Average is a blended figure. Nashville's 13,898 active listings were booked 54% of nights available at an average daily rate of $349, according to AirDNA's June 2026 data. That $349 and that 54% include top-performing four-bedroom rooftop townhomes in Germantown alongside poorly photographed two-bedrooms without parking in outer-ring zip codes. Your deal is not the average. Your deal is one specific property in one specific zone with one specific permit class — and it needs to survive a stress test before you write an offer.
This is how smart Nashville investors actually model occupancy, and what the numbers look like when you run the deal at conservative assumptions instead of the headline figure.
The Performance Spread That the Market Average Hides
Before building a model, you need to understand what the data actually shows across the distribution — not just at the mean.
AirROI data shows Nashville properties at the top 10% achieving 79% or higher occupancy, strong performers in the top 25% at 64% or higher, typical median properties running around 45%, and entry-level bottom-quartile properties averaging 27%. That is a 52-point spread between the best and worst tier. When you underwrite at 54%, you are modeling the 50th percentile of a market that includes brand-new listings with zero reviews, properties with one-bathroom layouts trying to host group trips, and units listed in non-walkable zones where demand is structurally lower.
From June 2025 to June 2026, Nashville STR revenue declined 6.1% and RevPAR fell 9.8% even as occupancy ticked up 1.7% — which tells you that rate compression is real. Occupancy being slightly up does not mean the math got easier. It means more listings are competing for the same demand pool at lower nightly rates.
Nashville's peak Airbnb revenue month is October, averaging $5,084, while January averages just $1,920 — meaning peak months can generate more than 2.5 times the revenue of the off-season. That seasonal swing matters enormously for cash flow planning. A property that looks fine on annual averages can run two or three months underwater if you have not modeled what January looks like at $188 a night with 31% occupancy.
The Three Occupancy Scenarios Every Nashville STR Underwriting Should Run
The Costigan Group uses three scenarios in every Nashville STR underwriting model before an offer is written: base case, conservative case, and stress case. Here is what each means in practice with current market data.
Base Case — 54% occupancy, $325 ADR. This approximates the AirDNA market average adjusted slightly downward on rate to account for a newly listed property without an established review base. Annual gross revenue: roughly $64,400. This is the optimistic scenario. Underwriting to it is not wrong, but you should not make a go/no-go decision on it alone.
Conservative Case — 45% occupancy, $285 ADR. This approximates the AirROI median for Nashville-Davidson and reflects year-one performance for a property without booking history or a pre-launch marketing strategy. Annual gross revenue: approximately $46,800. AirROI's 2026 dataset for Nashville-Davidson showed a market-level average of $46,801 per year at 43.5% occupancy and a $347 nightly rate — so this scenario is grounded in what the typical performing asset actually delivers, not what the top of the market does.
Stress Case — 38% occupancy, $260 ADR. In January 2026, GoodNight Stay's Nashville market data showed citywide occupancy at 31.2% with an ADR of $188. The stress case models a property that leans more heavily on winter months relative to peak season, with modest rate performance. Annual gross revenue falls to approximately $36,100. This is the number that determines whether the deal structurally survives a bad year.
What the Stressed Deal Looks Like on a Real Acquisition
Take a representative deal: a three-bedroom NOOSTR-eligible townhome in East Nashville, purchased for $625,000, financed with 25% down on a DSCR loan.
DSCR loan rates in mid-2026 range from approximately 6.75% to 8.50% for 30-year fixed products, with well-qualified borrowers holding a DSCR above 1.25 and a credit score above 720 typically landing in the 6.75% to 7.50% range. At 7.25% on a $468,750 loan (75% LTV), your principal and interest payment is approximately $3,198 per month.
Add property taxes at approximately 1.0% of assessed value ($521/mo.), insurance for a STR at roughly $250/month, HOA if applicable, and STR management fees. Property managers typically charge 25% to 40% of revenue for short-term rental management. At 28% on gross revenue, management alone costs $1,064/month at the conservative case revenue run rate of $3,900/month gross.
Total monthly fixed and semi-fixed obligations: approximately $5,030 before maintenance, supplies, and platform fees. Platform fees on Airbnb and Vrbo run roughly 3% on the host side. At conservative case revenue of $3,900/month gross, you are running a negative $1,247/month before maintenance and restocking costs. The deal does not cash-flow positive at median occupancy with a 75% LTV DSCR loan at current rates. Full stop.
That is not a reason to not buy the deal. It is a reason to know this before you close, not after. The investors who understand this recalibrate their down payment, negotiate the price, or identify a property profile that services the debt — typically a four-bedroom unit that commands group-travel pricing and consistently outperforms the three-bedroom segment.
The Property Size Lever That Changes the Math
Bedroom count is the most underappreciated underwriting variable in Nashville STR investing. The market is heavily group-travel-driven — bachelorette parties, corporate offsites, family reunions, CMA Fest groups — and that demand structure rewards scale in a way most residential markets do not.
