The investment thesis that drove a wave of Nashville short-term rental construction is buckling under higher interest rates, softening travel demand, and a surplus of supply that builders can no longer sell. According to Tasha DeRegis, founder of Sell My House Fast TN, the short-term rental segment has become the most distressed corner of the Nashville, Tennessee market. The damage is hitting developers hardest who overpaid for projects during the boom.
Builders Overbought, Overbuilt, Can’t Exit
DeRegis identifies the short-term rental market as the single area generating the most friction in Nashville deals right now. The problem is compounding: developers who entered the market during peak Airbnb enthusiasm paid elevated prices for land and construction, financed at rates that assumed continued appreciation, and are now sitting on completed inventory that buyers won’t touch at break-even prices.
The investor class that would have absorbed this inventory has largely retreated as the economics of ownership have deteriorated. “A lot of builders have overbuilt and overpaid for their projects, and they can’t sell them because people aren’t investing anymore,” DeRegis says.
Nashville’s appeal as a short-term rental destination, driven by its reputation as a bachelorette-party and live-music hub, attracted significant speculative capital between 2020 and 2022. That capital chased a market with apparent structural demand, and for a period, it delivered. But higher home prices combined with higher interest rates have pushed out the buyers who would have made those investments viable.
Rate Hikes Broke the Math
When Low Rates Expired
The short-term rental slowdown traces directly to the same rate-and-price dynamic affecting the broader Nashville market. When interest rates were near historic lows, investors could acquire properties at inflated prices and still generate positive cash flow from short-term rental income. That math no longer holds.
DeRegis explains that low interest rates during and after COVID drove up demand, which in turn drove up prices. Now Nashville faces pressure from both sides: elevated prices locked in during the boom and significantly higher borrowing costs. A short-term rental property that penciled out at a 3% mortgage rate now requires substantially higher occupancy and nightly rates to service the debt — rates the market is not reliably delivering.
“People aren’t able to make sense of paying the high premiums that they used to pay,” she says.
Nashville Is Especially Exposed
Short-term rental markets in several high-profile leisure destinations have shown similar stress as the post-pandemic travel surge normalizes and operating costs rise. But Nashville’s concentration of purpose-built short-term rental inventory — properties designed and marketed specifically for Airbnb use rather than converted from long-term housing stock — makes the city particularly exposed to a demand correction.
DeRegis notes that properties blending in with competitors at the same price point are the hardest to move. Investors who want to sell in this environment need to outperform their competition by a significant margin on design, finishes, and features just to attract a buyer.
Weak Economy Compounds the Problem
Consumer Pullback Cuts Occupancy
The financing squeeze alone would pressure short-term rental operators, but broader economic weakness is compounding the problem. DeRegis describes a climate in which consumer confidence is low, the job market is under pressure, and discretionary travel spending is softening. For short-term rental investors, this translates directly into lower occupancy rates and reduced pricing power.
When travel budgets contract, leisure destinations like Nashville — which depend heavily on group travel and event-driven tourism — tend to see occupancy swings that make underwriting short-term rental income unreliable. For investors who purchased at peak prices expecting consistent revenue, that volatility creates a cash flow problem that can quickly become a solvency problem.
Distressed Owners, Few Exit Options
Short-term rental operators sitting on properties that no longer cash flow face a narrowing set of choices. Selling at a price that covers the mortgage is increasingly difficult when the pool of investment property buyers has already shrunk. Holding means absorbing ongoing losses. And waiting for market conditions to improve is a strategy that requires capital most distressed owners do not have.
Even well-situated short-term rental properties are struggling to attract buyers because the investment case that once supported their purchase no longer holds at current interest rates and occupancy levels. DeRegis says properties in this position are “very hard to sell.”
For some owners, deeply discounted sales may be the only way to limit further losses. What that option acknowledges is that waiting for a return to boom-era valuations is not a viable plan for most operators caught in the current downturn.
What Comes Next for Nashville
Whether Nashville’s short-term rental market stabilizes or continues to deteriorate depends heavily on interest-rate movements and the trajectory of consumer travel spending — two variables DeRegis says she cannot predict with confidence. Investors who entered the short-term rental space with aggressive assumptions should prepare for a prolonged period of difficulty rather than a quick recovery. Builders who remain stuck with unsold inventory face a narrowing set of options: hold and absorb losses, sell at steep discounts, or find creative exit structures that limit the damage.
According to DeRegis, investors still entering the Nashville market should run their numbers conservatively and plan for the worst-case scenario rather than assuming a rebound. Areas with high concentrations of active listings and long days on market are particular warning signs, she says, buyers should not ignore.
About the Expert: Tasha DeRegis is the founder of Sell My House Fast TN, operating in the Nashville, Tennessee residential and investment property market. Her firm acquires distressed properties and works across flipping, wholesaling, buy-and-hold rentals, and new construction.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
