Gatlinburg: $1000 psf

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Gatlinburg: $1000 psf

Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

I figured this day was coming.  A good friend of mine just bought two-500 sq ft rental homes in Gatlinburg for $1 million.  Granted, these are near downtown and right on the Roaring Fork River.

This isn’t an out of state speculator; he’s a seasoned local pro, and said the numbers on this work quite well.


Still, incredible.

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y

Do you actually know the numbers? If each unit rents for $175 a night for $300 nights a year, that's only $105,000 before expenses. A good long-term rental will earn 1% of the purchase price monthly, which would be $10,000 per month or $120,000 per year. So the earnings are quite a bit lower than a long-term rental and that's before considering the additional expenses (utilities, lodging taxes, landscaping, etc.). 

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  • John Carbone
    Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    4y
    Quote from @Ken Boone:

    @Frank Borzen I am interested in what @Collin Hays thinks as well but I will tell you what I think.  The waterfront cabins in Townsend, will do much better than the non waterfront cabins in Townsend.  However, my guess is that it won't do as good as a non waterfront cabin in PF/Gatlinburg - I could be wrong.  When visiting we used to always stay in Townsend, just to stay out of the hustle and bustle of PF/Gatlinburg, but in the last couple decades, internet has still not reached Townsend, cell coverage is awful and if you need to stay connected it is very difficult.  Now there are still some that want that, but most people are not thrilled about that so you are not going to get the same demand/prices that you will get in PF/Gatlinburg - IMO.  Not a lot of food options over there.  It's a great place to stay to get away from crowds and if your main goal is to visit Cade's Cove over and over.. which has been what I have typically done cause I like the photography opportunities there.

    I have always loved it over there, but like I said I need to stay connected at least part of the time, and it is really difficult over there and limited food options.

    Try Cosby on the other side. Very strong 5g and high speed fiber in some places. 15-20 mins to gatlinburg and 3 of the park entrances with no traffic. 
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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Collin Hays:

    Do you have an update on this? I'm curious to know how they performed so far.

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  • Collin HaysBusiness Member
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    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    3y
    Quote from @Nathan Gesner:
    Quote from @Collin Hays:

    Do you have an update on this? I'm curious to know how they performed so far.


    He just completed renovations on both, so no rentals yet.  I won’t be privy to the numbers.  But he is quite excited and confident, and the appraisals post renovation exceeded his purchase price and the renovation costs.  

    It appears to me that “ground zero” properties in Gatlinburg- those properties within walking distance to downtown, are moving toward their own level of pricing, well above the surrounding area.  $1000 psf could be the floor at some point relatively soon.

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Nathan Gesner

    I am curious to know how these will be performing in 2024…

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  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    3y

    I know this guy that has STRs for refinery contractors in a refinery town.  He pays $6-$8 psf for a house.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Chris Seveney:

    @Nathan Gesner

    I am curious to know how these will be performing in 2024…


     Me, too. He spent $1 million, then sat out the summer and poured more money into them? Meanwhile, I see plenty of larger units on the river with lower rates and availability. I fully expect this to be a stinker. 

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  • Collin HaysBusiness Member
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    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    3y
    Quote from @Nathan Gesner:
    Quote from @Chris Seveney:

    @Nathan Gesner

    I am curious to know how these will be performing in 2024…


     Me, too. He spent $1 million, then sat out the summer and poured more money into them? Meanwhile, I see plenty of larger units on the river with lower rates and availability. I fully expect this to be a stinker. 


     Where are these cabins on the river of which you speak?  

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Collin Hays:

    You originally posted about them, so surely you know where they are? 
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  • Wilson Hunter
    Investor · Greenville, SC · Member since 2020 · 210 posts · 302 votes
    3y
    Quote from @Nathan Gesner:
    Quote from @Collin Hays:

    You originally posted about them, so surely you know where they are? 

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Wilson Hunter:

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

    It's hard to tell without playing around with availability dates. I just saw a really nice 4bed/2bath for $317 a night. Little Bear is a nice single-family and it's renting for $200 a night. These are both on what you refer to as a river.

    I saw a lot of people making emotional purchases and this appeared to be one of them. Collin said the buyer was a "seasoned local pro, and said the numbers on this work quite well." I just want to see if I'm wrong. 
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  • John Carbone
    Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    3y
    Quote from @Nathan Gesner:
    Quote from @Wilson Hunter:

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

    It's hard to tell without playing around with availability dates. I just saw a really nice 4bed/2bath for $317 a night. Little Bear is a nice single-family and it's renting for $200 a night. These are both on what you refer to as a river.