ADR scales substantially with property size in Nashville, from $123 for studios up to $582 for six-plus bedroom homes, reflecting the premium guests will pay for group-friendly accommodations. That is not a minor difference. A six-plus bedroom townhome in a NOOSTR-eligible zone running at $582 ADR and 50% occupancy generates approximately $106,215 in annual gross revenue. Larger properties with four-plus bedrooms command significantly higher revenue, with six-plus bedroom units earning $148,197 annually.
The math on a four-bedroom or larger deal in a walkable zone near downtown looks different at every occupancy tier. The stress case still has a path to breakeven. The three-bedroom suburban unit does not carry the same flexibility buffer — which is why property selection and location within the NOOSTR-eligible zone matters more than the discount you can negotiate off asking price.
For a deeper look at how we approach neighborhood-level selection, the Nashville neighborhoods guide covers the investment case for each major submarket including proximity to downtown demand generators.
The Occupancy Floor That Determines Permit Value
One number matters more than your ADR when you are acquiring an existing NOOSTR-eligible property: the occupancy floor at which the deal's NOI still exceeds its debt service.
Work backward from your DSCR requirement. Most DSCR lenders require a minimum ratio of 1.0, meaning gross rent must at minimum cover PITIA. A DSCR of 1.0 means the rent exactly covers the mortgage payment, and that is the minimum most lenders accept. Some lenders underwriting Nashville STRs use AirDNA projected rent schedules rather than actual lease income to qualify the loan — which can produce an AirDNA-modeled DSCR that looks fine while the realistic operator-level occupancy breaks the actual cash flow.
On the deal above, PITIA is approximately $4,000/month all-in. To hit a 1.0 DSCR on an AirDNA basis, projected gross rent must clear $4,000. At a $285 ADR, that requires 14 booked nights per month, or a 45% occupancy rate. That is the minimum viable floor. Below 45%, the deal is cash-flow negative on a DSCR basis. Above 54%, the deal produces meaningful NOI.
The occupancy floor — not the projected revenue ceiling — is the number the underwriting model is built to identify.
What the Permit Moratorium Does to Your Assumptions
NOOSTR permits in Nashville are restricted to properties zoned in commercial-mixed districts, and STR eligibility is parcel-specific. Two adjacent townhomes can have entirely different STR rights depending on their zoning classification, overlay district, and Specific Plan or Planned Unit Development conditions.
This matters to the underwriting because the permit scarcity creates a defensible competitive position that should factor into how you model occupancy. Properties inside the NOOSTR-eligible footprint compete in a constrained supply pool. New competitor inventory cannot be added in most residential zones. Davidson County's non-owner-occupied STR permit list sits at roughly 4,800 active units heading into 2026, and the Metro Council's moratorium in most residential zones means that number is capped, not growing.
Capped supply with durable tourism demand is a structural argument for occupancy stability that you should not ignore in your model — but it is a second-order factor. The first-order factor is still whether the deal services its debt at realistic occupancy, not at the occupancy level the permit scarcity might eventually support.
Pre-purchase permit verification is non-negotiable. Our short-term rental advisory process includes a property-specific permit eligibility review before the offer is submitted, not during the inspection period. If the permit does not transfer, the investment thesis does not either.
The One Assumption Most Investors Get Wrong
Investors anchor to the trailing twelve-month revenue from a seller's performance history, then assume their Year 1 will match it.
It will not. Listings with established review histories, Superhost status, and multi-year booking patterns on Airbnb and Vrbo outperform comparable new listings by 15% to 25% in the first operating year, based on what we observe when we underwrite Nashville acquisitions. A new operator inheriting a property but starting from zero on the listing platform does not inherit the ranking algorithm position.
When we underwrite a Nashville STR acquisition, the conservative case is Year 1 performance without the prior operator's review equity. Not Year 2 or Year 3 when the listing has matured. If the deal does not work in Year 1 at 40% to 45% occupancy, it requires perfect execution and favorable market conditions to survive — and that is a speculation, not an investment.
The Costigan Group has been featured in Apple News and national outlets for precisely this kind of pre-purchase STR underwriting work. The framework is the same regardless of price point: stress the occupancy before you stress your cash reserves.
How to Use This Framework Before Writing an Offer
Run all three scenarios. Calculate the monthly cash flow at base, conservative, and stress case. Identify the occupancy floor at which the deal breaks even on cash flow after debt service and operating expenses. Verify that the property is in a NOOSTR-eligible zone before those numbers mean anything. If the stress case produces a monthly shortfall you cannot absorb out of reserves for twelve months, the price is wrong or the property is wrong.
The Nashville STR market is not broken. Nashville scores 83 out of 100 on AirDNA's Market Score, benchmarked against STR markets with at least 15 active listings globally. There is real demand here, real permit scarcity in the right zones, and a tourism base that does not disappear. But the deals that work in this market are priced right, permitted correctly, and underwritten honestly — not modeled at market-peak occupancy with no margin for a slow January.
If you want to run the actual numbers on a Nashville STR you are considering, the Costigan Group's Nashville STR Underwriting Calculator and our 2026 STR Playbook are built exactly for this. Reach out before the offer, not after.
