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

On the assumptions in the table above (a 40% operating expense load, unlevered, excluding appreciation), these eleven Nashville submarkets compute to roughly 4.4% to 5.7%. Wedgewood-Houston, The Gulch, and East Nashville lead, and they sit within a tenth of a point of each other, so treat the ordering as noise rather than a ranking. Belmont and Hillsboro Village and 12 South trail because acquisition prices are high relative to achievable nightly rates. Higher figures quoted elsewhere generally assume a lighter expense load or an owner who self-manages.

Which Nashville neighborhood is best for STR investment ROI?

For unlevered yield, Wedgewood-Houston and East Nashville are strong: nightly rates hold up well against a much lower acquisition cost, permitting is mixed Type 1 and Type 2, and there is real appreciation upside. The Gulch is the outlier, landing near the top on yield as well as on gross revenue. For absolute gross revenue, SoBro leads the city at roughly $88,000 a year on these assumptions. The right answer depends on whether you optimize for yield, appreciation, or a trophy asset.

How do Nashville STR permits affect investment decisions?

Nashville issues two permit types: Type 1 (owner-occupied, you live on the property) and Type 2 (non-owner-occupied, true investment). Type 2 permits are restricted in most residential zones, so you generally need to be in a multi-family or commercial-zoned parcel. Before making an offer, confirm the parcel is in a Type 2-eligible zone or the deal does not work as a pure investment.

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 norm), cleaning (often passed to guest but creates exposure), supplies and consumables, utilities and internet, repairs and maintenance, property taxes, insurance (STR-specific policy), permit renewal, and platform fees. The 40% figure used in our table is a portfolio average; well-run owner-operated properties can run lower.

How accurate are these ROI estimates?

Treat these as directional benchmarks, not guarantees. Acquisition price varies widely by condition, size, and parcel. ADR and occupancy depend heavily on design quality, professional photography, dynamic pricing, and operations. The same address can outperform the high end of these ranges with strong management or underperform the low end without it. Run our free revenue calculator for a property-specific projection.

Where does this data come from?

Median acquisition prices are compiled from Zillow and Redfin Nashville sale data for 2-3BR investor-grade properties (2025-2026). ADR and occupancy come from AirDNA Nashville market data and Misfit Homes' own managed portfolio. Operating expense load is a portfolio average across actively managed Nashville STRs.

Nashville STR Investment Guide: ROI by Neighborhood

A data-driven look at cap rate, revenue, and operating economics for Nashville short-term rental investments. Updated for 2026.

Nashville is one of the strongest short-term rental markets in the United States, but neighborhood selection drives nearly every dollar of return. This guide compares typical acquisition prices, gross and net revenue, and unlevered cap rates across the city's most investable neighborhoods, so you can match the right deal to the right strategy: yield, appreciation, or trophy asset.

Numbers are compiled from Zillow and Redfin Nashville sale data, AirDNA Nashville market data, and Misfit Homes' own managed portfolio (2025-2026). Cap rates assume a ~40% operating expense load and exclude financing and appreciation.

ROI by Neighborhood

Neighborhood	Median Price (2-3BR)	Gross Revenue	Net Revenue	Cap Rate	Permit
Wedgewood-Houston Emerging arts district. Highest appreciation upside.	$565K	$53K	$32K	5.7%	Type 1 / Type 2
The Gulch Luxury high-rise market. Strong year-round demand.	$875K	$82K	$49K	5.6%	Type 2 friendly
East Nashville Best revenue-per-dollar in the urban core.	$615K	$57K	$34K	5.6%	Type 1 / Type 2
West End Corporate and hospital traffic. Stable occupancy.	$785K	$70K	$42K	5.3%	Type 2 friendly
Germantown Historic charm + walkability. Limited inventory.	$825K	$70K	$42K	5.1%	Type 1 / Type 2
Edgehill Walkable to Gulch at a lower entry price.	$595K	$50K	$30K	5.1%	Type 1 / Type 2
Midtown / Music Row Industry traffic + Vanderbilt drive demand.	$720K	$61K	$36K	5.0%	Type 2 friendly
SoBro Highest ADR in the city. Premium condo inventory.	$1.05M	$88K	$53K	5.0%	Type 2 friendly
Sylvan Park Family-friendly. Steady but lower ADR.	$680K	$55K	$33K	4.9%	Mostly Type 1
12 South Owner-occupied stock dominates. Hard to enter.	$950K	$75K	$45K	4.8%	Mostly Type 1
Belmont / Hillsboro Village University demand, parents weekends, low turnover.	$825K	$61K	$36K	4.4%	Mostly Type 1

Sources: Zillow, Redfin, AirDNA, Misfit Homes managed portfolio (2025-2026). Net revenue assumes ~40% operating expense load. Cap rate = Net Revenue / Median Price (unlevered, excludes appreciation).

Best for Yield

East Nashville and Wedgewood-Houston deliver the strongest cash-on-cash returns. Lower acquisition prices, mixed Type 1 / Type 2 zoning, and rising design-forward demand.

Best for Trophy Assets

SoBro and The Gulch produce the highest absolute revenue. Luxury condo inventory, walkability to Broadway, and consistent year-round demand from convention and bachelorette traffic.

Best for Appreciation

Germantown and Wedgewood-Houston are still mid-cycle. Limited historic inventory in Germantown and ongoing development in WeHo set up meaningful long-term price growth.

How to Read a Nashville STR Deal

1. Confirm the parcel is permit-eligible. Type 2 (non-owner-occupied) permits are restricted in most residential zones. Before writing an offer, verify the address sits in a Type 2-eligible zone, or the deal will not work as a pure investment. Permit walkthrough →

2. Stress-test occupancy. Underwriting at 75%+ is aggressive in most Nashville neighborhoods. Model the deal at 65% and confirm it still works.

3. Budget design and furnishing. Design quality is the single biggest controllable revenue lever. Plan $20K to $50K for furnishing a 2-3BR depending on positioning. Property design and staging →

4. Compare against management fees, not gross revenue. A 20% management fee on a property doing $90K is worth more than a 15% fee on a property doing $65K. Net is what funds the mortgage.

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

Nashville STR Investment FAQ

Common questions from investors evaluating Nashville short-term rentals.

Underwriting a Nashville deal?

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