Best Tennessee Cities for Rental Property: DSCR Math
DSCR Loans: Tennessee
Best Tennessee Cities for Rental Property: The DSCR Math in Memphis, Jackson, Clarksville, Chattanooga, Johnson City and Knoxville
Nashville gets the headlines, but the Tennessee cities where a median priced rental still covers its payment are mostly somewhere else. Here is how six of them rank once you add the tax bill the way Tennessee actually calculates it.
The short answer
On public numbers, Memphis and Jackson are the two Tennessee cities where a median priced three bedroom rental clears its full payment most comfortably, at about 1.42 and 1.25 on our example math, with Clarksville just above 1.00 and Chattanooga and Johnson City just under it. That comes from HUD's FY2027 Fair Market Rents, Census median home values and the Tennessee Comptroller's tax rates. A DSCR investor loan qualifies on the property's rent instead of your income, so those ratios are what decide the file.
Pillar Mortgage Group DSCR program at a glance
- Minimum DSCR
- As low as 0.50
- Cash out
- Up to 80% LTV, no ownership seasoning
- Gift funds
- 100% gift for down payment, closing costs and reserves
- Interest only
- 10 years IO on a 40 year term, or a 30 year term with IO
- First time investors
- Allowed, no primary residence or VOR needed
- Reserves
- None required under $1M loan amount and under 75% LTV
- Loan amount
- Up to $5 million
- Where we lend
- 35 states, Arizona plus 34 more
Program terms as of November 2026. Every loan is subject to underwriting and property eligibility. This is not a commitment to lend.
Our Tennessee DSCR loan page covers the statewide picture: the Nashville and Memphis metros, short term rental permits, the landlord and tenant law and closing a rental in Tennessee. This post answers a narrower question investors ask me every week: outside Nashville, which city should I actually buy in? If one of these cities is already on your list, our Chattanooga rental property post goes town by town through Hamilton County.
Every number below was checked on November 8, 2026 against HUD User's FY2027 Fair Market Rents, Census Bureau QuickFacts and the Tennessee Comptroller of the Treasury.
The short ranking
Memphis first, Jackson second, Clarksville third, then Chattanooga and Johnson City, with Knoxville set aside until its new tax rates settle.
That order holds on a median priced three bedroom with 25% down. It is a ranking of rent against price, not of neighborhoods, schools or appreciation. A buyer who wants a newer house and slower turnover may happily accept a 0.90 in Chattanooga over a 1.42 in Memphis, and our ratio floor of 0.50 leaves room for that choice.
HUD rents for 2027
Jackson posted the biggest rent increase of the six for FY2027, while Clarksville, Chattanooga and Knoxville actually moved down.
| HUD rent area | 2 bed FY2027 | 3 bed FY2027 | 3 bed FY2026 | Change |
|---|---|---|---|---|
| Memphis metro (Shelby, Fayette, Tipton plus DeSoto MS and Crittenden AR) | $1,301 | $1,717 | $1,683 | up $34 |
| Jackson | $1,375 | $1,730 | $1,677 | up $53 |
| Clarksville (Tennessee and Kentucky counties) | $1,307 | $1,786 | $1,871 | down $85 |
| Chattanooga (Tennessee and Georgia counties) | $1,340 | $1,657 | $1,734 | down $77 |
| Johnson City | $1,211 | $1,461 | $1,398 | up $63 |
| Knoxville (Knox, Blount, Anderson, Loudon, Union) | $1,475 | $1,844 | $1,864 | down $20 |
Jackson's two bedroom benchmark rose from $1,260 to $1,375, about 9%, which puts a Jackson two bedroom above Memphis and Clarksville. A HUD benchmark is a screening tool. Check it against real listings and the appraiser's rent schedule before you rely on it for a specific house.
Buying a rental in Tennessee outside Nashville? Send us the address and the city. We will run the DSCR on that county's rate, its appraisal ratio and the HUD rent before you offer.
