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VOL. 45 | NO. 37 | Friday, September 10, 2021

Spread the word: Party’s winding down for short-term rentals

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News has never traveled faster than it does today, but the latest news concerning the short-term rental situation in Nashville seems to have exited the information highway.

Short-term rentals (STRs) began to boom in Nashville in 2015, some eight years after the company Airbnb was founded and began to gain momentum in the “It City,” which also has become known as “The Bachelorette Party Capital of the World.”

In the early days back in 2015, any property anywhere in Metropolitan Nashville could be listed as an STR. The situation exploded in its unregulated state, and there were reports of orgies in the backyards of stable neighborhoods being witnessed by unsuspecting youth and the aged alike.

Investors across the globe saw the opportunity to realize spectacular returns on real estate investments. To be fair, they probably were not aware of any hanky panky. Regardless, money poured into the city.

Realizing there was an issue, Metro Council understood that 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, yet it did not eliminate some of the debauchery and wildness of the visiting bachelorettes and their friends.

The STRs were so profitable that properties were being snatched sight unseen by real estate groups consisting of people who had never set foot in Nashville.

This was big news, and word spread quickly. What has not spread quickly is that the Metro Council – after more than a year of debate and hearing from constituents on both sides of the argument – eventually voted to regulate the situation. In 2018, it began to phase out non-owner-occupied (NOO) STRs. No property zoned “R” or “Rs,” both reflecting residential properties, can be used as NOO STRs.

Apparently, many investors across the country missed that memo. Local Realtors are constantly bombarded by out-of-town buyers who want to buy STRs. Granted, there remain opportunities for investment, and local real estate guru Grant Hammond is a leader in assisting development of STRs that comply with the Metro ordinance.

There is still gold in the STR hills, even with rising property values and regulations.

Residential multifamily midrise buildings and high-rises are exempt from the restriction and can be used as STRs. Unfortunately for some investors, the homeowners’ associations for many buildings that could, under Metro law, offer STRS have amended their bylaws to ban STRs.

This leaves the out-of-town investors scratching their collective heads. They have heard of this bonanza, albeit a few years late, and they cannot comprehend why a complex would not want to reap the financial rewards of STR visitors.

Of course, they have never had to attempt slumber within 20 feet of a bachelorette party in full swing.

Not all STR users are wild, of course, and the bed-and-breakfast industry has flourished for hundreds of years. When the owner resides in the home and actually provides a bed and breakfast, the situation is usually calm. A few thousand untamed bachelorettes experiencing one last weekend of freedom should not cast a bad light on an entire industry that is pouring hundreds of millions of dollars into the city’s coffers.

When Ray Stevens penned his classic “Everything is Beautiful,” he had never driven behind a peddle tavern or a lowboy pulled by a John Deere.

There are STR investment opportunities available. They are not cheap, yet they are bountiful to some extent.

One local commercial real estate broker fearing he was missing out on the action purchased a couple of units with STR capabilities and was excited that the management company would book the rooms, change the towels and linens, clean the condo and alter the rents based on surges such as CMA Week, Titans and Predators games, and other events for a fee of 28%.

After a couple of years of this, he determined that a long-term renter who brought their own sheets and furniture – and a management company charging an 8% fee – was more profitable, as there were fewer repairs, extra fees for cleanup involving, well, let’s just leave it at extra cleanup. You might be eating while you are reading this.

Recently, the Nashville Area Chamber of Commerce touted an article in SmartAsset citing Nashville as a Top 10 city for long-term rentals. With the STR condos springing up all over town and housing available in new and established neighborhoods, the long-term rental may fare as well as the STR.

Meanwhile, those choosing to invest in STRs should do their homework.

Sale of the Week

4321 Estes Road

Green Hills is one of the city’s older neighborhoods with new construction dotting the infill lots and replacing teardowns. As with downtown condos and some of the newer homes, high prices per square foot are becoming the norm rather than the exception.

Nancy Tice listed the home at 4321 Estes Road for $587 per square foot and received multiple offers.

With 2,809 square feet in the main dwelling and 1,056 in a detached studio, the property received multiple offers before selling for $1.752 million – $93,000 more than list price – bringing a whopping $624 per square foot.

However, if the studio footage – and fine footage it is – is included, the price was a mere $453 per square foot.

Dan Griscom, a longtime fixture and award-winning Realtor at Pilkerton Realtors, won the battle for her client, as she often does. Including the studio, the house has four bedrooms and three full bathrooms.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty, LLC and can be reached at riuchard@richardcourtney.com.

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