It seems like wherever you’re investing today, if you’re choosing an Airbnb rental strategy, you need to take into consideration that there might be some regulations set in place. How strict these regulations are depends on the real estate market you’re investing in, and how its regulators feel about short term rental platforms like Airbnb and VRBO saturating their communities and neighborhoods with rental properties.
While some cities support and welcome short term rental operators seeing as they support the market and economy, others have a different perspective. Nashville, TN is one of the cities which seems to be against the Airbnb wave and because of some strong push-back from the city council, real estate investors now need to be careful with where and how they invest in Airbnb Nashville.
Enforcing Nashville Airbnb Laws
So did these regulations just come out of nowhere? No. The city has been trying to regulate Nashville short term vacation rentals for quite some time and is now reinforcing original laws as well as new regulations. What should you do as an Airbnb Nashville investor (or a future one)? Well, seeing that the Nashville Metro Council is cracking down on illegal rentals in the city, we recommend you seriously study the Nashville Airbnb laws and the short term rental ordinance. First, start by understanding what the city believes is a short term rental.
Defining a Short Term Rental
A short term rental property is a residential dwelling unit which has a maximum of four sleeping rooms. This property must be used or advertised for rent for transient occupancy by guests. These dwelling units cannot be rented out to the same occupant for more than 30 consecutive days. Otherwise, it wouldn’t be considered a short term rental property.
Now that you know what qualifies as a short term rental for your Airbnb Nashville investment, it’s time to talk about permits.
Applying for the Right Permit
Something many real estate investors tend to ignore is the importance of running a licensed Airbnb Nashville property. The city is currently facing the task of cracking down on 1000s of illegally operating short term rentals. The Metropolitan Government requires short term rental operators to obtain an operating permit. There are two main types of short term rental permits: owner-occupied and non-owner occupied.
Most Airbnb Nashville investors will find themselves having to apply for the non-owner occupied permits. From the name, you can understand that these are for short term rental properties in which the owner doesn’t reside in said property. These rentals, like owner-occupied rentals, have a limit of a single party of individuals. Last year, 2,188 short term rental permits were granted. This year, only 756 permits have been issued so far.
Real estate investors must also comply with zoning restrictions as new non-owner occupied permits aren’t allowed in residential (R or RS) zones. Note: Existing permit holders in these zoned districts are grandfathered under state law and may be eligible for permit renewal. If the Metro locates any illegally operating Airbnb vacation rentals, the property owners are sent an initial violation notice and are then fined $50 day.
This bill was recently introduced in the city and it’s definitely something Airbnb Nashville investors need to be updated on. Bill BL2019-1633 proposes the elimination of multi-family (RM) zoning from the list of zones which allow for non-owner occupied permits. Another thing real estate investors need to know about this ordinance is that it is a starter bill, meaning the city might be planning on banning short term rentals in even more zones.
The Tennessee state law protects current permit holders in the RM zones, but if there is a transfer of ownership, this permit expires, therefore losing its grandfather status. The bill is set to go into effect starting in May 2020. So investors can still apply for non-owner occupied permits in these zones as the Codes Department website states that they will issue permits until the effective date.
Other Short Term Rental Requirements
Whether you’re planning on investing in an Airbnb Nashville property or you’re already operating a short term rental in the Nashville real estate market, there are a couple of rules you should keep in mind:
- The permit holder is responsible for the guests of his/her property. All guests must abide by any applicable noise restrictions and waste management provisions.
- Short term rental property owners are responsible for collecting and remitting all applicable room, occupancy, and sales taxes required by state law or the Metropolitan Code.
- Changing ownership of the property will cancel the permit. You must renew your permit before it expires (expiration is 365 days after its issue).
- There is a maximum of 12 occupants for short term rentals. The principal renter of this unit must be at least 21 years of age.
- Short term rental operators may not be compensated by a guest who occupied the unit for less than 24 hours.
For a more comprehensive list of any rules and restrictions which may apply to your Airbnb Nashville investment property, click here.
Where Can You Legally Operate an Airbnb Property?
There are a couple of zoning districts where you can get a non-owner occupied permit for your short term rental. This zoning district land use table clarifies which zones permit these investment properties. The strict restriction on Airbnb Nashville and new zoning laws makes it difficult to confidently say that an investment in some of the top performing neighborhoods for Airbnb Nashville will remain legal.
If you do wish to pursue the Airbnb rental strategy in Nashville, start your search for a profitable investment property now.
Alternative: Opt for a Long-Term Rental in the Nashville Real Estate Market
We will be using Mashvisor’s data analytics to list some neighborhoods in which you can operate profitable long-term rentals; this is also a successful rental strategy in the Nashville housing market.
- Median Property Price: $334,933
- Price per Square Foot: $165
- Monthly Traditional Rental Income: $3,025
- Traditional Cash on Cash Return: 6%
- Median Property Price: $226,300
- Price per Square Foot: $166
- Monthly Traditional Rental Income: $2,004
- Traditional Cash on Cash Return: 5%
- Median Property Price: $249,450
- Price per Square Foot: $156
- Monthly Traditional Rental Income: $1,898
- Traditional Cash on Cash Return: 5%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
The Bottom Line
Do you have a certain investment property in mind and are considering it for an Airbnb Nashville rental strategy? Don’t forget to check if it complies with the zoning restrictions. You can further analyze your investments with Mashvisor’s data and tools. Do you have questions about Mashvisor? Read our FAQs to learn more.