Prices and renters
Memphis is the cheapest of the six by a wide margin and also the most renter heavy, and that pairing is exactly why its ratio leads.
| City | Median home value | Owner occupied | Median gross rent (ACS) | Population, July 2025 |
|---|---|---|---|---|
| Memphis | $169,000 | 44.9% | $1,181 | 609,647 |
| Jackson | $217,800 | 51.2% | $1,145 | 69,339 |
| Clarksville | $263,600 | 55.6% | $1,307 | 188,829 |
| Chattanooga | $283,200 | 52.4% | $1,256 | 194,144 |
| Johnson City | $268,200 | 51.3% | $1,023 | 74,943 |
| Knoxville | $239,700 | 46.6% | $1,191 | 202,021 |
| Tennessee | $286,700 | 66.9% | $1,189 | 7,315,076 |
Every city on this list has a lower owner occupied rate than the state's 66.9%, so every one of them has a deep renter pool. Memphis and Knoxville are the only two where renters outnumber owners. Clarksville has the highest median gross rent of the group, which tracks with Fort Campbell next door.
How Tennessee taxes a rental
Tennessee taxes a house on 25% of its appraised value, then multiplies by the county rate and, inside a city, the city rate, both per $100 of assessed value.
The Comptroller's certified tax rate guidance lays out the classes: residential property is assessed at 25% of fair market value and commercial at 40%. So a $200,000 house is assessed at $50,000, and a combined rate of 3.00 produces a $1,500 bill. The rates look large next to other states because they apply to that smaller assessed number.
| City | County rate | City rate | Combined, 2025 | 2026 appraisal ratio | Last and next reappraisal |
|---|---|---|---|---|---|
| Memphis (Shelby) | 2.69 | 2.58081 | 5.27081 | 1.0000 | 2025 and 2029 |
| Jackson (Madison) | 1.8736 | 1.6114 | 3.485 | 0.7574 | 2022 and 2027 |
| Clarksville (Montgomery) | 2.10 | 0.92 | 3.02 | 0.9697 | 2024 and 2029 |
| Chattanooga (Hamilton) | 1.5157 | 1.93 | 3.4457 | 1.0000 | 2025 and 2029 |
| Johnson City (Washington) | 1.71 | 1.3785 | 3.0885 | 0.9049 | 2024 and 2029 |
| Knoxville (Knox) | 1.554 | 2.1556 | 3.7096 | 1.0000 | 2026 and 2028 |
Rates are the Comptroller's 2025 list, the latest published. The City of Memphis adds 2.58081 per $100 of assessed value on top of Shelby County's 2.69, the highest combined rate of the six. The appraisal ratio matters too. Madison County's 2026 appraisal ratio is 0.7574, which means appraised values there sit well below market, so a house bought in Jackson today carries a tax bill based on roughly three quarters of its price until the 2027 reappraisal.
Run the DSCR on your deal
DSCR calculator
Clears 1.00. Rent covers the full monthly payment.
- Principal and interest$1,678
- Property tax$250
- Insurance$120
- HOA dues$0
- Total monthly payment (PITIA)$2,048
- Monthly rent$2,200
Illustrative only. This is not a quote, a rate, an approval or a commitment to lend. Default values are placeholders, not Pillar Mortgage Group rates or terms. DSCR here is monthly rent divided by principal and interest (or interest only), property tax, insurance and HOA dues. A lender sets the rent figure it uses from the appraisal and lease, and every loan is subject to underwriting.
Want the real ratio on this property? Send us the address and the rent. We will run it the way a lender will and tell you where it lands.
The DSCR math, city by city
Memphis lands near 1.42, Jackson near 1.25 and Clarksville near 1.07 on a median priced three bedroom, while Chattanooga and Johnson City land at 0.92 and 0.87.
The setup: buy at the city's Census median value with 25% down and a 30 year fixed at Freddie Mac's 7.18% average from November 5, 2026, used as a reference rate only (it is a conventional loan average, not a DSCR rate and not a rate we are quoting). The tax bill is price times the appraisal ratio times 25% times the combined rate. Insurance is $1,950 a year, an example number, not market data and not a quote. Rent is the HUD three bedroom benchmark.
| City at median value | Loan | P and I | Monthly tax | DSCR, 30 year fixed | DSCR, interest only at 30% down | Clears 1.00 up to about |
|---|---|---|---|---|---|---|
| Memphis, $169,000 | $126,750 | $859 | $186 | 1.42 | 1.63 | $252,000 |
| Jackson, $217,800 | $163,350 | $1,107 | $120 | 1.25 | 1.45 | $278,000 |
| Clarksville, $263,600 | $197,700 | $1,339 | $161 | 1.07 | 1.25 | $285,000 |
| Chattanooga, $283,200 | $212,400 | $1,439 | $203 | 0.92 | 1.07 | $258,000 |
| Johnson City, $268,200 | $201,150 | $1,363 | $156 | 0.87 | 1.01 | $229,000 |
The last column is the useful one. Clarksville's line sits only about $21,000 above its median, so a Clarksville buyer has less room than the ratio suggests. Memphis has the most room, roughly $83,000 above the median, even with the highest tax rate in the table. On a two bedroom, Memphis lands near 1.08 and Jackson near 0.99, and the other cities fall well under 1.00.
