The Tennessee Rental Property Market: Data, Deals, and Why Vols Orange Is the New Cash-Flow Green

Executive Summary

Tennessee’s rental market in 2025 is marked by contrasting performances across asset types and metros. Multifamily is digesting a record supply wave—most heavily in Nashville—which has softened occupancy and rent growth temporarily. Single-family rentals (SFR) remain more resilient, buoyed by high mortgage rates, tight for-sale inventory, and household formation trends.

Macro drivers—no state income tax, relatively low property taxes, and robust net in-migration—continue to support rental demand, even as insurance premiums and operating costs rise sharply.

Key Takeaways:

• Nashville: Growth engine slowed by oversupply, with late-2025 rebound likely.
• Memphis: Affordable and logistics-driven; operational execution is key.
• Knoxville & East Tennessee: Consistently high occupancy; anchored by education, healthcare, and research.
• Chattanooga: Quality-of-life magnet with stable fundamentals.

Macro Backdrop

• Population & Migration: Tennessee’s population reached ~7.23 million in mid-2024, up ~79,000 YoY. Net domestic and international migration account for most growth, particularly into Nashville, Knoxville, and Chattanooga.
• Labor Market: As of spring 2025, ~167,000 job openings statewide (4.7% job openings rate). Healthcare, education, logistics, and manufacturing are core employment sectors.
• Tax Environment: No state income tax; effective property tax ~0.49% (statewide average). Sales tax rates hover above 9% in many localities.
• Insurance Pressures: Premiums rose 8–15% YoY between 2023–2025, driven by severe weather events and rising replacement costs.
• Housing Affordability: While more affordable than coastal markets, major Tennessee metros have seen renter cost burdens rise, with Knoxville and Chattanooga now at 30–33% rent-to-income ratios for median earners.

Statewide 2025 Themes

While each metro has its own personality, there are several themes that connect Tennessee’s rental markets this year. The first is a classic case of supply and demand imbalance: after record deliveries in 2023–2024, Nashville alone has more than 16,000 units still underway as of mid‑2025, though new starts have slowed, hinting at relief ahead. The second is the performance gap between asset types—single‑family rentals are posting roughly 3% year‑over‑year rent growth statewide compared with near‑flat trends in multifamily, as families seek space and school access amid high mortgage rates. Third, Tennessee’s affordability advantage, especially visible in Memphis with median rents between $1,050 and $1,175, continues to draw cost‑conscious households from pricier states. Fourth, expense inflation is reshaping underwriting; insurance, payroll, and repairs and maintenance have all risen materially, making budgeting discipline essential. Finally, operational differentiation is becoming a competitive edge, with tenant retention strategies and relevant amenities proving critical to driving renewals in a more competitive leasing environment.

• Supply Whiplash: Nashville saw >16,000 units underway mid‑2025, following record completions in 2023–2024. Starts have slowed sharply.
• SFR Outperformance: SFR rent growth at ~3% YoY statewide vs. ~0–1% for multifamily.
• Relative Affordability Advantage: Memphis median rent is ~$1,050–1,175, far below national averages.
• Expense Inflation: Insurance, payroll, and R&M remain elevated; budgeting discipline is critical.
• Operational Differentiation: Tenant retention and amenity relevance drive renewals.

Metro Snapshots

Nashville: From Supply Hangover to Second-Half Rally

Nashville remains the state’s fastest-growing metro but is working through a substantial oversupply of new apartments. Following a wave of completions in 2023–2024, the city’s occupancy hit a trough of about 93.6% in early 2025. Median rents sit near $1,422, about 1.4% lower year-over-year, but the pace of completions is slowing with roughly 16,600 units still underway. Its diverse economy—spanning healthcare, music and entertainment, higher education, and tech—continues to attract new residents, which should help absorption. For investors, value-add suburban B/B+ properties and SFR portfolios in ring suburbs offer the most attractive opportunities, while build-to-rent (BTR) projects can work if construction costs are locked in. Risks include short-term rental (STR) restrictions, competitive Class A concessions, and rising insurance costs.

