Question 1

Will a blanket loan across my family LLC's rentals affect the Tennessee FONCE exemption?

Accepted Answer

The loan does not change the test, but the portfolio itself might, so know the test before you close. Tennessee's franchise and excise tax applies to LLCs by default, which surprises investors who hear "no state income tax" and assume no entity-level tax. The family-owned non-corporate entity exemption turns on two thresholds. At least 95% of the voting rights, capital interest or profits must be held by relatives, by trusts for their benefit, or by the estate of a deceased individual who was a relative while living. And at least 66.67% of the entity's activity must be the production of passive investment income, or that combined with farming. Passive investment income is defined as gross receipts from royalties, rents from residential or farm property, dividends, interest, annuities, and gain on the sale or exchange of stock or securities. Three details matter to a portfolio. Residential property cannot have more than four residential units at any one location, so a 6-unit building sitting in the same LLC is not producing qualifying rent. Commercial rent is not on the list at all. And gain on the sale of real property is not on the list either, so a year in which you sell doors out of the portfolio is a year the 66.67% test can break. We are a lender, not your CPA. Take the entity and timing questions to a Tennessee CPA and attorney before you sign, not after.

Question 2

What does Tennessee's recording tax cost on one blanket note instead of separate mortgages?

Accepted Answer

Tennessee taxes recorded debt at 11.5 cents per $100, with the first $2,000 exempt, and the debtor pays it. The note holder collects and remits. Every recorded debt instrument has to carry the legend stating the maximum principal indebtedness for Tennessee recording tax purposes, and that stated maximum is the number the tax is calculated on. For a revolving structure, the tax is charged once on the stated maximum and re-draws are not taxed again. If you later raise the stated maximum, the increase is taxed on its own, and the $2,000 exclusion does not apply a second time. So the stated maximum is a real decision on a portfolio facility, not boilerplate: state it too low and you pay again when you upsize, state it far above what you will ever draw and you pay 11.5 cents per $100 today on money you never use. On the acquisition side, Tennessee's realty transfer tax is $0.37 per $100, based on the greater of consideration or property value, and the buyer pays it by statute. Recording fees run about $10 per document plus $5 per page beyond two. Davidson County's own fee schedule was not published where we could verify it, so have your closer confirm the county line items.

Question 3

Nashville rents are falling. How do you underwrite a whole portfolio into that?

Accepted Answer

Off the collected rent on the schedule of properties, with no rent growth assumed anywhere in the model. As of mid-2026 three independent indices agree on direction. Apartment List has metro rent growth at -3.6% year over year on a $1,373 median, Zumper has the Nashville 1-bedroom median at $1,650, down 5%, and CoStar data via Northmarq has average advertised asking rent down 1.2% to $1,642. Multifamily vacancy is 8.5%, a cyclical high, and flat quarter over quarter. On a single door that is a rounding error you can absorb. Across 10 or 20 doors, a rent-growth assumption compounds into a coverage number that was never real. The constructive half of the story is supply: deliveries fall from 12,852 units in 2024 to 9,011 in 2025 to a forecast 6,020 in 2026, units under construction are down about 25%, and annual multifamily permitting is down more than 50%, while trailing twelve month absorption held near 8,700 units. That is a credible reason to expect a 2027 or 2028 recovery. It is not a reason to size a 2026 loan to it. Treat the recovery as upside and run the coverage yourself with the portfolio loan calculator.

Question 4

Some doors in my portfolio run as short-term rentals. Does that survive a portfolio refinance or sale?

Accepted Answer

The permit does not survive a transfer, and that is the most consequential fact in Davidson County. The ordinance says a short-term rental permit shall not be transferred or assigned to another individual, person, entity, or address. Tennessee's Short-Term Rental Unit Act, at T.C.A. section 13-7-601 and following, agrees: grandfathered status ends on sale or transfer, after 30 continuous months without short-term rental use, or after three or more separate violations of generally applicable local law. Metro will not issue a new not-owner-occupied permit in AR2A, R, RS or RM zoning, the entire conventional residential stack, and reporting indicates none have issued in residentially zoned areas since January 1, 2022. Practical consequences for a portfolio. If you are selling doors out of the collateral, nightly revenue is not part of what a buyer inherits, so do not price the release off it. If you are moving properties into a new entity as part of a restructure, a change in ownership of record is exactly what the non-transfer rule reaches, so confirm the effect with Metro Codes before you record anything. And market-wide, the short-term rental numbers have rolled over: as of mid-2026, average daily rate is around $347 to $349, down roughly 6% year over year, with revenue per available room down 8% to 10% and supply contracting. We underwrite these doors on long-term rent.

Question 5

How do Davidson County property taxes hit the carry on a portfolio?

Accepted Answer

Tennessee taxes assessed value, not market value, and the assessment ratio is where portfolio carry gets mispriced. Residential and farm property is assessed at 25% of appraised value; commercial and industrial at 40%. Davidson County's 2025 rates are $2.814 per $100 of assessed value in the Urban Services District and $2.782 in the General Services District, so the district a door sits in changes the bill. Worked through in the General Services District, a $500,000 house is assessed at $125,000, and $125,000 divided by 100 times $2.782 is $3,477.50 a year, about 0.70% of market value. The same $500,000 assessed as commercial at 40% is $200,000, or $5,564, about 1.11%. Commercial carry runs roughly 1.6 times residential carry on identical value. Repeat that across a portfolio and a classification you assumed rather than checked becomes a five-figure annual miss. Davidson reappraises on a four-year cycle. Confirm each parcel's classification and current appraised value with the Davidson County Assessor before you hand us a tax line, and we will escrow to the go-forward bill.

Question 6

My portfolio spans Davidson, Rutherford, Sumner and Wilson counties. Does that complicate one blanket loan?

Accepted Answer

Not for the loan structure. It complicates the diligence, because the rules stop at the county line and Davidson's do not travel. Multi-county Nashville portfolios are normal, and the metro is 14 counties, not one. What changes across them is real. Permit activity has moved: Rutherford County, the I-24 corridor through Murfreesboro, Smyrna and La Vergne, ran 1,680 single-family permits in the first half of 2026, up 17.6% year over year and about a quarter of the metro total, while Davidson fell 35.1%. Rent direction diverges too, and not along a simple urban-versus-suburban line, with Zumper 1-bedroom medians as of August 2026 down 8% in Mt. Juliet and 4% in Hendersonville while Murfreesboro rose 2% and Smyrna rose 5%. Two honest gaps. We could not verify property tax rates for Williamson, Rutherford, Sumner or Wilson counties or their cities from a primary source, and short-term rental ordinances for the seven main suburbs were not verifiable either, so treat every "Nashville rule" you have read as a Davidson County rule until the specific city is checked. We will underwrite the schedule county by county and tell you which line items we have verified and which your closer needs to pull. See the portfolio loan program for structure and release terms.

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