Why Knoxville has no tax line
Knox County reappraised in 2026 and is on a two year cycle, so the 2025 rates in the Comptroller's list no longer match the values on a 2026 bill.
After a reappraisal, Tennessee's certified tax rate law resets the rate so the county collects about the same total as before. Values went up, so the rate comes down, but your individual bill can still rise or fall. Running a Knoxville house at the old 3.7096 combined rate against a new value would overstate the tax. Before tax, a Knoxville three bedroom at the $239,700 median covers its principal, interest and insurance about 1.34 times on the HUD rent of $1,844. Pull the actual 2026 bill from the Knox County Trustee before you finish the math, and our 1% rule and DSCR post shows how to screen a price quickly while you wait.
Which city fits which investor
Pick Memphis for cash flow, Jackson for a reappraisal head start, Clarksville for military demand and Chattanooga or Johnson City for a newer house at a thinner ratio.
- Memphis: lowest prices and the most renters, but the highest tax rate and the most variation from street to street. Budget more for condition and turnover.
- Jackson: the strongest rent growth in this group for FY2027 and a tax bill held down by the 0.7574 ratio. Expect that bill to reset with the 2027 reappraisal.
- Clarksville: the highest median gross rent of the six and steady demand from Fort Campbell, but HUD's benchmark dropped $85 for FY2027.
- Chattanooga: a healthier price trend and an easier house to manage, with a ratio near 0.92 at the median. Interest only at 30% down gets it to about 1.07.
- Johnson City: HUD's three bedroom rose $63, but at $1,461 it is still the lowest rent here.
Financing a Tennessee rental
At these prices almost every loan sits far under $1 million, which brings the reserve rule into play.
- No reserves under $1 million and under 75% LTV. Put a little more than 25% down and reserves can drop out of the file. Our DSCR reserve requirements post shows where that line falls.
- 100% gift allowed for the down payment, closing costs and reserves, with no asset sourcing, no large deposit sourcing and no seasoning.
- First time investors allowed: no primary residence ownership and no VOR required.
- Interest only: ten years interest only on a 40 year term, or a 30 year term with interest only, up to 70% LTV on a purchase, which is why the interest only column uses 30% down.
- Cash out up to 80% LTV with no ownership seasoning, DSCR as low as 0.50 and loans up to $5 million.
Our loan programs page lists everything else we place.
Where it goes wrong
It goes wrong when the ratio is right and the house is wrong.
Honest caveat: a city median hides enormous spread. A $169,000 Memphis median includes houses that rent easily and houses that sit empty for months, and the HUD benchmark is the same for both. The lender will use the lease or the appraiser's rent schedule, not this table. Treat these ratios as a reason to look at a city, then underwrite the street, the roof and the tenant pool before you trust them.
Also check whether the address is actually inside the city. A Memphis or Jackson mailing address outside city limits pays only the county rate, which changes the math a lot.
Sources
All sources checked November 8, 2026. Data changes, so confirm before you rely on it.
