages of a renter’s market is that it offers you a chance to generate a secure passive income as a real estate investor. Nashville is a vast area, and people often move here for work, which automatically ensures you profit in the long run.
Of course, in order to do well, you must first perform a detailed—and thorough—Airbnb analytics and decide where you want to invest.
Airbnb Nashville TN: Looking at the Data
Investing in real estate involves constantly monitoring statistics and the latest data and then assessing the profitability of the real estate market you’re researching. However, the process can be somewhat difficult if you rely on old-school research methods and outdated information.
Luckily, we’re here to cut right to the chase and present you with our up-to-date and accurate information regarding the Nashville real estate market.
Let’s take a look at Mashvisor’s latest Airbnb data together:
- Listings for Sale: 486
- Median Property Price: $1,127,600
- Average Price per Square Foot: $1,118
- Number of Airbnb Listings: 4,052
- Monthly Airbnb Rental Income: $4,287
- Airbnb Cash on Cash Return: 3.57%
- Airbnb Daily Rate: $274
- Airbnb Occupancy Rate: 56%
- Days on Market: 19
- Walk Score: 36
When you look at the numbers above, Nashville certainly gives off the impression of a lucrative location for your future vacation rental. But we’re not entirely done with analyzing the market yet.
It’s time to touch on some concrete facts concerning life in Nashville and discuss what it offers investors and tenants interested in investing in the state.
Before we go any further, though, we’d like to use this opportunity to refer you to the tool that provided us with the statistics you were looking at a second ago.
Mashvisor’s Rental Property Calculator is an investment tool that is a MUST for investors looking to manage dozens of numbers and assess the particular property’s profitability within just minutes of typing in the location.
Mashvisor’s Rental Property Calculator is a must-have for investors looking to evaluate a property’s profitability within minutes .
Now that we’ve drawn your attention to it, we can go back to Nashville’s real estate market.
Why Should You Consider Investing in Airbnb Nashville?
We’re slowly moving from “how to invest in real estate” to “reasons why you should consider a particular area for buying vacation rental property.”
With Nashville, it’s easy to be blown away by the advantages of this beautiful city. Now, let’s go through some of them together.
The Nightlife
There’s an unwritten rule that there will always be room for profit from rentals when the city’s nightlife is good. That’s exactly the case with Airbnb Nashville. You can have the time of your life here, and for an investor, it is the equivalent of the jackpot.
It wasn’t hard to narrow down the selection to a few places with the most appeal for guests in Nashville, so here are a few examples:
Printer’s Alley
You must have heard of the famous Printer’s Alley at least once. You can start and end your night-out here, going from karaoke bars to western music clubs—a good time is guaranteed.
This alley is especially popular among young people.
Sambuca
When you think of Nashville, the first thing that comes to mind is country music, right? Well, it’s not the only thing visitors can enjoy during their stay.
Sambuca is a famous two-story restaurant that features jazz, classical, and soul tracks for people who want to take a break from Nashville’s country vibes.
Lower Broadway
Tradition cannot be left behind, and Lower Broadway is the heart and soul of country music in Nashville. If you want to spend a few days living that country lifestyle and enjoying a couple of refreshing drinks, this is the place for you.
Low Living Costs
We mentioned low tax rates for a reason. They often mean low living costs, as well, and you can consider it yet another reason to invest in Airbnb Nashville.
For starters, utilities are below the US average, with an index cost of 99.3. It’s estimated that Nashville residents spend about 6.3% of their income on utilities.
On the other hand, groceries are estimated at 2% above the national average. But residents of Nashville can find affordable food and drinks at some of the leading supermarkets, such as Piggly Wiggly, ALDI, Publix, and the like.
Top 3 Neighborhoods in Nashville
Calculating the cap rate will bring you closer to the expected returns and profitability.
We’ve already analyzed the Nashville housing market from a broader perspective—but now, it’s time to focus on particular areas that might be appealing to investors.
Here are the top three neighborhoods for investing in rental property, from those with the highest cash on cash return to the lowest, according to Mashvisor data:
East Nashville
- Number of Airbnb Listings: 456
- Monthly Airbnb Rental Income: $4,508
- Airbnb Cash on Cash Return: 6.39%
- Airbnb Daily Rate: $251
- Airbnb Occupancy Rate: 60%
- Walk Score: 56
Buena Vista
- Number of Airbnb Listings: 567
- Monthly Airbnb Rental Income: $5,349
- Airbnb Cash on Cash Return: 5.70%
- Airbnb Daily Rate: $298
- Airbnb Occupancy Rate: 56
- Walk Score: 78
Germantown
- Number of Airbnb Listings: 596
- Monthly Airbnb Rental Income: $4,334
- Airbnb Cash on Cash Return: 2.86%
- Airbnb Daily Rate: $293
- Airbnb Occupancy Rate: 57%
- Walk Score: 75
After seeing the numbers above, picking out a Tennessee investment property should go much faster.
Airbnb Nashville: The Final Verdict
We managed to complete the topic of investing in Airbnb Nashville. Along the way, we got acquainted with essential information that a real estate investor should know before directing their funds towards a particular property.
The Nashville housing market is slowly breaking through, proving that it can be one of the lucrative locations for investing in short-term rental properties in the future. Low living costs and attractive nightlife are among the most significant contributors.
If you strongly believe that Airbnb Nashville could be your next successful investment project, it would help to go through its current performance on the real estate market and some of the best neighborhoods for buying an investment property.
We can help you do your research better, and if the numbers look promising, come up with a personalized investment strategy. Mashvisor aims to assist real estate agents and investors in expanding their investment portfolios and making high returns on their projects.
Don’t miss this chance to sign up for a 7-day free trial of Mashvisor, followed by a 15% discount on your quarterly or annual subscription?