    I saw a lot of people making emotional purchases and this appeared to be one of them. Collin said the buyer was a "seasoned local pro, and said the numbers on this work quite well." I just want to see if I'm wrong. 

     I did a drive by the two places Colin mentioned. I’m a bit skeptical of the valuation, but I’m not an expert in downtown Gatlinburg either. I personally think it’s overpriced for what you get. I think this is a strong bet on gatlinburg becoming the aspen of the southeast. I do hope it works out though as I think that will be good for the general area. I paid about $500 a foot for a similar sized cabin on a creek over the summer that is 25-30 mins away from here, and it is doing phenomenal. It’s a pretty large lot with a good amount of creek front. My cash on cash is projecting at 40-45 percent. But this brings back to the notion of investing for cash flow or future equity. Assuming the guy does well on cash flow, will the resale valuation reach $1500-$2000 a square foot for something that small? I’m skeptical on this unless interest rates go to 2-3 percent. I bought mine for cash flow, I don’t expect the value to be 500k in 10 years, but the 25-30k net profit a year will have the place paid off in well under 10 years. 

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  • Cliff H.Pro Member
    Rental Property Investor · Nashua, NH · Member since 2014 · 599 posts · 477 votes
    3y

    Time will tell, but at the end of the day $1m property still = locking up $200k/property minimum. How long before I’m making $200k in net return? Not arguing the numbers on an area I know little about, just observing the reality of time margin on return. 

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  • Ryan MoyerBusiness Member
    Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
    3y
    Quote from @John Carbone:

    These markets aren't really comparable.  Aspen is expensive because rich people want to own houses for themselves there.  Gatlinburg is expensive because investors can make money there.  Two completely separate market forces.

    People are willing to pay WAY over what makes sense as an investment to live in Aspen.  Not the case in Gatlinburg.

    A 4br home in Aspen doesn't sell for $10M because it brings in $1M/yr in gross revenue.  It sells for $10M because rich people want a 4br house in Aspen to use for themselves.  Heck, a 4br home in Aspen probably has lower gross revenue than a 4br home in Gatlinburg, even though the property costs 10x as much to acquire.

    No one in Gatlinburg is going to pay $10M for a home that does $70k/yr in gross income like they will in Aspen.  And that's fine, Gatlinburg's home values are tied to their revenue (unofficially, of course) and that revenue is great, so home prices are strong.  But a standard 4br cabin in Gatlinburg isn't going to start generating $1M/yr in gross revenue any time soon, and that's the only way 4br cabins there would suddenly cost $10M.  In Aspen, they cost that for entirely different reasons.

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  • John Carbone
    Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    3y
    Quote from @Ryan Moyer:
    Quote from @John Carbone:

    These markets aren't really comparable.  Aspen is expensive because rich people want to own houses for themselves there.  Gatlinburg is expensive because investors can make money there.  Two completely separate market forces.

    People are willing to pay WAY over what makes sense as an investment to live in Aspen.  Not the case in Gatlinburg.

    A 4br home in Aspen doesn't sell for $10M because it brings in $1M/yr in gross revenue.  It sells for $10M because rich people want a 4br house in Aspen to use for themselves.  Heck, a 4br home in Aspen probably has lower gross revenue than a 4br home in Gatlinburg, even though the property costs 10x as much to acquire.

    No one in Gatlinburg is going to pay $10M for a home that does $70k/yr in gross income like they will in Aspen.  And that's fine, Gatlinburg's home values are tied to their revenue (unofficially, of course) and that revenue is great, so home prices are strong.  But a standard 4br cabin in Gatlinburg isn't going to start generating $1M/yr in gross revenue any time soon, and that's the only way 4br cabins there would suddenly cost $10M.  In Aspen, they cost that for entirely different reasons.

    Right, so paying $1000 a foot plus renovation costs is a bet that over time the market perception will shift to the more exclusive nature similar to an aspen. 
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  • Collin HaysBusiness Member
    OP
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    3y
    Quote from @Ryan Moyer:
    Quote from @John Carbone:

    These markets aren't really comparable.  Aspen is expensive because rich people want to own houses for themselves there.  Gatlinburg is expensive because investors can make money there.  Two completely separate market forces.

