Every week, buyers searching for a downtown Nashville Airbnb investment land on the same product category: a high-rise condo in the 37201 or 37203 ZIP, steps from Lower Broadway, with a skyline view and a projected nightly rate that looks compelling on paper. It is the most-searched STR submarket in the city. The pitch writes itself. You buy a unit at the Four Seasons, 505, Encore, or Viridian, post it on Airbnb, and collect bachelorette-party money year-round.
Here is the problem with that pitch. Most of those buildings will not let you run a short-term rental. And the ones that will still require you to clear a math hurdle that few investors actually stress-test before they make an offer.
The Consensus View — and Why It Needs to Be Challenged
The conventional wisdom is simple: Nashville is a tourism machine, Lower Broadway concentrates demand better than almost any urban core in the country, and downtown proximity equals STR pricing power. None of that is wrong in isolation. Nashville's average daily rate of roughly $350 outpaces both Austin ($290) and New Orleans ($297), reflecting strong event-driven pricing — and while occupancy rates across those comparable cities hover similarly around 50 to 53 percent, Nashville's mix of large group rentals and year-round tourism sustains higher earnings.
The logic that follows — buy downtown, capture that ADR premium — is where the analysis goes wrong. Because downtown is not a single, permeable submarket. It is a collection of individually governed buildings, each with its own HOA, its own bylaws, and its own STR policy. And the most prominent ones have locked the door.
The HOA Problem Most Buyers Never Check Until It's Too Late
No downtown Nashville high-rise condo buildings allow short-term rentals as a category. Buildings like Viridian, ICON, and Encore restrict owners to minimum 12-month leases and typically limit rental permits to roughly 20 percent of total units. While Airbnb listings do appear in downtown high-rises, these are generally master-leased apartment units, not individually owned condos.
Even where Metro Codes permits non-owner-occupied STR use, HOA or condominium association documents can prohibit it entirely. Reviewing HOA bylaws and architectural review documents before assuming any condo qualifies for STR use is non-negotiable. The zoning layer and the HOA layer are legally independent. Metro Nashville can approve your permit application, and your HOA can still shut you down. Buyers discover this after closing. Sometimes after they have already furnished the unit.
This is not a minor footnote. By default, most HOA bylaws in Nashville high-rises require any tenants to sign leases for a minimum of six to twelve months, which automatically eliminates short-term rental possibilities unless the HOA specifically allows it. Most do not. Most never will.
The Zoning Layer Is More Restrictive Than You Think
In Nashville and Davidson County, the law requires that anyone wishing to rent a property as a short-term rental must receive a permit from Metro Codes prior to listing. The new online permit application process became effective March 11, 2026.
New non-owner-occupied permits are issued only in a specific list of zoning districts, including MUN, MUL, MUG, MUI, OG, OR20 through OR40-A, ORI, CN, CL, CS, CA, CF, and the DTC designations — DTC North, DTC South, DTC West, and DTC Central — along with SCN, SCC, and SCR. Those DTC designations are the downtown core. But zoning eligibility is only the first gate. Existing permit holders in non-eligible districts may be eligible for renewals, but those permits are not transferable if the property is sold or transferred.
That last sentence is the one that trips up investors the most. A building may currently house active Airbnb operators running on legacy permits — permits that belonged to the previous owners and legally cannot be assigned at sale. You are not buying into an STR-approved unit. You are buying a condo in a building where somebody else used to run an STR. Those are very different things. For a deeper breakdown of the permit mechanics across Davidson County, the Costigan Group STR advisory page walks through how we underwrite permit eligibility before an offer is made.
Now Run the Math on the Buildings That Actually Qualify
There is a narrower set of buildings in and around the downtown core that were purpose-built or specifically entitled for non-owner-occupied STR use. Hyve, Muse, Allegro, Heritage at Broadway, and a handful of others were designed from the ground up for this use. These are real, they work, and they do produce income. But here is what the pro forma looks like when you run it honestly.
The average active Nashville STR listing earned $40,900 in gross revenue over the trailing twelve months, according to AirDNA, with listings booked 54 percent of available nights at an average daily rate of $349. That is the citywide average. Downtown-positioned units in STR-entitled buildings can outperform that number, but they also carry entry prices well above the metro average.
Realtor.com data places downtown Nashville at roughly $675,000 median and $702 per square foot — meaningfully above The Gulch's $626,000 median and $664 per square foot. For purpose-built STR product like Hyve, entry prices run higher given the permit premium already baked in. HOA fees on mid-market downtown condos run $400 to $700 per month, and high-rise luxury product carries fees of $700 to $3,000 or more monthly. At 505, HOA fees range from $315 to $3,200 per month depending on unit size and floor, with most one-bedroom units paying between $375 and $900 monthly.