• Median rent: ~$1,422 (Aug 2025), –1.4% YoY.
• Occupancy: ~93.6% trough in early 2025, recovering.
• Pipeline: ~16,600 units underway; completions slowing.
• Economic Base: Healthcare, music/entertainment, higher ed, tech.
• Play: Value-add suburban B/B+ assets; SFR portfolios in ring suburbs; pragmatic BTR.
• Risks: STR restrictions, Class A concessions, insurance escalation.

Memphis: Affordability, Logistics, and Operational Alpha

Memphis remains Tennessee’s affordability leader, with average rents ranging from about $1,050 to $1,175 and only minimal growth over the past year. While occupancy lags other metros in the high-80% range, conditions are improving as new supply tapers—only 1,000 to 1,300 units are expected to deliver in 2025. The city’s role as a national logistics hub, anchored by FedEx, along with manufacturing and distribution, supports a stable renter base. Investors can find success with workforce multifamily properties where strong property management can capture operational upside, or with low-basis SFRs targeting long-term tenants. Risks center on neighborhood-specific vacancy and collections performance.

• Average rent: ~$1,050–$1,175 (Aug 2025), 0–1% YoY.
• Occupancy: High-80s; improving as supply slows (~1,000–1,300 units due in 2025).
• Economic Base: FedEx HQ, logistics, manufacturing.
• Play: Workforce MF with strong PM; low-basis SFR with long-term tenants.
• Risks: Neighborhood-specific vacancy; collections management.

Knoxville & East Tennessee: Sticky Renters, High Occupancy

Knoxville and its surrounding East Tennessee markets are some of the tightest rental markets in the state, maintaining occupancy rates of 96–97% even with recent deliveries. Median rents are roughly $1,130, down 3.3% year-over-year, but affordability pressures in the for-sale market are keeping renters in place longer. Anchored by the University of Tennessee, Oak Ridge National Lab, and a robust healthcare sector, this region offers steady, recession-resistant demand. Investment plays include stable multifamily assets near major employers and compliant mid-term rentals catering to traveling nurses and contractors. Risks include limited acquisition opportunities and insurance cost increases.

• Median rent: ~$1,130, –3.3% YoY.
• Occupancy: 96–97%.
• Economic Base: University of Tennessee, Oak Ridge National Lab, healthcare.
• Play: Stable MF near anchors; compliant MTR for traveling professionals.
• Risks: Limited acquisition volume; rising insurance.

Chattanooga: Small-Big City with Outdoor Pull

Chattanooga blends small-city charm with big-city amenities, boasting a median rent near $1,195, about 3.2% lower than a year ago. Occupancy remains in the mid-90s, aided by a manageable development pipeline. Its economy is anchored by Volkswagen manufacturing, tourism, and a growing tech startup scene, while its outdoor lifestyle and quality of life attract remote workers and families alike. Investors should focus on small to mid-sized multifamily in walkable, amenity-rich neighborhoods or family-friendly SFRs. The main risks involve submarket variability and creeping insurance costs.

• Median rent: ~$1,195, –3.2% YoY.
• Occupancy: Mid-90s.
• Economic Base: Volkswagen manufacturing, tourism, tech startups.
• Play: Small/mid MF in walkable neighborhoods; family SFR.
• Risks: Submarket variability; insurance cost creep.

