A family was curious about the actual rental yield they could expect. They were looking for properties in Nashville with a budget of around $400,000. It's important to note that simply looking at rental prices can inflate the numbers.

The average rent in Nashville is $1,983 (Zillow, as of August 2026). This is 3 percent higher than the national average, but it has decreased by 8 percent compared to the previous year. Studios average $1,592, one-bedroom units are around $1,650, and two-bedroom units are about $1,870. The first step is to divide the rent by the purchase price to check the 1 percent rule, but the fact that rents have decreased compared to last year could negatively impact the yield calculation.

Next, let's look at property taxes. The effective tax rate in Davidson County, where Nashville is located, is about 0.81 percent, which is higher than the Tennessee state average of 0.54 percent but lower than the national average (according to OwningWell). The area is set to see a tax rate increase following a reassessment in 2025, so it's important to keep an eye on potential tax rate changes alongside favorable property tax rates.

Tennessee law prohibits rent control, and no local government can create rent ceiling ordinances. While this creates a favorable environment for landlords to adjust rent, they cannot raise it arbitrarily during the lease term, and if the lease is month-to-month, a 30-day notice is required.

Returning to the family's story, investment loans require a down payment of 15 to 25 percent, which is higher than for primary residences, and a credit score of at least 620 is needed for approval, with better rates available for scores above 740. It's also important to note that lenders only consider 75 percent of the expected rental income as qualifying income, which should be factored into their budget.

During the operational phase, it's typical to budget for property management fees of 8 to 12 percent of the monthly rent and to set aside about 1 percent of the property value annually for maintenance reserves. The family also had to realize that landlord insurance, while offering broader coverage than standard homeowners insurance, comes with higher premiums.

Areas that Korean families are particularly interested in Nashville include Brentwood and near Franklin. While it's good to refer to ratings from GreatSchools or Niche, school district boundaries change frequently, so it's advisable to check the assigned school for a specific address before purchasing. Areas supported by strong school districts tend to have relatively stable rental demand even during periods of declining rents.

For families moving to Nashville from other states, the absence of a state income tax in Tennessee can be an attractive factor. However, as the family discovered, they also need to consider property taxes and rental trends to accurately calculate the actual cost of moving. If they are coming from states like California or New York, where rent control exists, the lack of rent control in Tennessee may seem advantageous, but during periods of declining rents, it could actually become a burden for landlords.

The family also made sure to conduct a home inspection before purchasing. Even in high-rent areas, older homes can have significantly varying maintenance costs depending on the condition of heating and cooling systems or the roof. It's not uncommon to negotiate the purchase price based on the inspection report.

They also needed to obtain insurance quotes. Landlord insurance premiums can vary greatly based on the age and location of the property, so it's wise to compare quotes from two or three different providers. The family realized late in the process that the insurance premiums were higher than they initially budgeted.

Ultimately, what the family confirmed is that rental yield is a number that must reflect the purchase price, property taxes, operating expenses, and vacancies. It's also worth noting that at the time of sale, they can defer capital gains tax through a 1031 exchange, which is something to consider in a long-term strategy. While the rental prices are still above the national average, the recent downward trend and rising property taxes are burdens that need to be addressed. This article does not constitute investment or legal advice, and it is recommended to consult with a professional before making any contracts.