Spring Hill, TN · Member since 2016 · 18 posts · 4 votes
I am considering buying my first rental property in the Gatlinburg area.
I am hoping to get a property management company to stay hands off so I can continue working full time and hopefully be able to purchase a second property in the future.
I have seen a lot of rental properties listed for sale in the Gatlinburg area. Is this normal turnover or is the market in decline? I do not want to make my first purchase in a declining market.
Can anyone that owns property in the area provide some some insight on the direction of the market? Any issues with that market area like regulations or new developments that I need to be concerned about?
Please feel free to pm me if you prefer.
Thanks for your help and insights.
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
8y
Hi Kennith! I own 5 cabins in PF/Gatlinburg. The market is definitely on its way up. Since most of the homes are vacation rentals and few people actually live there, the prices are still far far below what they were pre-crash.
I also second what @Jeff Piscioniere said. It is very difficult to cash flow if you place it with one of the local PMs, they charge 30-40% of your gross rentals. I have bought cabins from several owners who were actually LOSING money with the PM's. My husband @Luke Carl manages all 5 of ours from his iphone using the VRBO and Airbnb apps, and he has a 9-5 gig.
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
8y
Kennith Osborne the market is not even remotely in decline in fact it’s doing awesome. May I make a suggestion.....unless you want to continue to work and/or wait even longer to buy your second property, forget the property management idea. 30-40% of your profits poof into thin air and I’ve talked to plenty of people who basically say their rental company/property management suck! It’s almost child’s play to manage it yourself on Airbnb, TripAdvisor, and vrbo. Get yourself a really good cleaning crew and they are your eyes and ears on the ground. You’ll need a couple handymen in your contact list and a few others like plumber, electrician, and HVAC. You just come back and ask us and we’ll hook you up with the proven professionals.
Gatlinburg is a 12month vacation destination. You will not be disappointed. Any questions let me know Kenneth. Good luck to you!!!
Jeff
I work a lot and on 3rds at that. To make matters worse I am not even allowed to have my phone on for safety reasons. I am not much on giving up that much to management fees but I may not be able to keep up with it and keep it profitable. Once I have jumped in I will feel more comfortable.
I am going thru the steps right now. I got preapproved and I am trying to make sure I am aware of all the expenses I will be in for and how heavy the regulations are.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
Kennith Osborne With any VR you really need to take a look at a T12 or a projection from a property management company. A lot of people spend time trying to estimate vacancy/occupancy themselves and just go in circles. A lot of people don’t even think about paying all utilities, landscaping, linens, furnishing, cable, internet, etc. The cost structure really isn’t apples-to-apples with other real estate endeavors.
That said, what I have heard with a lot of VR markets is that you get a lot of turnover at the 5-year mark. People (not really real estate investors) buy with the hope of making money and getting to enjoy the property. Expenses are higher than they thought, they can’t afford a PM, and the novelty of self-managing wears off pretty quick after that. Maybe that’s not the case in TN but it happens in many markets. It’s just plain tough to cash-flow with a PM slicing 18%-30% off of the top.
But don’t take my word for it. I’d bet a box of donuts there’s far more than one VR on the market that’s being professionally managed. They’ll have gross revenues, expenses, and everything else for those properties.
Spring Hill, TN · Member since 2016 · 18 posts · 4 votes
8y
@Andrew Johnson
The current owner is managing the property on his own with VRBO.com.
I am considering doing the same to keep the management fees and payoff the property quicker. While they offer the ability to add cleaning fees I have not seen the ability to add taxes and fees collected by the state and local government.
VRMO is about the only company I have found so far that does projections on rental properties. If you know of another company that does feel free to let me know.
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
8y
Kennith Osborne you can add your taxes to your listing. In fact Airbnb just started not only taking taxes out but submitting them to TN on your behalf. Either way it’s not difficult to submit taxes on your own. I understand you want to be as hands off as possible but it’s not worth giving up 30+% because of a couple checks you have to write and mail and logging on to TN state site to submit. It’s worth every penny than paying a property manager all that money.
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
8y
Hi Kennith! I own 5 cabins in PF/Gatlinburg. The market is definitely on its way up. Since most of the homes are vacation rentals and few people actually live there, the prices are still far far below what they were pre-crash.
I also second what @Jeff Piscioniere said. It is very difficult to cash flow if you place it with one of the local PMs, they charge 30-40% of your gross rentals. I have bought cabins from several owners who were actually LOSING money with the PM's. My husband @Luke Carl manages all 5 of ours from his iphone using the VRBO and Airbnb apps, and he has a 9-5 gig.
and @Avery Carl is also right! She is always right.
We love the area! In fact I was just looking at pictures of the view from one of our porches when I got the email the Avery tagged me.
Also... to your point that there are many for sale.... It's important to remember there are around 10,000 of these cabins in the area. Lots of folks assume there's a small number of cabins. Not true. The area gets 12+million visitors per year. Folks need a place to stay!
Spring Hill, TN · Member since 2016 · 18 posts · 4 votes
8y
@Jeff Piscioniere I do not mind writing the checks. I use to do books for several companies. I just like for customers to see their money is going to the state not the owner. My agent says I can expect about 13% for state, local and bed taxes. She recommended talking to a CPA for exact numbers.