Strategy Playbook

Tennessee’s rental market rewards investors who pair strong fundamentals with disciplined execution. Acquisition strategies should focus on yield-first opportunities where the purchase price is supported by in-place cash flow rather than speculative rent growth; in other words, basis matters more than buzz. Underwriting assumptions should be grounded—flat to +2% rent growth for multifamily and +2–4% for SFR—so that deals work without requiring an aggressive market upswing. Operating expense control is critical, particularly around insurance, where mitigation efforts and bulk vendor contracts can protect margins. Retention is a cornerstone of returns; renewals are cheaper than new leases, and community engagement can boost tenant loyalty. Zoning compliance is non‑negotiable, especially for STR and MTR strategies in Nashville, where local rules are strict. On the financing side, keep DSCR at or above 1.20x on stabilized numbers and stress test for potential rate increases. Finally, exit planning should assume at least a 25–50 basis point cap rate expansion, ensuring you’re prepared for a range of market conditions.

• Acquisition: Focus on yield-first deals; basis matters.
• Underwriting: Flat to +2% rent growth MF, +2–4% SFR.
• OPEX Control: Mitigate insurance costs; bulk vendor contracts.
• Retention: Renewals > new leases; community engagement.
• Zoning Compliance: Especially for STR/MTR in Nashville.
• Debt Discipline: DSCR ≥1.20x stabilized; stress test for rate hikes.
• Exit Planning: Assume +25–50 bps cap rate expansion.

Underwriting Benchmarks

For SFR investors and small multifamily owners, these benchmarks serve as a reality check when modeling deals in Tennessee. In urban Class A multifamily, rent growth is likely to hover between 0–2% in the near term, with early‑cycle vacancy in the 8–10% range due to new supply digestion. Suburban Class B properties tend to see steadier 1–3% rent growth and slightly lower vacancy around 7–8%, making them attractive for stable cash flow plays. Single‑family rentals generally enjoy stronger rent growth—about 2–4%—and tighter vacancy at 5–6%, especially in family‑oriented neighborhoods with good schools. Across all asset types, insurance premiums are climbing at +8–15% annually, and CapEx needs shouldn’t be underestimated: plan $250–$400 per unit per year for small multifamily after initial improvements, and $900–$1,200 per home for SFR depending on age and condition. Leverage in the 60–70% LTV/LTC range balances returns with resilience, helping ensure DSCR coverage even if market conditions soften.

• MF Urban A: 0–2% rent growth; 8–10% vacancy early-cycle.
• MF Suburban B: 1–3% rent growth; 7–8% vacancy.
• SFR: 2–4% rent growth; 5–6% vacancy.
• Insurance: +8–15% YoY.
• CapEx: $250–$400/unit MF; $900–$1,200/home SFR.
• Leverage: 60–70% LTV/LTC.

Regulatory Notes

For SFR investors and small multifamily owners, understanding Tennessee’s landlord-tenant rules is essential to protecting returns. Rent control is pre‑empted statewide, meaning no city can impose limits on rent increases—a landlord‑friendly feature that supports market‑driven pricing. The eviction process is faster than in many states, but still requires proper notice and a court order, so budgeting for occasional turnover downtime is wise. Short‑term rentals (STR) are governed at the local level; Nashville, in particular, enforces strict regulations on non‑owner‑occupied STRs in many residential zones, making due diligence on zoning and permitting a must before committing to that strategy.

• Rent Control: Pre‑empted statewide.
• Evictions: Faster than many states but court process required.
• STR: Governed locally; Nashville strict on non‑owner‑occupied.

Conclusion

In summary, Tennessee’s rental property market in 2025 offers opportunity for disciplined investors—especially those targeting SFR and small multifamily assets—who are ready to pair conservative underwriting with proactive operations. Whether you’re eyeing a Nashville suburb, a cash‑flowing Memphis duplex, or a steady Knoxville four‑plex, success will come from buying at the right basis, managing expenses, and focusing on tenant retention.

For those seeking financing, American Heritage Lending provides programs built for real estate investors, including 30‑ and 40‑year fixed‑rate DSCR loans with interest‑only options for stabilized properties, 12–24 month bridge loans for value‑add projects, and a full suite of other investor-focused loan programs. Our goal is to help you structure financing that keeps cash flow healthy while giving you flexibility for growth.