Gatlinburg Cabin Target Cost in current market
Troy, IL · Member since 2018 · 18 posts · 4 votes
Gatlinburg Cabin Target Cost in current market
Most Popular Reply
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
4yQuote from @Luke Carl:
it’s all about you. I have one 550 sq ft and it grosses about 65k. Use the enemy method. Run your numbers.
In STR the question is more-so "CAN I DO THIS" and many people cannot
Yea but to be fair, 65k on a 1 bed 550 sq ft is not the norm. Can it be done? yes Will any 1 bed cabin do that? no way. A lot has to do with location and the amenities in the cabin. It also has a lot to do with how many 5 star reviews you have and how well you manage it. Will a first time STR buyer do that - no way. He will have no reviews. He will not be able to command the same price point etc.. He has a lot to learn.
You also have to remember that prior to covid most folks would tell you the norm for that area was 20k per bedroom average - now I blow those numbers away but I also brought properties that I knew would blow those numbers away with the right amenities. That per bedroom average has gone up quite a bit the last 2 years for various reasons, but there will be a pull back coming and people are going to get burnt. It will be the people jumping in at these high prices for the first time with no experience that will get burnt and its gonna happen. Can you still cashflow in this market? Yes you absolutely can, but you have to buy right. What properties will cash flow well at these price points has narrowed quite a bit in the last few years.
Yes the prices have changed even more so than that. The cabin I just finished, built with August 2020 pricing I can sell for almost 3 times that today.
At that price point on a typical 1 bed cabin, you will be lucky to break even, and if you profit, it won't be much. And the amount of profit you might get would have to be debated whether or not it was worth your time and energy to manage it.
For the last year, people have been selling all kinds of things and people have been so frenzied they are buying - even if they don't make sense. I have seen some realtors jump in and help selling stuff that don't make sense. i.e. selling building lots that wont get a septic permit, selling a cabin that did xxxx last year, which turned out was completely trashed and most likely didn't rent at all last year. You have to be careful what you are buying, and have a good realtor as well.
Now perhaps your reasons for buying a cabin are not purely investment related. Maybe you want the cabin for your use and you want to rent it out when not using it just to help cover the cost. Then that is a different story and purely up to you at that point. I am giving my response based on your purchase being solely investment driven.
15 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes4y
Quote from @Arthur Means:
Hey all,
sorry for the short question here, just wondering if someone can help me with what I should be looking for from a cost perspective when buying my first or short-term rental.
I saw a one bedroom one bath cabin today that looked decent, it was about 720 ft. It's sold in 2020 for about 200,000, now the owner wants $450,000. Which is $625 a square foot
obviously this is just one example, but have prices really changed this much in 2 years? Seems like it would be pretty difficult to cash flow positive on something that's small for that much money. Any type of guidance here for what the overall market looks like would be super helpful
Yes, the prices have changed that much. They are disconnected from reality. Not only are the sales prices unrealistic, the rent rates for the past two years have been higher than normal. When the market stabilizes (or even crashes) then you could be stuck with lost equity and lower income that doesn't support the purchase price.
I saw someone talking about buying two little cabins in downtown Gatlinburg for over $1 million. They said the price was crazy, but the numbers worked based on recent rental history. I'll bet dollars to donuts that he'll lose on that purchase.
The DIY Landlord Book4.7247 Reviews - 4yLuke CarlPro MemberRental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
it’s all about you. I have one 550 sq ft and it grosses about 65k. Use the enemy method. Run your numbers.
In STR the question is more-so "CAN I DO THIS" and many people cannot
- 4yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
1 bed, 720 sqft, $450K, and tourism based income... For those reasons I'm out.
- Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes4y
Quote from @Luke Carl:
it’s all about you. I have one 550 sq ft and it grosses about 65k. Use the enemy method. Run your numbers.
In STR the question is more-so "CAN I DO THIS" and many people cannot
Yea but to be fair, 65k on a 1 bed 550 sq ft is not the norm. Can it be done? yes Will any 1 bed cabin do that? no way. A lot has to do with location and the amenities in the cabin. It also has a lot to do with how many 5 star reviews you have and how well you manage it. Will a first time STR buyer do that - no way. He will have no reviews. He will not be able to command the same price point etc.. He has a lot to learn.
