WHY DO FOREIGNERS CHOOSE TO INVEST IN TENNESSEE?

Tennessee is a veritable hotbed of opportunity for foreign real estate investors. If you dream of expanding your real estate portfolio in the United States, this state is an ideal playground . Whether you're looking for a profitable rental investment or a more ambitious real estate project, Tennessee has a lot to offer. But before embarking on this adventure, it's crucial to understand the investment options available and the visa requirements for investing in the United States.

The Different Investment Options in Tennessee

Tennessee is a land of opportunity for real estate investors for several reasons. With a booming market, still-affordable prices, and an investor-friendly environment, the state attracts an international clientele.

Investing in Tennessee rental real estate: a growing market

Rental real estate remains the most popular option among foreign investors in Tennessee. Rental yields in cities like Nashville and Memphis are particularly attractive, thanks to a steady demand for housing. Nashville , in particular, has seen rapid population growth in recent years, driving up rental demand. By investing in single-family homes or rental apartments , you can expect annual returns between 6% and 8% . This is a boon for those looking for a secure, long-term investment .

But be careful, you can't just jump in blindly! Choosing your location wisely is essential. Memphis and Knoxville also offer great prospects for profitability, especially if you're interested in affordable housing with good rental potential.

Commercial real estate: high returns

If you have more capital and are looking for higher returns, commercial real estate may be the ideal option. Whether it's office space , retail space , or shopping centers , Tennessee has a thriving commercial real estate market. Nashville and Memphis , in particular, are strategic locations for these investments, with returns sometimes exceeding 8% . It's essential to carefully analyze growing areas and sectors that are attracting more and more consumers and businesses.

The trading sector is not for the faint-hearted. However, with the right guidance and thoughtful investment, the rewards can be worth the effort.

Investing in Tennessee for Foreigners: Visa Types

Investing in Tennessee real estate in the United States is not without its administrative formalities. Fortunately, several types of visas are available for foreign investors. Depending on the size and nature of your investment, there are several options.

The EB-5 visa: the ultimate investor visa

The EB-5 visa is arguably the most sought-after visa for foreign investors. This visa allows you to obtain a green card (permanent residency) in exchange for an investment in a U.S. real estate project or business. The minimum investment requirement is $1 million , but this amount can be reduced to $500,000 if you invest in a low-income area . It's important to note that this investment must create jobs for Americans, a key criterion for obtaining the visa.

Tennessee is full of EB-5 eligible real estate projects, especially in the commercial sector . For those looking to invest heavily, this is a great way to combine real estate investment with permanent residency in the United States.

The E-2 Visa: The Option for Smaller Investors

If you can't afford to invest $1 million, the E-2 visa could be a viable alternative. This visa allows foreign investors to temporarily reside in the United States, provided they invest in a U.S. company . While it doesn't lead directly to permanent residency, it remains a flexible option for those who want to manage their investment while taking advantage of the tax benefits and economic dynamism of the United States.

The investment amount for an E-2 visa varies depending on the nature of the project, but in general, it is recommended to invest a minimum of $100,000 to $150,000 in a real estate project or business in Tennessee. This visa is ideal for beginner real estate investors or those not looking to commit to very large-scale projects.

Tennessee Real Estate Market: A Playground for Investors

The benefits of Tennessee's real estate market extend beyond attractive returns. The state also offers favorable taxes, an affordable cost of living, and a stable economic environment, making it a prime location for foreign investors.

A dynamic and growing market

Tennessee's major cities, such as Nashville , Memphis , and Knoxville , are experiencing population growth . According to the latest data, Nashville's population has grown by more than 10% over the past five years, a clear sign of the city's attractiveness. This translates into a growing demand for housing, but also an increase in real estate prices.

Tennessee real estate offers a great balance between still-reasonable prices and high upside potential. Unlike states like California or New York , where prices are sky-high, Tennessee offers opportunities to invest in properties that generate high returns without requiring excessive capital. Now is the time to seize these opportunities before the market becomes too competitive .

Favorable taxation for foreign investors

Tennessee has a major tax advantage : there is no personal income tax . This allows foreign investors to save money on rental income or capital gains when reselling a property. If you're looking to maximize your returns, this is a significant advantage over other states where taxes can be higher. This favorable tax climate is a great reason to choose Tennessee as a real estate investment location.

The Pros and Cons of Investing in Tennessee

Tennessee offers many advantages for foreign investors, but as with any investment, there are also disadvantages to consider. Making an informed choice is essential to maximize your chances of success.

Benefits of Investing in Tennessee

1. Favorable Taxation: As mentioned earlier, one of Tennessee's biggest advantages is the lack of a personal income tax . This means investors benefit from a more lenient tax system than in many other US states. This allows them to keep a larger portion of rental income or capital gains realized when reselling properties.

2. Booming Real Estate Market: Tennessee's economy is booming, with cities like Nashville and Memphis experiencing a population explosion. This growth is attracting not only new residents but also many businesses, creating a high demand for real estate. This gives investors the opportunity to make long-term gains through property appreciation .

3. Affordable Cost of Living: The cost of living in Tennessee is relatively low compared to states like California or Florida , which allows investors to acquire properties at competitive prices. In addition, this attracts many renters looking for affordable housing in cities like Knoxville or Chattanooga .

