What is a good cap rate for a Nashville short-term rental?

Modeled at the Nashville market occupancy of about 54% (AirDNA, May 2026) with a 40% operating expense load, unlevered and excluding appreciation, these eleven neighborhoods compute to roughly 3.4% to 4.7%. Wedgewood-Houston, East Nashville and Edgehill lead; 12 South and Hillsboro Village & Belmont trail because purchase prices are high relative to nightly rates. Several neighborhoods do not pencil as an unlevered investment at market occupancy, which is the honest answer. Higher figures quoted elsewhere usually assume higher occupancy, a lighter expense load, or an owner who self-manages.

Which Nashville neighborhood is best for STR investment?

First, the one where the parcel can get the permit you need. Most houses in East Nashville, Edgehill, Sylvan Park, Germantown, 12 South, Hillsboro Village & Belmont sit on residential zoning, where a new buyer can get an owner-occupied permit but not a non-owner-occupied one, so a pure investment there usually does not exist. Among parcels that can get an investor permit, yield favors lower purchase prices (Wedgewood-Houston, East Nashville corridors), and gross revenue favors SoBro and The Gulch, where the building's HOA rules decide whether you can rent.

How do Nashville STR permits affect investment decisions?

They decide whether the deal exists. Metro only issues new non-owner-occupied (investor) permits in non-residential districts, such as commercial and mixed-use zoning, not in R, RS, RM, or AR2a residential zones. Owner-occupied permits require the owner, a natural person, to live there. Permits do not transfer when a property sells, so a buyer applies fresh. Confirm the parcel's zoning before you make an offer.

What operating expenses should I model for a Nashville STR?

Plan for roughly 35% to 45% of gross revenue in operating expenses: management fees (20% to 30% of gross is the Nashville market norm), cleaning (often passed to the guest but still a cost exposure), supplies, utilities and internet, repairs and maintenance, property taxes, STR-specific insurance, permit renewal, and platform fees. The table uses 40%. Hotel occupancy tax (7% of gross plus $2.50 a night in Metro) and state sales tax are collected from guests on top.

How accurate are these estimates?

Treat them as directional, not as a forecast. Purchase price varies with condition, size, and parcel. Occupancy is the market average applied to every row, and a specific home can land well above or below it depending on design, photos, pricing, and reviews. Send us a listing and we will model that address.

Where does this data come from?

Purchase prices are typical 2 to 3 bedroom figures from Zillow and Redfin Nashville sale data (2025 to 2026). Nightly rates are the midpoints of the typical ranges on our neighborhood pages, from AirDNA Nashville market data and the homes we manage. Occupancy is AirDNA's Nashville market figure for the trailing 12 months to May 2026. The 40% expense load is an assumption you should replace with your own numbers.

Nashville STR Investment Guide: ROI by Neighborhood

What a 2 to 3 bedroom costs in eleven Nashville neighborhoods, what it grosses at the market occupancy, what is left after real expenses, and which permit a new buyer can get.

In Nashville the parcel decides more than the house does: whether it can get a non-owner-occupied permit, and how far the walk to Broadway is. This guide compares typical purchase prices, gross and net revenue, and unlevered cap rates across eleven neighborhoods, all modeled at the same, realistic occupancy.

The occupancy assumption: Nashville market, trailing 12 months to May 2026 (AirDNA): about 54% average occupancy and about $40.5K average annual revenue per listing, with revenue down 7.1% and nightly rates down 5.4% year over year. Every row uses that 54% figure. Nightly rates are the midpoints of the typical ranges on our neighborhood pages; purchase prices come from Zillow and Redfin Nashville sale data (2025 to 2026). Cap rates assume a 40% operating expense load and exclude financing and appreciation.

Cap rate by neighborhood at 54% occupancy

Wedgewood-Houston4.7% cap

Typical price:

$565K

Gross / net:

$44K / $27K

Permit for a new buyer:

Mixed: investor permits only on commercial or mixed-use parcels
East Nashville4.3% cap

Typical price:

$615K

Gross / net:

$44K / $27K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)
Edgehill4.2% cap

Typical price:

$595K

Gross / net:

$42K / $25K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)
The Gulch4.1% cap

Typical price:

$875K

Gross / net:

$59K / $35K

Permit for a new buyer:

Investor permits possible; building HOA rules decide
West End4.0% cap

Typical price:

$785K

Gross / net:

$52K / $31K

Permit for a new buyer:

Mixed: investor permits only on commercial or mixed-use parcels
Sylvan Park3.9% cap

Typical price:

$680K

Gross / net:

$44K / $27K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)
Midtown3.9% cap

Typical price:

$720K

Gross / net:

$47K / $28K

Permit for a new buyer:

Mixed: investor permits only on commercial or mixed-use parcels
Germantown3.8% cap

Typical price:

$825K

Gross / net:

$52K / $31K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)
SoBro3.5% cap

Typical price:

$1.05M

Gross / net:

$62K / $37K

Permit for a new buyer:

Investor permits possible; building HOA rules decide
12 South3.4% cap

Typical price:

$950K

Gross / net:

$54K / $33K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)
Hillsboro Village & Belmont3.4% cap

Typical price:

$825K

Gross / net:

$47K / $28K

Permit for a new buyer:

Mostly owner-occupied only (residential zoning)

Neighborhood	Typical price (2 to 3BR)	Gross revenue	Net revenue	Cap rate	Permit for a new buyer
Wedgewood-Houston	$565K	$44K	$27K	4.7%	Mixed: investor permits only on commercial or mixed-use parcels
East Nashville	$615K	$44K	$27K	4.3%	Mostly owner-occupied only (residential zoning)
Edgehill	$595K	$42K	$25K	4.2%	Mostly owner-occupied only (residential zoning)
The Gulch	$875K	$59K	$35K	4.1%	Investor permits possible; building HOA rules decide
West End	$785K	$52K	$31K	4.0%	Mixed: investor permits only on commercial or mixed-use parcels
Sylvan Park	$680K	$44K	$27K	3.9%	Mostly owner-occupied only (residential zoning)
Midtown	$720K	$47K	$28K	3.9%	Mixed: investor permits only on commercial or mixed-use parcels
Germantown	$825K	$52K	$31K	3.8%	Mostly owner-occupied only (residential zoning)
SoBro	$1.05M	$62K	$37K	3.5%	Investor permits possible; building HOA rules decide
12 South	$950K	$54K	$33K	3.4%	Mostly owner-occupied only (residential zoning)
Hillsboro Village & Belmont	$825K	$47K	$28K	3.4%	Mostly owner-occupied only (residential zoning)

Gross = midpoint nightly rate x 54% x 365. Net = gross less a 40% operating expense load. Cap rate = net / typical price (unlevered, excludes appreciation). Occupancy: AirDNA, trailing 12 months to May 2026. Prices: Zillow and Redfin Nashville sale data, 2025 to 2026.

Send us the listing before you make an offer

We will tell you whether the parcel can get the permit you need, what it should earn, and what we would change. Before you offer, not after.

Check a listing with Steve Call (615) 235-9585 Text us

Highest unlevered cap rate

Wedgewood-Houston, East Nashville and Edgehill model highest at 54% occupancy, mostly because purchase prices are lower. Check the permit first: in residential pockets a new buyer gets an owner-occupied permit only.

Highest gross revenue

SoBro and The Gulch gross the most (SoBro about $62K a year here), but high prices pull their cap rates down, demand is event-driven, and the building's HOA decides whether a condo can be rented at all.

What does not pencil

12 South and Hillsboro Village & Belmont trail because prices are high relative to nightly rates. At market occupancy, several neighborhoods do not work as an unlevered investment. Better to know that before you buy.

How to Read a Nashville STR Deal

1. Confirm the parcel is permit-eligible. Metro only issues new non-owner-occupied permits in non-residential districts. Before writing an offer, verify the address sits on a commercial or mixed-use parcel, or the deal will not work as a pure investment. Permit walkthrough

2. Underwrite at the market, not the best case. Nashville averaged about 54% occupancy over the 12 months to May 2026 (AirDNA). Model the deal at or near that and treat anything above it as upside you have to earn.

3. Budget design and furnishing. Design quality is the single biggest controllable revenue lever. Plan $20K to $50K for furnishing a 2 to 3 bedroom depending on positioning. Once it is furnished, our listing and photo optimization makes sure the photos and copy actually sell it.

4. Compare net, not gross. What funds the mortgage is what is left after management, cleaning, taxes, and upkeep. Compare managers on the net they produce, not the percentage they quote.

5. Build a 6-month operating runway. Ramp-up takes 60 to 120 days for reviews, photos, and pricing to settle. Have cash on hand for the lean months.

Misfit Homes manages 78 short-term rentals in Nashville, has operated here since 2017, and is licensed by the State of Tennessee as a Vacation Lodging Service Firm, license #602.

Nashville STR Investment FAQ

Common questions from investors evaluating Nashville short-term rentals.

Underwriting a Nashville deal?

Get a property-specific projection and a permit check from our local team before you make an offer.