After talking with you might Real Estate agent and you I am going to forgo the management company.
@Avery Carl thank you so much! It helps being able to talk with someone in the area in the same business as I try to get started. I will PM you and your husband later on.
I have been looking at the income estimates and expenses on the property to see how it is going to work out. The cabin has not been stained since at least 2004. My realtor says it can cost between $3k- $5 to have it done. Not sure about the how much down time it will take to have it stained.
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
8y
There is a Short Term/Vacation Rental forum on here. Spend some time hanging out over there and get to know the cast of characters Paul Sandhu for president.
Cambridge, MA · Member since 2017 · 268 posts · 247 votes
8y
I second the fact that there is something countercyclical with Vacation Rentals. Seeing higher inventory and Days on Market in Cape Cod area. I think anybody who is thinking of investing or a second home is trying to make it in the big metro areas with 10% appreciation a year.
Spring Hill, TN · Member since 2016 · 18 posts · 4 votes
8y
@Joel Baker I passed on the cabin after finding out it needed 2 retaining walls. These would of cost between $20,000 to $30,000 each. That would of taken my entire gross for two years and left a bad taste to say the least. I am still hoping to invest in vacation rentals or home rentals in the future.
Annie and her husband are very helpful. They hooked me up with a loan agent and insurance agent that are familiar with vacation rentals. Their website list the gross income for year one and year two of each property.
Investor · West Monroe, LA · Member since 2015 · 196 posts · 70 votes
8y
@Jeff Piscioniere, I am looking at purchasing a cabin in the Gatlinburg area myself at this point, but I've never owned STR's. Have you been buying these below market value, or are you okay with paying market value if it still cash flows? I'm accustomed to just buying undervalued properties in my local market, so I'm struggling with this concept.
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
8y
@Austin Works these properties are all going to be functioning vacation rentals that are at market value unless you happen to find one that’s has been lived in and forclosed on but they’re rare and good luck finding a local contractor you can trust. They see any area code other than 865 and they see dollar signs $$$$ I would not suggest going this route unless you’re going to move in for a month and manage the rehab.
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
8y
A few years ago it was possible to buy undervalued properties in this area. But now, short term rental investors moving in from areas like Nashville, New York, and other large cities where short term rental laws have tightened and inhibited their ability to scale, have discovered the Smokies and their excelling COC return. Demand is high and supply is low, not seeing more than a 5% discount from purchase price, with a few exceptions.
Investor · West Monroe, LA · Member since 2015 · 196 posts · 70 votes
8y
@Luke Carl, thank you for your feedback. I am really trying to wrap my mind around this, as I just don't like going into a deal without multiple exit strategies. With me buying one of these properties at market value, what exit strategies would you see available for this type of property? I'd be underwater if I wanted to sell. What figure are you referring to as 2-2.5%? Rent to purchase ratio?
I own 2 Gatlinburg STR's, and in my opinion, 2-2.5% gross monthly rental of the purchase price is very generous! I'd say more in the 1.5 - 1.75% would be more what I see. Additionally, take 30-40% mgmt fee / maintenance from that, and your net would be closer to the 1% Range.
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
8y
@Austin Works sorry for the delayed response. Exactly what @Lucas Carl stated. You’re not going to find below market that’s not a fixer upper or is ready to slip off its foundation down a hillside. Lol! My wife and I were planning on scaling our STR business as we have seen our cabin’s value increase over 20% in just 2 years but I’ve now turned my REI focus to buy and hold rentals nearer my market in CT. I have 2 partners and our goal is to scale as quickly as possible as the 3 of us and our families bought one way tickets on the early retirement express! 😉 I’ve got some nice equity to tap as needed in the cabin going forward. I’m looking at a few $thousand to stain my cabin in the next year or so but aside from that its cruise control using AirBNB, TripAdvisor, and VRBO and I keep the 30-40% otherwise spent on subpar rental management services.
Investor · FL · Member since 2016 · 332 posts · 388 votes
8y
@Ric Tro if you are not making 2% then you need to look at what needs to change. What does the reviews say? Is your management company undervaluing your nightly rate? Can you get more per night? Are they offering too many discounts (rent 5 nights get 2 free)? Is your management company not filling the nights? I self-manage and 2.25% is the avg monthly return as @Luke Carl states including Jan & Feb. You should pull close to $20K gross per bedroom per year for 2+ bedroom cabins and if you have a 1-Bedroom cabin $30K gross. By self-managing my net is at 1.9%. While I have three distinct cabins currently under construction, I am in the design stage of a indoor pool cabin and returns are off the charts for them. I hope to break ground in October and have it operational by next summer.
Bay Area, CA · Member since 2018 · 27 posts · 16 votes
8y
@Account Closed Thanks for your post, it was so helpful! I'm in California and on a whim last year took the kids to Dollywood and that area (Disneyland, So Cal etc. get old) and they still talk about it as one of their most favorite vacations. I'd love to have a place out there to visit in the mountains and to have as a STR. Can you tell me, with so many cabins there (or at least it seems there are lots of them) how does competition not drown out the newbie on airbnb etc. Is there still room for new folks? And with those numbers above, sounds like if it's feasible financially, better to get a 2 bedroom? Or is that not necessarily the case? Thank you!