- HUD User, FY2027 Fair Market Rents, Shelby County, TN (Memphis, TN MS AR HUD Metro FMR Area). 2 bed $1,301, 3 bed $1,717, 4 bed $1,981 (FY2026 3 bed $1,683)
- HUD User, FY2027 Fair Market Rents, Madison County, TN (Jackson, TN MSA). 2 bed $1,375, 3 bed $1,730 (FY2026 $1,260 and $1,677)
- HUD User, FY2027 Fair Market Rents, Montgomery, Hamilton, Washington and Knox counties, TN. 3 bed: Clarksville $1,786 (FY2026 $1,871), Chattanooga $1,657 ($1,734), Johnson City $1,461 ($1,398), Knoxville $1,844 ($1,864); 2 bed $1,307, $1,340, $1,211, $1,475
- U.S. Census Bureau QuickFacts, Memphis, Jackson, Clarksville, Chattanooga, Johnson City and Knoxville, Tennessee. Median value of owner occupied housing units, owner occupied rate and median gross rent, ACS 2020 to 2024; population estimates July 1, 2025 (V2025); Tennessee statewide figures
- Tennessee Comptroller of the Treasury, 2025 Property Tax Rates. County and city rates per $100 of assessed value: Shelby 2.69 and Memphis 2.58081; Madison 1.8736 and Jackson 1.6114; Montgomery 2.10 and Clarksville 0.92; Hamilton 1.5157 and Chattanooga 1.93; Washington 1.71 and Johnson City 1.3785; Knox 1.554 and Knoxville 2.1556
- Tennessee Comptroller of the Treasury, Reappraisal Schedule. 2026 appraisal ratios and last and next reappraisal years: Shelby 1.0000, 2025 and 2029; Madison 0.7574, 2022 and 2027; Montgomery 0.9697, 2024 and 2029; Hamilton 1.0000, 2025 and 2029; Washington 0.9049, 2024 and 2029; Knox 1.0000, 2026 and 2028, two year cycle
- Tennessee Comptroller of the Treasury, State Board of Equalization, Property Tax Reappraisal and Certified Tax Rate. Residential assessed at 25% of fair market value, commercial 40%; certified tax rate keeps total county collections the same after a reappraisal
- Freddie Mac Primary Mortgage Market Survey. 30 year fixed average 7.18% as of November 5, 2026 (reference only)
Frequently asked questions
What is the best city in Tennessee to buy a rental property?
On rent compared to price, Memphis leads. HUD's FY2027 three bedroom Fair Market Rent for the Memphis area is $1,717 and the city's median home value is $169,000, so a median priced three bedroom lands near a 1.42 DSCR with 25% down at a 7.18% reference rate, even after the highest combined tax rate of the cities we compared. Jackson is second at about 1.25.
How are rental properties taxed in Tennessee?
Tennessee assesses residential property, including rentals, at 25% of appraised value. The county rate and, inside a city, the city rate are then applied per $100 of that assessed value. A $200,000 house is assessed at $50,000, so a combined rate of 3.00 produces a $1,500 yearly bill.
What is the property tax rate in Memphis for a rental?
On the Comptroller's 2025 list, Shelby County's rate is 2.69 and the City of Memphis adds 2.58081, a combined 5.27081 per $100 of assessed value. On a $169,000 house assessed at 25%, that is roughly $2,227 a year.
Is Clarksville, TN good for rental property?
It can work. Clarksville has the highest median gross rent of the six cities we compared, $1,307, but HUD lowered the FY2027 three bedroom benchmark to $1,786. A median priced three bedroom lands near 1.07 on our example numbers and stops clearing 1.00 around $285,000.
Why did you skip the Knoxville tax bill?
Knox County reappraised in 2026, so the 2025 rates on the Comptroller's list no longer match current values. Tennessee's certified tax rate law resets the rate after a reappraisal. Get the actual 2026 bill from the Knox County Trustee before you run a Knoxville DSCR.
Can I get a DSCR loan in Tennessee?
Yes. Tennessee is one of the 35 states where Pillar Mortgage Group places DSCR loans. The loan qualifies on the property's rent against the full payment, with ratios as low as 0.50, loans up to $5 million and no tax returns or W2s.
Why Pillar Mortgage Group
A brokerage built for rental investors. That difference is the whole point.
We are a brokerage. We price your DSCR file across the wholesale lenders we work with and bring you the one that fits the deal, instead of the only product on one bank's shelf.
DSCR loans qualify on the rent, not your tax returns. Ratios as low as 0.50, loans up to $5 million, and first time investors welcome.
Arizona plus 34 more states, from Alabama to Wyoming. One team for the whole portfolio, wherever the next door is.
If the numbers do not work, we say so before you spend money on an appraisal. We would rather tell you in week one than sell you a loan you should not take.
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This content is for informational and educational purposes only and does not constitute financial, legal, or tax advice. Mortgage rates, loan programs, and market conditions are subject to change without notice. Not a commitment to lend. All loans subject to credit approval. Third-party market data sourced from publicly available information. Pillar Mortgage Group conducts business in accordance with the Fair Housing Act and the Equal Credit Opportunity Act.