Stack those HOA fees against the revenue picture. If your unit grosses $55,000 annually — a strong performer at downtown rates — and your HOA runs $700 per month, you have spent $8,400 off the top before touching a mortgage payment, a property manager at 20 percent of gross, Metro Nashville's hotel occupancy tax ( combined state and local taxes on room rentals can reach 15.25 percent plus a flat fee ), utilities, maintenance, and insurance. Underwriting with 25 to 35 percent operating costs before trusting any projection is the floor, not the ceiling, once HOA fees are added in on high-rise product. On a $650,000 purchase, the net operating income left after those layers rarely supports a cap rate above 4 percent. That is not an investment. That is a lifestyle purchase with an Airbnb account attached.
The Market-Level Trend Making This Worse
From June 2025 to June 2026, Nashville STR revenue is down 6.1 percent, ADR is down 6.0 percent, and RevPAR is down 9.8 percent, according to AirDNA — even as overall occupancy edged up 1.7 percent and active listings fell 1.9 percent. Rates are compressing. Supply is tightening slightly. But the revenue-per-listing figure is still moving in the wrong direction. For an investor paying a permit premium on a downtown condo and carrying elevated HOA fees, this is not the tailwind moment to anchor an underwrite on peak-year projections.
Downtown condos are presenting negotiating opportunities not seen in years, while suburban submarkets remain supply-constrained and demand-driven. That note about negotiating opportunity sounds like a buying signal. It is not — not for STR purposes. It signals that the resale market for downtown condos is soft, which matters enormously for your exit strategy. The buyer pool for a downtown Nashville condo is already narrow. The buyer pool for a downtown Nashville condo at a price that justifies STR economics is narrower still.
Where the Better Opportunity Actually Lives
The STR buildings in Nashville that actually pencil at today's purchase prices tend to share a few characteristics: they are purpose-built for non-owner-occupied use, they carry lower per-unit acquisition costs than downtown high-rises, and they are located within the 3-mile walkability radius of Broadway without sitting directly in the high-rise condo market.
Germantown townhome developments built under SP zoning — including Alora and Lucy — sit in downtown-adjacent zoning. East Nashville STR-permitted buildings along Main Street, Lischey Avenue, and the Five Points corridor, including The Jesse, Vibe, Starlet East, and Lyric, represent another cluster. Downtown boutique and mid-rise developments specifically approved for STR use during entitlement, such as Heritage at Broadway, Hyve, Allegro, and Muse, round out the legitimate pipeline.
The Germantown and East Nashville product, in particular, tends to carry lower HOA fees and lower entry prices than the downtown high-rise stack — which means the same gross revenue number produces a dramatically better cash-on-cash return. Larger properties with four or more bedrooms command significantly higher revenue, with six-plus-bedroom units earning $148,197 annually according to Rabbu's March 2026 data — and fee-simple townhome product in STR-eligible zones is where that type of bedroom count is actually available at a manageable per-unit acquisition price.
If you want to understand how those underwriting numbers compare across building types and neighborhoods, start with our Nashville STR Underwriting Calculator before you start touring properties. The math on product type matters far more than the map pin.
The One Legitimate Case for a Downtown STR Purchase
There is a real scenario where a downtown Nashville STR investment works: you identify a purpose-built STR building, confirm the specific unit carries an active non-owner-occupied permit, verify that the permit is associated with the unit's address (not just the current owner's license), review the HOA documents for any cap on STR units in the building, and purchase at a price that produces a net yield above your debt service. That is a narrow target. It exists. We have closed those transactions.
What it is not is "buy a downtown Nashville condo and list it on Airbnb." That version of the plan fails at the HOA layer more often than it succeeds at the permit layer. The assumption that downtown location equals STR eligibility is the single most common expensive mistake we see in this market. Being featured in USA Today as Nashville's leading STR and investment advisor means we have seen that mistake made by sophisticated buyers who read the Airbnb listing before they read the HOA bylaws.
Nashville's STR market is real. The tourism demand that underpins it is real. But the right entry point for most investors is not the most-Googled one. If you want to evaluate specific buildings, neighborhoods, and entry prices across the full permitted landscape — not just the Broadway-adjacent high-rises — that is where our team actually spends its time. Explore the full Nashville neighborhood guide and relocation resources to understand the broader market context before narrowing to a submarket. The numbers exist to tell you which product works. Most buyers just never ask for them before they sign a contract.
If you are serious about underwriting a Nashville STR investment with real numbers — purchase price, HOA costs, permit eligibility, projected revenue, and net yield — reach out to The Costigan Group before you make an offer. We will tell you what the deal looks like before you own it, not after.
