[Updated Fall, 2018] Short terms rentals are a hot topic in Nashville. Airbnb, VRBO, HomeAway, and others have become popular and desirable for homeowners and investors alike. If you are considering making an investment in a short-term rental in Nashville. Here are a few things you should consider.
Within Your Primary Residence
Want to rent out a bedroom in your own house for a weekend? That’s fine. How about renting out your whole house while on vacation? That’s okay too. You need a permit to do so, but regulation is a relatively painless process.
Investors Note: Metropolitan Government Has Instituted Guidelines For Non-Owner Occupied STRPs.
A lot has changed here recently. The city has basically phased out non-owner permits in residential neighborhoods and you must have a city permit to run a short-term rental business from a non-owner occupied home.
- New not-owner-occupied permits are not permitted in R or RS zoned properties. Existing permit holders in these zoned districts may be eligible to apply for renewals, but those permits are not transferable if the property is sold.
- New not-owner-occupied permits will only be issued as a use permitted with conditions (PC) in RM2 through RM20-A, RM40 through RM100-A, MUN and MUN-A, MUL and MUL-A, MUG and MUG-A, MUI and MUI-A, OG, OR20 through OR40-A, ORI and ORI-A, CN and CN-A, CL and CL-A, CS and CS-A, CA, CF, DTC North, DTC South, DTC-West, DTC Central, SCN, SCC and SCR zoning districts.
- Permits for Specific Plan (SP) zoned properties or properties within a Planned Unit Development (PUD) will be issued only if allowed by the SP or PUD.
Condos Have Different Rules
Generally speaking, multi-family properties fall outside the rules above. Obviously, condos are easier to manage. They also tend to have more central locations, which makes them attractive to investors and tenants alike, but almost all condominium projects have bylaws that forbid them as being used as short-term or executive rentals.
For instance, the Bennie Dillon condos in downtown Nashville have bylaws that say “no more than 25% of units can be investor-owned and all leases must be at least 180 days in length.” Similar rules hold true for the Viridian, Encore, ICON in the Gulch, Twelve Twelve, Terrazzo, Adelicia, and practically all condominium developments in Nashville.
Generally speaking, this language will be inserted into bylaws by default. In order for a condominium development to allow short-term rentals, the association would have needed to amend their bylaws to specifically allow such arrangements. According to my own research, the following developments DO allow short term rentals:
- The Quarters
- Riverfront Condos
- Studio One
- Southview on 2nd
- Spence Manor is said to be amending their rules now.
Townhomes generally also have bylaw restrictions, as do some attached HPRs (horizontal property regimes). Even single family home neighborhoods with HOA rules could feasibly ban short term rentals.
Bottom Line: Review the HOA guidelines before making an offer.
Some developers are focusing on new construction built specifically to target investors looking for units in MUL complexes. I’m compiling a list of such places. It’s not for publication and available specifically for our registered clients. Contact us for more info. Expect to pay north of half a million dollars to purchase in a new MUL-compliant building.
Management Fees Can Add Up
We are Realtors, not property managers. The popularity of short term rentals in cities such as Nashville with a high concentration of vacationers, tourists, and convention goers has exploded the property management industry. There is no shortage of available management companies to choose from. Here is a short list that I’ve curated in no particular order with no affiliations:
Do Your Research
As much as I’d like to be able to estimate rents, vacancies, and cap rates for you, it’s simply not something my license allows. No Realtor in Nashville can provide that service. Short term investments are such a new and speculative market to our city, that risks are inherent. With that said, we’d be happy to help you purchase, sell or finance a property that will best work for your situation.
With any investment, due diligence is warranted. Here is an excellent article clipped from Inman News that references average Nashville booking revenues. The article caters toward agents, but I think you’ll find value in it.
TIP: Have some insider knowledge you’d like to share? Feel free to post in the comments below. Much appreciated!