The Nashville real estate market has grown 28% since 2020, making it one of the hottest markets in the country.

But with this boom, the big question is: where should you invest? Homes for sale in Franklin, Tennessee, or office buildings?

For residential investors, the surge in demand is impossible to ignore. Rental demand is rising, driven by an influx of new residents, particularly those from companies such as Oracle and Amazon.

In this article, we’ll dive into:

• The surge in residential rental demand and its long-term implications
• Why Nashville’s office market is seeing a record-low vacancy rate
• How to evaluate the best Nashville investment properties

Whether you’re considering apartments or office buildings, this guide will help you make an informed decision.

Side-by-Side Comparison: Residential vs. Commercial Real Estate in Nashville

Your approach to estate investing in Nashville will vary significantly depending on whether you choose residential or commercial properties.

Here’s a quick, side-by-side breakdown to help you decide:

Factors	Residential	Commercial
Minimum Investment	$350K for a 3BR home in Madison	$800K for a small retail space in Donelson
Typical Tenant	Families, remote workers	Medical offices, boutique retailers
Average lease Length	I Year	3–10 years (Triple Net (NNN) leases common)
Cap Rates	4–7% (ex, Sylvan Park)	6–12% (ex, SoBro mixed-use properties)
Financing Option	3.5% FHA loans available, flexible entry	25%+ down payment, strict DSCR (Debt-Service Coverage Ratio)

Residential Real Estate Investing: Nashville Hotspots

If you’re looking for Brentwood, Nashville houses for sale, you’re searching for exciting opportunities. Let’s explore some of the top neighborhoods delivering strong returns and what you should consider.

Best Neighborhoods for Residential Real Estate ROI

East Nashville

Known for its vibrant culture and exceptional charm, East Nashville boasts an average annual return of 9.1%, making it a dream for investors willing to undertake some renovation work.

Hermitage

Rental demand is booming in Hermitage, with an impressive 85% occupancy rate. Steady rental income and lower maintenance turnover make this area a solid bet.

North Nashville

Thanks to growth around HBCUs like Tennessee State University, North Nashville has seen an incredible 18% year-over-year appreciation. It’s a hotspot for both student housing and young professionals.

Pros of Residential Real Estate Investing in Nashville

• Affordable Entry Points: Duplexes typically start around $ 250,000, offering great value compared to other major cities.
• Booming Remote Work Demand: According to Tyler Cauble’s data, remote workers are driving up housing demand across the city.

Cons of Residential Real Estate Investment

• Higher Tenant Turnover: Student-heavy areas may experience more frequent tenant turnover, resulting in increased management demands and potential vacancy gaps.

Nashville’s energy, growth, and affordability make it a goldmine.

Commercial Real Estate Investing: Nashville Opportunities

Top Sectors to Watch For Commercial Real Estate Investment

Nashville’s commercial real estate scene is heating up across several sectors. Medical offices are a prime opportunity, fueled by HCA’s massive $2.1 billion healthcare expansion. Last-mile warehouses near BNA Airport are booming, thanks to the unstoppable growth of e-commerce.

Let’s not forget Music Row, where recording studios have seen an impressive 22% rent growth since 2022, driven by the city’s ever-thriving music industry.

Why Commercial Real Estate Investors are Excited.

Triple-net (NNN) leases remain a significant draw, shifting property expenses such as taxes and maintenance to tenants. Plus, 1031 exchange options, like those offered by Excelsior Group, make it easier to defer capital gains and reinvest smartly — a win-win for portfolio growth.

Challenges to Navigate Commercial Real Estate

Downtown tenant improvement costs are steep, averaging about $120 per square foot. Investors need to budget carefully and factor this into long-term ROI projections.

Nashville-Specific Real Estate Factors

Taxes:

One of the biggest perks for real estate investors in Nashville is the lack of a state income tax. This means more of your rental income and capital gains stay in your pocket — a significant advantage compared to investors in other states.

Zoning:

However, it’s not all smooth sailing. Recent zoning changes have imposed stricter restrictions on short-term rentals, particularly in 14 specific ZIP codes. If you’re eyeing the Airbnb market, it’s crucial to double-check the latest regulations before diving in.

Future Trends:

Nashville’s real estate scene is buzzing with exciting developments. Wedgewood-Houston is experiencing a surge in demand for mixed-use spaces, which blend residential, retail, and creative workspaces into vibrant neighborhoods.

In downtown areas, converting office buildings into residential units is gaining momentum — a savvy response to the evolving post-pandemic lifestyles and work patterns.

Other Insights:

Nashville’s continued population growth and strong job market add to its appeal. With thoughtful planning, investors can still uncover exceptional opportunities in this rapidly evolving market.

Hybrid Strategies For Real Estate Investment

Multi-Family (5+ Units):

Multi-family properties with five or more units hit the sweet spot between residential familiarity and commercial profitability. Although classified as commercial real estate, they often house residential tenants, offering stable rental income and potential for scalable growth.

For example, an 8-plex in Antioch priced at $1.2M with an attractive 8.5% cap rate showcases the kind of opportunity savvy investors love—strong returns with manageable risk.

Live-Work Properties:

The rise of creative entrepreneurship has fueled demand for live-work spaces, especially in hotspots like The Nations artist lofts. These properties let tenants blend their living and working environments, making them incredibly appealing to artists, freelancers, and remote workers. Investors benefit from tapping into a growing market segment that is willing to pay a premium for flexibility and lifestyle convenience.

Why It Matters:

Hybrid strategies offer the best of both worlds—residential stability with commercial upside.

Local Resources For real Estate Investment

Finding the proper local support can make all the difference in your investment journey. Here’s a quick guide to help you tap into the best Nashville condos for sale, among other properties.

Interactive Map: Nashville’s Top Investment ZIPs

Explore Nashville’s hottest real estate areas with our easy-to-use interactive map. Whether hunting for multi-family units, commercial spaces, or up-and-coming neighborhoods, this map highlights the ZIP codes with the highest ROI potential. It’s designed to help you quickly spot opportunities — and get ahead of the competition.

Key features:

• Real-time data on property values and rental trends
• Highlighted zones for rapid development
• Filters for property types and investment goals

Financing Guide: Local Lenders with Commercial Expertise

The right financing partner can streamline your investment process. We’ve curated a list of trusted Nashville lenders specializing in commercial real estate and investment properties. These experts understand the local market nuances — meaning faster approvals, smarter terms, and a smoother overall experience.

What you’ll find:

• Top-rated lenders with flexible loan options
• Special programs for first-time investors
• Personalized support for portfolio expansion

Commercial vs Residential Real Estate FAQs

What’s the average ROI for Nashville rental properties?

The average return on investment (ROI) for Nashville rental properties ranges from 6% to 10%, depending on the location and property type. Prime areas like East Nashville often offer higher returns, with short-term rentals providing additional opportunities.

Can I use an FHA loan to purchase a commercial property in Tennessee?

FHA loans are for residential properties only(up to 4 units). For commercial properties in Tennessee, you’ll need conventional or SBA loans.

Where are Nashville’s opportunity zones?

Opportunity zones are in North Nashville, East Nashville, and South Nashville, including neighborhoods like Jefferson Street and Wedgewood-Houston. These zones offer tax incentives to investors.

Conclusion

Whether you’re a hands-on investor with a budget under $500K looking for residential opportunities or a portfolio of $1M+ and seeking commercial properties with tax advantages, Nashville has something for you.

Ready to make your next move? Download our free Nashville Investment Neighborhood Scorecard and start making informed decisions.

Let’s talk business. Call our real estate brokers in Nashville, TN, today.