VOL. 45 | NO. 37 | Friday 10th September 2021
The news has never been faster than it is today, but the latest news on the short-term rental situation in Nashville seems to have left the information superhighway.
Short Term Rentals (STRs) began booming in Nashville in 2015, around eight years after Airbnb was founded, and began to gain traction in “It City,” also known as “The Bachelorette Party Capital of the World.”
In the early days of 2015, every property in Metropolitan Nashville was able to be listed as a STR. The situation exploded in its unregulated state, and there were reports of orgies in the backyards of stable areas witnessed by unsuspecting youth and old alike.
Investors around the world saw the opportunity to generate spectacular returns on real estate investments. To be fair, they probably weren’t aware it was a handkerchief. Still, money poured into the city.
Realizing there was a problem, Metro Council understood the industry needed to be regulated and voted to issue a limited number of STR permits per neighborhood. In theory, this would slow the carnage down, but it didn’t remove some of the debauchery and ferocity of the visiting bachelors and their friends.
The STRs were so profitable that real estate was being ripped away unnoticed by real estate companies made up of people who had never set foot in Nashville.
This was big news and the news spread quickly. What didn’t spread quickly is that – after more than a year of debating and hearing voters on both sides of the argument – the Metro Council finally voted to resolve the situation. In 2018, it started phasing out STRs (NOO) that it did not use itself. No lots with the zones “R” or “Rs”, which reflect both residential properties, can be used as NOO STRs.
Apparently, many investors across the country missed this memo. Local brokers are constantly bombarded by out-of-town buyers looking to buy STRs. Granted, opportunities for investment remain and local real estate guru Grant Hammond is a leader in helping develop STRs that are compliant with the Metro regulation.
There’s still gold in the STR hills, even with property values and regulations rising.
Residential, multi-family, medium and high-rise buildings are exempt from the restriction and can be used as STRs. Unfortunately for some investors, many of the properties that Metro law could offer STRS have changed their bylaws to prohibit STRs.
Foreign investors are scratching their collective heads. You have heard of this bonanza, albeit a few years late, and cannot understand why a complex may fail to reap the financial benefits of STR visitors.
Of course, they’ve never had to try slumbering within 20 feet of a bachelorette party in full swing.
Of course, not all STR users are wild, and the bed and breakfast industry has thrived for hundreds of years. If the owner lives in the house and actually provides a bed and breakfast, the location is usually quiet. A few thousand untamed bachelors experiencing a final weekend of freedom shouldn’t throw a bad light on an entire industry that is pouring hundreds of millions of dollars into the city’s coffers.
When Ray Stevens wrote his classic “Everything is Beautiful,” he had never driven behind a street bar or a lowboy pulled by a John Deere.
There are STR investment opportunities. They’re not cheap, but they are plentiful to some extent.
A local commercial real estate agent, fearful of missing out on the action, bought a few units with STR capabilities and was thrilled that the management company would book the rooms, change towels and linens, clean the apartment, and change rents due to overruns like CMA Week , Titans and Predators games and other events for a fee of 28%.
After a couple of years, he found that a long-term renter who brought their own sheets and furniture – and a management company that charged an 8% fee – was more profitable, having fewer repairs, extra cleaning fees with, well, let’s leave it easy with the additional cleaning. You may be eating as you read this.
Recently, the Nashville Area Chamber of Commerce announced an article in SmartAsset naming Nashville as a top 10 city for long term rentals. With STR condos popping up all over the city and apartments available in new and established neighborhoods, the long-term rental can do as well as the STR.
In the meantime, those who choose to invest in STRs should do their homework.
Sale of the week
4321 This street
Green Hills is one of the city’s older neighborhoods, with new builds puncturing the fill areas and replacing demolitions. As with downtown condos and some of the newer homes, high prices per square meter are becoming the norm rather than the exception.
Nancy Tice listed the home at 4321 Estes Road for $ 587 per square foot and received several offers.
With 2,809 square feet in the main apartment and 1,056 square feet in a detached studio, the property received several offers before it sold for $ 1.752 million – $ 93,000 more than list price – which brings in a whopping $ 624 per square foot.
However, when the studio footage – and fine footage – is included, the price was only $ 453 per square foot.
Dan Griscom, a long-time staple and award-winning broker at Pilkerton Realtors, won the battle for her client as so often. Including the studio, the house has four bedrooms and three bathrooms.
Richard Courtney is a Licensed Real Estate Agent with Fridrich and Clark Realty, LLC and can be reached at email@example.com.