Nashville's Latest Investment Trend
It's no secret that Nashville has been one of the big winners for real estate investors over the past 20+ years. Our city has seen multiple waves of investors, most of whom have come out ahead--especially if they held onto the property for a number of years. I have worked with many clients with portfolios of 15+ properties which have more than doubled in value if they purchased them a decade ago and now have a mature portfolio that is 100% cashflow.
Over the past 5-7 years, Nashville has gained national attention for a newer investment model: short term rentals, or Airbnb/VRBO properties. These properties have helped investors see double-digit ROIs. I have personally owned these properties, and still do, and I've helped many a client navigate the rules and regulations put in place by Nashville over the past few years--not an easy feat! For those willing to jump through a couple hurdles, the returns have been worth it.
In the midst of the ever-growing tourist industry in Nashville, the city also attracted some pretty big new suitors: Amazon and Oracle. While the rest of the country was also experiencing the growth that COVID brought---and that no one saw coming, Nashville secured some pretty major players that have promised to bring 6-figure jobs to thousands of people. That is a long-term play. As the COVID craziness that the rest of the nation saw starts to fizzle out, and despite interest rates rising to combat inflation, Nashville continues to grow.
Developers are extremely bullish on Nashville. Nashville was recently named the #1 Market to Watch by the Urban Land Institute for the 2nd year in a row. There are buildings and developments going up left and right. At one point I heard that Nashville had 3% of the WORLD'S cranes. That is a lot of cranes, my friend. And guess what? It's still not enough to keep up with demand. Are we all experiencing a slow-down right now? Yes. Will Nashville come out a winner in the end. Yes. You can't argue with the investment that so many companies are making in Nashville. You can't argue with the number of people still moving to Nashville--and a lot of them aren't even moving with a company. They are moving here because they want to be here. It's a fun town. If you don't know that, you probably haven't visited in a while.
With all of the industry and people moving here, and with the current market uncertainty, we are seeing more people deciding to rent for a year or so. That brings the latest investment trend: corporate rentals. This isn't a new concept in general, but it is an investment strategy that Nashville hasn't had the demand for...until now. With the regulations and hurdles that Nashville has set in place for short term rentals (Nashville classifies a short term rental, STR, as a property that is rented for less than 30 days at a time), investors are seeing high returns and fewer headaches with corporate rentals, which fall outside of the regulations for STRs because they are rented for more than 30 days at a time.
Whether it's a family renting for a year while they get their bearings and decide what neighborhood they want to buy into, or it's an executive who needs a place to crash while they are in town, corporate rentals are big business in Nashville right now. It's also a way for investors to buy and hold while making some income. There are many neighborhoods going through changes around the the Nashville urban core that are in close proximity to destinations like Geodis Park, Fifth + Broad, and the Nashville International Airport (BNA). Location, location, location. These are perfect properties to offer as corporate rentals and then flip in a few years or continue to hold while potentially building immense equity.
The investors that buy into these areas now are the ones who, in a few years, will be the "brilliant" investors who knew to buy into these emerging areas before everyone else. I can't tell you how many times people tell me they wish they had purchased property 5 years ago. Well, guess what? Those people will be saying that again in 5 years. We all know what happens when everyone catches on that a neighborhood is hot--Everyone ends up paying more. Now is the perfect time to buy--when everyone else is pausing. This is when the investor sets himself up for the big payday. Are you going to get yours? This could be your next rental.