Short-Term vs Long-Term Rentals in Knoxville: What Should You Buy?

Investing in rental properties in Knoxville, Tennessee, offers exciting opportunities, but choosing between short-term and long-term rentals can significantly impact your returns, workload, and overall strategy.

This guide breaks down the key differences, benefits, and considerations to help you decide which rental strategy aligns with your goals as a prospective real estate buyer.

Understanding Short-Term and Long-Term Rentals

• Short-Term Rentals: These are properties rented out for short periods, typically days or weeks, often through platforms like Airbnb or Vrbo. They cater to tourists, business travelers, or event attendees.

• Long-Term Rentals: These involve leasing a property for months or years, usually through a fixed-term lease agreement, appealing to residents seeking stable housing.

Both strategies have unique advantages and challenges, especially in a vibrant market like Knoxville. Let’s dive into the details to help you make an informed decision.

Short-Term Rentals in Knoxville: Pros and Cons

Pros

1. Higher Income Potential: Short-term rentals often command higher nightly rates than monthly rents. In Knoxville, a popular destination due to its proximity to the Great Smoky Mountains and the University of Tennessee, peak seasons (fall football games, summer tourism) can yield significant profits.

2. Flexibility: You can use the property yourself during off-seasons or adjust pricing based on demand, such as during events like the Knoxville Marathon or UT game weekends.

3. Tax Benefits: Short-term rental owners may qualify for tax deductions like furnishings, utilities, and maintenance costs, especially if the property is rented for fewer than 14 days per year.

Cons

1. Higher Operating Costs: Short-term rentals require frequent cleaning, restocking supplies, and maintenance, which can eat into profits. For example, professional cleaning services in Knoxville typically cost $100-$200 per turnover.

2. Management Intensity: Managing bookings, guest communications, and check-ins can be time-consuming unless you hire a property management company (often 10-25% of revenue).

3. Regulatory Risks: Knoxville has zoning regulations and permit requirements for short-term rentals. Some areas restrict non-owner-occupied rentals, and you’ll need a permit from the city, costing around $150 annually.

Long-Term Rentals in Knoxville: Pros and Cons

Pros

1. Stable Income: Long-term rentals provide consistent monthly cash flow with less fluctuation. In Knoxville, the median rent for a 3-bedroom home is approximately $1,500-$2,000, offering predictable returns.

2. Lower Turnover Costs: With tenants staying for a year or more, you save on cleaning, marketing, and vacancy costs compared to short-term rentals.

3. Simpler Management: Long-term leases require less frequent tenant interaction and fewer operational tasks, making it ideal for hands-off investors.

Cons

1. Lower Revenue Potential: Monthly rents are generally lower than the cumulative nightly rates of short-term rentals, especially in high-demand seasons.

2. Tenant Risks: Problematic tenants can lead to property damage or unpaid rent, requiring legal action like eviction, which in Tennessee can take 30-60 days.

3. Less Flexibility: Long-term leases lock you into contracts, limiting your ability to use the property or adjust terms quickly.

Knoxville Market Insights

Knoxville’s real estate market is thriving, with a median home price of around $350,000 in 2025, up 5% from last year. The city’s appeal lies in its blend of urban amenities, outdoor attractions, and affordability, making it a hotspot for both short- and long-term rentals.

• Short-Term Rental Hotspots: Neighborhoods like Downtown Knoxville, Old City, and areas near Neyland Stadium are ideal for short-term rentals due to their proximity to tourist attractions and event venues. A 2-bedroom downtown condo can fetch $150-$300 per night during peak seasons.

• Long-Term Rental Demand: Suburbs like Farragut, Bearden, and West Knoxville are popular for long-term rentals, driven by families and professionals seeking quality schools and quiet neighborhoods. These areas offer stable tenant pools with lower vacancy rates.

Key Considerations for Investors

1. Financial Goals: Are you seeking high cash flow or steady, passive income? Short-term rentals can yield higher returns (10-15% ROI in prime locations) but come with more volatility, while long-term rentals offer modest but reliable returns (6-8% ROI).

2. Time Commitment: Short-term rentals demand active management or a willingness to pay for professional services. Long-term rentals suit investors with limited time.

3. Market Research: Analyze occupancy rates and rental demand. Short-term rentals thrive in tourist-heavy areas, while long-term rentals perform well in residential neighborhoods with strong job markets.

4. Regulations: For short-term rentals, check Knoxville’s zoning laws and obtain necessary permits. Long-term rentals face fewer regulatory hurdles but require compliance with landlord-tenant laws.

5. Property Type: Condos and single-family homes near downtown or UT are great for short-term rentals. Multi-family units or suburban homes work well for long-term leases.

Which Should You Choose?

• Choose Short-Term Rentals If:

• You’re comfortable with hands-on management or can afford a property manager.

• You want to capitalize on Knoxville’s tourism and event-driven demand.

• You’re willing to navigate regulations and invest in furnishings and marketing.

• Choose Long-Term Rentals If:

• You prefer predictable income with minimal daily involvement.

• You want to avoid the regulatory complexities of short-term rentals.

• You’re targeting stable, family-oriented neighborhoods with consistent demand.

Tips for Success in Knoxville

1. Research Neighborhoods: Use tools like AirDNA for short-term rental data or consult local property management firms for long-term rental trends.

2. Budget Wisely: Account for higher upfront costs (furnishings, permits) for short-term rentals and maintenance reserves for long-term rentals.

3. Leverage Local Expertise: Partner with a Knoxville-based real estate agent familiar with rental investments to identify high-potential properties.

4. Stay Compliant: Ensure your property meets safety standards and local regulations, especially for short-term rentals.

5. Diversify: Consider a hybrid strategy, such as offering a property as a short-term rental during peak seasons and long-term during off-seasons.

Conclusion

Both short-term and long-term rentals in Knoxville offer unique opportunities for real estate investors. Short-term rentals can maximize profits in tourist-heavy areas but require more effort and compliance. Long-term rentals provide stability and lower management demands, ideal for passive investors. By aligning your choice with your financial goals, time availability, and risk tolerance, you can build a successful rental portfolio in Knoxville’s dynamic market.

Ready to invest in Knoxville real estate? Connect with Bessie Whiteside, a trusted local real estate expert, who can guide you to properties that match your strategy and help you start building long-term wealth in this dynamic market.