Davidson County, TN Cap Rates by Neighborhood

County-Level Gross Yield: A Starting Point, Not a Conclusion

Davidson County's aggregate gross yield sits at 5.03%, derived from a median rent of $1,824/month against a median home price of $435,040. That number is accurate and also nearly useless for deal underwriting. It blends premium urban-core rents with premium urban-core prices on one end and high-yield peripheral rents with low entry prices on the other. The spread across named submarkets runs from roughly 4.0% gross up to 5.3% or better, depending on the corridor. Net cap rates after tax, insurance, and vacancy adjustments diverge even further.

The county-wide 19.9x price-to-rent ratio further illustrates the blending problem. East Nashville trades at a tighter ratio than the county median because prices have run harder than rents; the southeast quadrant trades looser because entry prices have lagged gentrification. Finding the right submarket inside that range is where acquisition underwriting actually happens.

Neighborhood-by-Neighborhood Yield Analysis

East Nashville

Median home prices fall in the $400,000–$625,000 range with average rents at $2,397/month. Using the midpoint price of $512,500, gross yield works out to about 5.6%. At the high end ($625,000), yield compresses to 4.6%. The 4.7% YoY price appreciation in East Nashville has outpaced rent growth, meaning the price-to-rent ratio here is tightening further. This is the county's most consistent appreciation corridor, but cash-on-cash buyers who need immediate yield need to buy at the low end of the price range to stay in viable gross yield territory.

The Gulch and 12 South

These established walkable neighborhoods command rents of $2,400–$2,995/month. There is no neighborhood-level ZHVI for these specific corridors in the available data, but their premium rent positioning relative to the county median ($1,824) is about 32%–64% above median. If acquisition prices track a similar premium to the county median (reasonable for urban-core condo product), gross yields compress toward 4.0%–4.5%. These are appreciation and occupancy plays, not yield plays.

Antioch-Priest Lake (Southeast Davidson)

Median rent of $1,795/month at entry-level price points below the county median creates the best gross yield picture in the county for a traditional single-family or small multifamily buyer. If acquisition price is 15%–20% below the county median (about $348,000–$370,000), gross yield lands at 5.8%–6.2%. This is the cash-flow corridor. Appreciation expectations should be discounted relative to East Nashville and the urban core, but the entry pricing absorbs more risk before a deal goes negative.

Donelson-Hermitage-Old Hickory

Average rents of $1,645/month with presumably lower home prices than the county median make this corridor modestly higher-yielding than the county aggregate. At an assumed purchase price of $350,000–$380,000, gross yield is about 5.2%–5.6%. Old Hickory Village's average rent of $1,395/month tightens that picture unless acquisition prices drop proportionally, which they should given the neighborhood's profile.

Neighborhood Comparison Table

Property Tax Impact on Net Cap Rate

Davidson County's 2025 reappraisal recorded a 45% median countywide increase in assessed values. The USD property tax rate was reset to $2.814 per $100 of assessed value to remain revenue-neutral at the county level. In Tennessee, residential property is assessed at 25% of appraised value.

Working the math on a $435,040 property: assessed value is $435,040 × 25% = $108,760. Annual tax at the USD rate of $2.814 per $100: $108,760 / 100 × $2.814 = $3,060/year or $255/month.

On a property generating $1,824/month gross rent ($21,888/year), property taxes alone consume 14.0% of gross income before any vacancy, maintenance, management, or insurance costs. That pulls net operating income down by $3,060, reducing effective net yield by roughly 70 basis points on the representative purchase price.

Any underwriting built on pre-2025 assessed values is now stale. The 45% step-up in assessed values is the baseline; recalculate from the current figures.

Flood Insurance Adjustment to Net Yield

Only about 2% of Davidson County households carry NFIP flood coverage despite 169 recorded flood events and $1.6 billion in cumulative damage since 1978. For properties in Zone AE (the 100-year floodplain, mandatory NFIP coverage on federally backed mortgages), annual premiums run $2,000–$4,000 or more.

On a $435,040 acquisition generating $21,888 in gross annual rent, a $3,000 annual NFIP premium shaves an additional 68 basis points off gross yield. Combined with the tax drag calculated above, a Zone AE property can see effective net yield fall 130–150 basis points below headline gross yield before vacancy or management are applied.

The 2022 FEMA map update added about 1,000 homes to the official high-risk zone by incorporating tributary creeks more precisely. A second remapping event is not speculative; it is a demonstrated pattern. Any acquisition near creek corridors or low-lying areas in Davidson County requires a zone-level title search and a worst-case flood insurance cost assumption before underwriting closes.

Cap Rate Compression vs. Decompression

The county-level ZHVI is down 3.28% year-over-year while rents remain broadly stable. When prices fall and rents hold, gross yields mechanically expand. That is the current setup at the county aggregate level.

The softness, however, is not uniform. Downtown and Class A multifamily vacancy hit 9.6% and 9.0% respectively at the end of 2025, and Class A effective rents in those corridors have been pressured by decade-high deliveries in 2023–2024. Single-family and workforce-grade rentals in peripheral submarkets face less direct supply competition.

Active listings are up 17.8% year-over-year as of May 2026, with 4.86 months of supply on the market. Negotiating power has shifted toward buyers in a way not seen since 2019. Condo and townhome segments have seen the sharpest price adjustments, creating selective decompression opportunities for buyers willing to transact in a soft-demand window.

Cap Rate Outlook

The construction pipeline is the clearest forward signal. Units under construction fell about 25% and permit issuance dropped more than 50%, with deliveries projected to fall for a third straight year in 2026. When new supply recedes and the 548,900-job labor base sustains renter demand, vacancy normalizes. The multifamily vacancy peak of 8.5% in 2025 was a supply-cycle artifact, not a demand failure. Wage growth of 5.9% year-over-year to a weekly average of $1,610 supports rent recovery.

Longer-horizon catalysts reinforce the case. The voter-approved $3.1 billion BRT plan with dedicated lanes on Gallatin Pike, Nolensville Pike, and Charlotte Avenue creates transit-adjacency value for properties on those corridors over the plan's multi-year buildout. The Boring Company's proposed 10-mile downtown-to-airport tunnel, if completed, adds demand support for downtown and Midtown product targeting business travelers and airport-area workers. Nashville International Airport's $1.5 billion expansion, targeting completion in 2028, sustains the corporate relocation pipeline that drives long-term housing absorption.

The December 2025 zoning reforms expanding by-right DADU eligibility across the Urban Services District add a value-add pathway for single-family investors who can develop a rentable detached unit without a separate overlay application. DADUs are capped at 1,000 square feet, require 5-foot rear and side setbacks, and cannot be used as short-term rentals. Investors underwriting DADU deals should confirm whether a target property falls inside a historic overlay district before pricing in that upside.

For a cash-flow buyer, the southeast quadrant (Antioch-Priest Lake, Donelson-Hermitage) offers the widest spread between entry price and gross rent, with supply-cycle dynamics pointing toward tightening vacancy in 2026–2027. For an appreciation buyer with a five-plus year hold, East Nashville's track record and proximity to transit corridors justify the compressed gross yield. Either way, the 2025 reassessment and Zone AE flood exposure require explicit line items in every deal model.

Model your specific deal with our investment property calculator to run these adjustments against your actual acquisition price and financing structure.