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Tennessee is widely known for being a state focused on tourism, manufacturing and agriculture. Not only that, but its capital Nashville is the Music City as well. That means a lot of people move here for the entertainment industry, for tourism, but also for creating their own business. As a result, the rental industry has grown significantly in Tennessee over the years, and that’s why it makes a lot of sense to acquire a rental property in the state, if possible.

Why is Tennessee attractive for rental property investors?

Generally, when you buy an investment property you want to ensure that there are a lot of people coming into that region. Tennessee was visited by 119 million people in 2018 alone, and that generated around $22 billion in travel spending. On top of that, Tennessee also has favorable laws when it comes to short term rentals.

There are also cities that have a good permitting process. Then you can add to that the fact that you have a lot of attractive locations to visit and explore, and the region itself has seen quite a lot of economic growth over the years. All these things make Tennessee extremely interesting for a large variety of investors.

What should rental property investors know about Tennessee?

The total Tennessee population is 6.829 million people, and it’s constantly growing, with an expected 7.5 to 8 million until 2030. On top of that, Tennessee has seen a very good job market growth. In fact, this is one of the states with a great recovery when compared to other regions within the country.

Another thing to keep in mind as an investor in Tennessee real estate is that the effective property tax rate for Tennessee is 0.64%, much lower when compared to other states within the country. You can also expect the average home price for Tennessee to be around $282,592.

Some locations will be more expensive, but it’s safe to say that buying a home here can give you a good ROI. The reason is simple, some locations have very high rent prices, and that makes them amazing for any possible real estate investors.

Nashville

There are a variety of high rent areas in Nashville that give you a tremendous return on investment. It’s possible to net a rental income of $3000+ per month. And with the average property price being $430000, it’s safe to say that buying a Nashville rental property is a very good idea.

The cash on cash return is 4.5% for this particular region. With that in mind, Nashville doesn’t issue short term rental permits for 2022, however you can acquire those from the current owner if you buy from someone.

Memphis

Memphis is known for its rich history in music, but it also has a thriving real estate market. The median sale price was $129k and the average rent is $821. Its employment growth of 2.8% makes this region incredibly appealing to rental property investors, and the best thing is that you can expect a pretty good ROI overall. Even if home prices are not extremely high, the fact that you can still have a good result is more than ok.

Knoxville

Knoxville’s average home price is $307,869, so it’s more expensive than the Tennessee average. With that in mind, the costs of living here are not very high, and you can expect the average rent to be $1393. Of course, some high rent areas in Knoxville can sometimes bring 1.5 or 2x that amount. Which is why we consider Knoxville to be one of the better places to buy a rental property in Tennessee. It does take a little while to find the right rental location, but you will be incredibly happy with the results.

Clarksville

Clarksville is the 5^th largest city in Tennessee and it has a population of roughly 160k people. On top of that, it has an army base and also one of the best universities in the region. It’s also home to the Leaf Chronicle, which is one of the oldest newspapers in Tennessee. The average home price is $190k for this region and the average rent is $757. With that in mind, the ROI is pretty impressive, and the nicest thing here is that they have a 9.2% home value increase. Add to that the fact that properties don’t stay for a long time on the market, and you will see why this is one of the better places to buy rental properties in Tennessee.

Columbia

Columbia has a lot of antebellum houses, and it also has a 4.4% employment growth, which makes it particularly appealing to a large variety of investors. The year over year increase is 16.2%, and that shows the amazing potential that Columbia rental properties can bring to an investor. There are also a very large number of leads per home, considering the fact that most homes stay under 10 days on the market. That goes to show the unique appeal of the region.

Smoky Mountains

If you care about seasonality and short term rentals, Smoky Mountains is a very good pick. The median price is $367000 for properties in this region, and you can expect a rental average of $639 per night in some cases. It’s important to note that such a location is mostly suitable for short term rentals, but you can get a very good ROI from it, and that’s exactly why you have to give it a try. You will be incredibly impressed with the tremendous value and quality that Smoky Mountains is able to provide.

Chattanooga

Another great place in East Tennessee where you can invest right away is Chattanooga. While Chattanooga home prices are $150000 on average, the Airbnb ROI here is 10.4%. On top of that, you can expect around $917 per month, which is great considering the home costs here. In some cases, and according to the neighborhood, it might even go over $1000 per month, which shows the true potential of Chattanooga as a rental property location.

Pegram

Pegram is a bit more expensive when compared to other locations in this list, since the typical home value here is $380690 on average. With that being said, the rent can be anywhere from $1000 to $1600. So the ROI is pretty good for the region itself. On top of that, the living costs are not very high, and the region itself has seen a lot of economic growth over the past decade. That solidifies it as one of the top places to buy rental property in Tennessee.

Conclusion

Each one of these locations is a great option if you’re looking to acquire rental properties in Tennessee. It all comes down to your budget and what expectations you have from an ROI standpoint. Generally, a lot of people are moving to Tennessee either to find work or start a new life, so you won’t have any shortage of tenants.

That’s especially true if you want to purchase a rental property in the tourist-filled locations within the state. One thing is certain, Tennessee can be great for purchasing rental properties, and these cities listed above are some of the prime options to keep in mind!