Question 1

What closing cost do conventional buyers in Tennessee miss?

Accepted Answer

The realty transfer tax, and by statute the buyer pays it. Tennessee charges $0.37 per $100 on the greater of the consideration or the property value. On a $400,000 purchase that is $1,480 due at recording, cash out of pocket rather than something you finance. There is a second one sitting on the loan itself: the indebtedness tax runs 11.5 cents per $100 of debt with the first $2,000 exempt, so a $300,000 loan adds roughly $343. Neither number is large on its own. Both belong in your cash to close, and both get missed when investors budget off an out-of-state closing statement.

Question 2

How do I underwrite property taxes on a Middle Tennessee rental?

Accepted Answer

Start with the assessment ratio, not the headline rate. Tennessee assesses residential and farm property at 25% of appraised value and commercial and industrial at 40%, and county rates are quoted per $100 of assessed value. So a $500,000 house is taxed on $125,000, and multiplying the market price by the county rate overstates the bill by a factor of four. We don't publish county rates on this page because they are set locally and move with each reappraisal. Pull the current rate for your parcel from the county assessor or trustee before you set the escrow, because on a conventional file that escrow feeds straight into your qualifying ratios. The 40% ratio is the one to watch if the use ever changes: same value, roughly 1.6 times the carry.

Question 3

Tennessee has no income tax. Does that mean no tax on my LLC?

Accepted Answer

No state tax on wage income is not the same as no entity-level tax. Tennessee doesn't tax wage or salary income, and the Hall income tax on interest and dividends was fully repealed for tax years beginning on or after January 1, 2021, so on the personal side the answer really is nothing. The entity side is different. Franchise and excise tax applies to LLCs, LPs and corporations doing business in Tennessee: 6.5% of Tennessee net earnings for excise, 0.25% of net worth for franchise, with a $100 minimum. The family-owned non-corporate entity (FONCE) exemption can take a small landlord out of it, but the test is tight. At least 95% of the entity must be held by family members or qualifying trusts, and at least 66.67% of receipts must be passive investment income, which includes rent only where the residential property has four or fewer units at that location and never includes commercial rent or gain on a property sale. Get the F and E question answered by a Tennessee CPA before you title the property, then tell us the entity you'll close in so the file is built right the first time. We are a lender, not your tax counsel.

Question 4

Rents are soft in Nashville. How does that change a conventional file?

Accepted Answer

It is the reason documented income is often the loan that survives the ratio test. As of mid-2026, three independent indices agree Nashville rents are falling, not growing: Apartment List has metro rent growth at -3.6% year over year, Zumper has 1-bedroom medians down 5%, and CoStar has advertised asking rent down 1.2%. Multifamily vacancy sits at 8.5%, a cyclical high. Meanwhile the metro median sale price hit a record $495,000 in June 2026. Record price against falling rent compresses coverage, which is exactly what squeezes a DSCR loan. If your returns document, conventional financing qualifies on you instead of on a rent number that has to hold. The constructive half of the story: deliveries drop from 12,852 units in 2024 to 9,011 in 2025 to a forecast 6,020 in 2026, so the supply pressure has a visible end.

Question 5

Can I count short-term rental income on a Nashville purchase?

Accepted Answer

Not on the seller's permit. In Davidson County a not-owner-occupied short-term rental permit is expressly non-transferable, the ordinance says it cannot be transferred or assigned to another person, entity, or address, and Tennessee's own preemption statute ends grandfathered status on sale or transfer. New NOOSTR permits are not available in the AR2A, R, RS, and RM districts at all, which is the whole conventional residential stack, and reporting indicates none have issued in residentially zoned areas since January 1, 2022. So a house in a residential Nashville neighborhood underwrites to long-term rent, whatever the seller's trailing revenue looks like. Check the address with Metro Codes before you write the offer, not after.

Question 6

I'm buying one side of a detached duplex. Does that finance conventionally?

Accepted Answer

It can, and the title work is the part to sort out early. Two detached houses sit on one Nashville lot under the Tennessee Horizontal Property Act at T.C.A. Title 66, Chapter 27, which expressly counts a separate free-standing building as a unit and creates the regime through a recorded master deed. That is how one side conveys on its own without a subdivision. For a conventional file it means the appraiser needs the right comparable units rather than fee-simple houses, and the master deed plus any association documents need to be in front of underwriting at the start rather than the week of closing. Send us the parcel and the master deed and we'll tell you quickly whether it fits conventional or belongs on another program.

Question 7

What is a conventional investment property loan?

Accepted Answer

It is standard, competitively priced financing for a non-owner-occupied investment property, the long-term loan you take when your file fits the conventional box. It usually carries a lower rate than a bridge or DSCR loan, in exchange for full documentation.

Question 8

How is it different from a DSCR loan?

Accepted Answer

A conventional loan qualifies on your documented personal income and credit, while a DSCR loan qualifies on the property's rent. Conventional pricing is often lower if you can document your income and you are within the limit on financed properties; DSCR is easier to scale and skips the income docs. We compare both and put you in the one that fits.

Question 9

How much do I need to put down?

Accepted Answer

Plan on roughly 20% to 25% down on an investment-property purchase, with the best pricing at lower leverage and higher credit. Cash-out refinances are typically capped a bit lower than purchases.

Question 10

What credit score do I need?

Accepted Answer

Conventional investment financing generally wants a credit score around 580 or higher, and your rate improves meaningfully as your score and reserves go up. We will tell you up front where your file lands.

Question 11

What can I use it for?

Accepted Answer

Purchases, rate-and-term refinances, and cash-out refinances on non-owner-occupied 1-4 unit investment property. If you will live in the property, that is owner-occupied financing, which we refer to a trusted partner rather than originate here.

Question 12

What documents are required?

Accepted Answer

Because it is fully documented, expect to provide income verification, tax returns, bank statements, and the standard conventional paperwork. If that documentation is a hurdle, our DSCR and bank-statement programs are the no-tax-return alternatives.

Conventional Investment in Nashville

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