Nashville is one of the larger build-to-rent markets: RealPage counted about 2,800 units under construction there in May 2026, and Tennessee permitted 32,068 single-family units in 2025 (US Census Bureau). The sources are on our 2026 financing data page. Under $5M, a project is a handful of houses or infill townhomes, built by a local builder or an investor who wants the rent afterwards.
Two loans in sequence
Both loans are made to a US LLC, with a fee of 1% to 2% of each loan at closing and no upfront fees. The DSCR take-out is arranged before the first draw, not at the construction loan's maturity.
| Construction loan | DSCR take-out | |
|---|---|---|
| Leverage | Up to 85% of total cost | Up to 80% of appraised value |
| Qualifies on | Budget, builder, schedule and exit | Long-term rent against the payment, as low as 1.0x |
| Funding | Draws after each inspected stage | One payment that repays the construction loan |
| Payment | Interest-only on the drawn balance, typically 9% to 12% | 30-year fixed available, from 6% to 6.5% |
| Term | 12 to 24 months | 30 years |
The rent has to be long-term, and local
Nashville does not issue new non-owner-occupied short-term rental permits in residential zones, so most residential investment property is underwritten as a long-term rental. A build-to-rent plan that only works at nightly rates does not work for the take-out.
The rent also has to be Nashville's own. Nashville-area and Memphis-area rents support very different construction budgets, and the take-out is sized on the rent the homes actually achieve, after property tax and insurance.
What the lender looks at
How draws work is in the construction draw schedule, and the general build-to-rent mechanics are in financing a build-to-rent project under $5M.
- Site control, zoning and permit status, and the number and type of homes
- Plans, a line-item budget with contingency, and the builder's contract and record
- A phasing plan, so the first homes lease while the last are still being built
- Comparable long-term rents for new rental homes nearby
- The DSCR test: 80% of the leased value repays the construction balance, and the rent covers the payment
- Your equity, reserves and the LLC that will borrow
Before you buy the land
Phasing matters because interest runs only on the drawn balance, typically at 9% to 12% a year during construction. Homes that lease early start paying their way while the rest are built, and give the take-out a real rent roll.
- Confirm the zoning allows the number and type of homes you plan, as long-term rentals
- Price the build line by line, with a contingency, and get the builder's contract
- Set the phasing: which homes finish first, and when they can lease
- Run the DSCR test on long-term rents, with taxes and insurance included
- Send the deal for a term sheet before you close on the land, so the construction loan and the take-out are known together
Tennessee points to plan for
Talk to a tax adviser about Tennessee franchise and excise tax on the LLC before you buy the land. The program is on Tennessee build-for-rent financing and Nashville specifics on investment property loans in Nashville. A term sheet comes back in 24 to 48 hours.
Non-US investors build to rent in Tennessee on the same terms as US investors, through a US LLC and with no US credit history required.