    People are willing to pay WAY over what makes sense as an investment to live in Aspen.  Not the case in Gatlinburg.

    A 4br home in Aspen doesn't sell for $10M because it brings in $1M/yr in gross revenue.  It sells for $10M because rich people want a 4br house in Aspen to use for themselves.  Heck, a 4br home in Aspen probably has lower gross revenue than a 4br home in Gatlinburg, even though the property costs 10x as much to acquire.

    No one in Gatlinburg is going to pay $10M for a home that does $70k/yr in gross income like they will in Aspen.  And that's fine, Gatlinburg's home values are tied to their revenue (unofficially, of course) and that revenue is great, so home prices are strong.  But a standard 4br cabin in Gatlinburg isn't going to start generating $1M/yr in gross revenue any time soon, and that's the only way 4br cabins there would suddenly cost $10M.  In Aspen, they cost that for entirely different reasons.

     I am not saying Gatlinburg is Aspen - I drove through Aspen today so I recognize the difference.

    The point is, investors are willing to buy in Gatlinburg for price to earnings multiples that are increasingly larger than the surrounding area.  Facts is facts. 



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  • Collin HaysBusiness Member
    OP
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    3y
    Quote from @Nathan Gesner:
    Quote from @Wilson Hunter:

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

    It's hard to tell without playing around with availability dates. I just saw a really nice 4bed/2bath for $317 a night. Little Bear is a nice single-family and it's renting for $200 a night. These are both on what you refer to as a river.

    I saw a lot of people making emotional purchases and this appeared to be one of them. Collin said the buyer was a "seasoned local pro, and said the numbers on this work quite well." I just want to see if I'm wrong. 

     A cabin on a river isn’t that same as a downtown Gatlinburg property on water.  And you are correct - I’m aware of most of them - there ain’t many! 

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    SMOKY MOUNTAIN FALLS INC.51 Review
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  • John Carbone
    Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    3y
    Quote from @Collin Hays:
    Quote from @Nathan Gesner:
    Quote from @Wilson Hunter:

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

    It's hard to tell without playing around with availability dates. I just saw a really nice 4bed/2bath for $317 a night. Little Bear is a nice single-family and it's renting for $200 a night. These are both on what you refer to as a river.

    I saw a lot of people making emotional purchases and this appeared to be one of them. Collin said the buyer was a "seasoned local pro, and said the numbers on this work quite well." I just want to see if I'm wrong. 

     A cabin on a river isn’t that same as a downtown Gatlinburg property on water.  And you are correct - I’m aware of most of them - there ain’t many! 


     This is a good point. I checked mls for almost 2 years everyday for a property on a creek around there, and I mean an actual creek that always flows, and paid almost $500 a foot. At the time I felt like I was overpaying, but I knew worst case I’d break even, and have a unique property. The more I think about it, if I’m getting $150-$200 a night 30 mins from Gatlinburg, this person should probably pull in $300-$400 being in a prime location. There is a value on scarcity. 

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  • Ryan MoyerBusiness Member
    Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
    3y
    Quote from @John Carbone:
    Quote from @Collin Hays:
    Quote from @Nathan Gesner:
    Quote from @Wilson Hunter:

    Collin is asking on which river you see "plenty of larger units on the river with lower rates and availability"

    It's hard to tell without playing around with availability dates. I just saw a really nice 4bed/2bath for $317 a night. Little Bear is a nice single-family and it's renting for $200 a night. These are both on what you refer to as a river.

    I saw a lot of people making emotional purchases and this appeared to be one of them. Collin said the buyer was a "seasoned local pro, and said the numbers on this work quite well." I just want to see if I'm wrong. 

     A cabin on a river isn’t that same as a downtown Gatlinburg property on water.  And you are correct - I’m aware of most of them - there ain’t many! 


     This is a good point. I checked mls for almost 2 years everyday for a property on a creek around there, and I mean an actual creek that always flows, and paid almost $500 a foot. At the time I felt like I was overpaying, but I knew worst case I’d break even, and have a unique property. The more I think about it, if I’m getting $150-$200 a night 30 mins from Gatlinburg, this person should probably pull in $300-$400 being in a prime location. There is a value on scarcity. 


    I remember those 2 cabins on one plot being sold together right when prices started going up.  They were on a creek, walking distance to downtown.  They weren't even that expensive and sat on the market a while because the cabins themselves were boring.  But I wonder what those things are worth now.

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