Disadvantages of Investing in Tennessee

1. Uneven growth across regions: While cities like Nashville are experiencing rapid growth , some rural areas in Tennessee may have a less dynamic real estate market . Therefore, investors must be strategic and focus on developing areas to maximize returns.

2. Dependence on population growth: Tennessee's real estate market is highly dependent on population growth, especially in Nashville. If this trend were to slow, it could affect housing demand and, consequently, rental yields. Therefore, it is essential to monitor demographic changes .

3. Increased competition: As the state attracts more investors, it may become more difficult to find undervalued properties or properties with good appreciation potential. This can lead to increased competition for properties, which could drive up prices and reduce profitability.

Investing in Tennessee: What are the current trends?

The Tennessee housing market in 2025 presents a dynamic picture, marked by sustained price growth, expanding supply, and signs of a slight cooling compared to previous years. Here's a look at the key trends to watch.

Price growth and market competitiveness

In April 2024, the median home price in Tennessee was $392,900 , a 5.9% increase from the previous year. In Nashville, the figure reached $478,060 , a 7.6% increase over the same period.

However, the average listing time increased slightly, reaching 49 days in April 2024, compared to 47 days the previous year. This trend suggests a slightly more buyer-friendly market, offering more time to evaluate available options.

Supply and demand: an evolving dynamic

The number of homes listed for sale increased by 16.8% in January 2025 compared to the previous year, signaling a growing supply on the market. Meanwhile, the rental vacancy rate decreased from 9.10% in the second quarter of 2023 to 8.50% in the second quarter of 2024, indicating sustained demand for rentals.

This combination of increased supply and stable demand contributes to a more balanced market, offering investors attractive opportunities while maintaining price competitiveness .

Price trends by region

Price trends vary across Tennessee :

Knoxville : 8.2% year-over-year increase , indicating strong demand and a dynamic market .

Memphis : More moderate growth of 2.4% , suggesting relative stability .

Jackson : Slightly down 1.4% in the previous quarter, although still up 6.36% year-over-year, which may reflect a correction phase or temporary oversupply.

Tennessee Growth

These regional variations highlight the importance of targeting specific areas based on investment objectives and risk tolerance.

Economic factors influencing the market

Mortgage rates, although slightly lower than at the end of 2023, remain above 6% , which may affect buyers' borrowing capacity and influence demand. Furthermore, rising living costs and inflation may put pressure on household budgets, impacting the real estate market .

Outlook for 2025

Forecasts for 2025 indicate moderate price growth, estimated at 3.7% , supported by increased supply and stable demand. This dynamic suggests a more accessible market for buyers and investors, with less intense competition than in previous years .

Growing investment sectors in the state

Tennessee offers a diversity of opportunities in several high- growth sectors . If you're looking to invest strategically, here are some sectors experiencing significant growth that could offer attractive returns.

Residential real estate: a sector in high demand

Residential real estate remains one of the safest sectors for investors. Nashville , in particular, is one of the fastest-growing cities in the United States, with a steadily increasing population and high demand for housing. Young professionals, students, and families looking for new opportunities are the main drivers of this demand .

With this in mind, investing in competitively priced apartments or single-family homes in Nashville or Memphis can be a winning strategy . Moreover, rental yields in these areas remain high, between 6% and 8% , offering attractive prospects for investors looking for passive income .

Commercial real estate: attractive returns

Commercial real estate, including offices , shopping centers , and logistics warehouses , is also experiencing significant growth. Memphis , in particular, benefits from its strategic geographic location with its port infrastructure and proximity to major highways . This location makes it a magnet for businesses , which is driving demand for commercial office and retail space .

Infrastructure and logistics: a key sector

The infrastructure and logistics sector is also booming in Tennessee, particularly around Memphis , which is a major logistics hub in the United States. With plans to develop warehouses and distribution centers, investing in industrial real estate in Tennessee can offer attractive returns. If you're looking for more resilient long-term investments , industrial real estate is a sector to keep a close eye on.

Investing in Tennessee for foreigners

Legal and fiscal constraints to take into account

Investing in the United States requires a thorough understanding of the tax and legal rules in force. Tennessee, while relatively investor-friendly , is no exception to certain rules that are crucial to know to avoid unpleasant surprises.

The creation of legal entities

One of the essential aspects of real estate investing in the United States is the creation of a legal entity , such as an LLC (Limited Liability Company). Creating an LLC allows you to protect your personal assets while facilitating the management of your properties and the declaration of your income. Investir.us assists many investors in this process to ensure a suitable legal structure .

Capital gains taxation

Although Tennessee does not levy an income tax, capital gains realized on the resale of real estate may be subject to federal tax . Therefore, it is essential to be well informed about the federal taxes that apply, particularly the capital gains tax . However, there are tax strategies that can reduce this burden, such as using a 1031 exchange , which allows you to defer paying taxes by reinvesting the gains in another property.

Local rental management rules

When investing in rental properties, it's important to understand local property management regulations . Rental laws vary by city and county, which means you need to pay attention to rules regarding lease agreements , security deposits , and unpaid rent . Investing in Tennessee commercial or residential properties also requires ensuring you meet all safety, accessibility, and local building code standards.

To maximize your chances of success in real estate investing in Tennessee, trust Investir.us , your expert partner to support you every step of the way in your project in the United States. Contact us today to make your real estate ambitions a reality!