You also have to remember that prior to covid most folks would tell you the norm for that area was 20k per bedroom average - now I blow those numbers away but I also brought properties that I knew would blow those numbers away with the right amenities. That per bedroom average has gone up quite a bit the last 2 years for various reasons, but there will be a pull back coming and people are going to get burnt. It will be the people jumping in at these high prices for the first time with no experience that will get burnt and its gonna happen. Can you still cashflow in this market? Yes you absolutely can, but you have to buy right. What properties will cash flow well at these price points has narrowed quite a bit in the last few years.
Yes the prices have changed even more so than that. The cabin I just finished, built with August 2020 pricing I can sell for almost 3 times that today.
At that price point on a typical 1 bed cabin, you will be lucky to break even, and if you profit, it won't be much. And the amount of profit you might get would have to be debated whether or not it was worth your time and energy to manage it.
For the last year, people have been selling all kinds of things and people have been so frenzied they are buying - even if they don't make sense. I have seen some realtors jump in and help selling stuff that don't make sense. i.e. selling building lots that wont get a septic permit, selling a cabin that did xxxx last year, which turned out was completely trashed and most likely didn't rent at all last year. You have to be careful what you are buying, and have a good realtor as well.
Now perhaps your reasons for buying a cabin are not purely investment related. Maybe you want the cabin for your use and you want to rent it out when not using it just to help cover the cost. Then that is a different story and purely up to you at that point. I am giving my response based on your purchase being solely investment driven.
- Investor · Greenville, SC · Member since 2020 · 210 posts · 302 votes4y
I would be careful in general because it’s likely we’ll see some amount of correction in the Smokies, but the cabin you’re referencing will definitely make good money (saw it this morning). I’m grossing over $70k on a cabin similar to that one and still have a full summer calendar despite much of the doom and gloom.
When looking for advice here I’d heavily weigh the opinions of prop manager Collin H, Luke Carl, and others who own in the area. They will have different opinions but are well-informed opinions because of their experiences.
- Troy, IL · Member since 2018 · 18 posts · 4 votes4y
Quote from @Ken Boone:
Quote from @Luke Carl:
it’s all about you. I have one 550 sq ft and it grosses about 65k. Use the enemy method. Run your numbers.
In STR the question is more-so "CAN I DO THIS" and many people cannot
Yea but to be fair, 65k on a 1 bed 550 sq ft is not the norm. Can it be done? yes Will any 1 bed cabin do that? no way. A lot has to do with location and the amenities in the cabin. It also has a lot to do with how many 5 star reviews you have and how well you manage it. Will a first time STR buyer do that - no way. He will have no reviews. He will not be able to command the same price point etc.. He has a lot to learn.
You also have to remember that prior to covid most folks would tell you the norm for that area was 20k per bedroom average - now I blow those numbers away but I also brought properties that I knew would blow those numbers away with the right amenities. That per bedroom average has gone up quite a bit the last 2 years for various reasons, but there will be a pull back coming and people are going to get burnt. It will be the people jumping in at these high prices for the first time with no experience that will get burnt and its gonna happen. Can you still cashflow in this market? Yes you absolutely can, but you have to buy right. What properties will cash flow well at these price points has narrowed quite a bit in the last few years.
Yes the prices have changed even more so than that. The cabin I just finished, built with August 2020 pricing I can sell for almost 3 times that today.
At that price point on a typical 1 bed cabin, you will be lucky to break even, and if you profit, it won't be much. And the amount of profit you might get would have to be debated whether or not it was worth your time and energy to manage it.
For the last year, people have been selling all kinds of things and people have been so frenzied they are buying - even if they don't make sense. I have seen some realtors jump in and help selling stuff that don't make sense. i.e. selling building lots that wont get a septic permit, selling a cabin that did xxxx last year, which turned out was completely trashed and most likely didn't rent at all last year. You have to be careful what you are buying, and have a good realtor as well.
Now perhaps your reasons for buying a cabin are not purely investment related. Maybe you want the cabin for your use and you want to rent it out when not using it just to help cover the cost. Then that is a different story and purely up to you at that point. I am giving my response based on your purchase being solely investment driven.
I appreciate this reply very much. It's very important to me about the first property that I buy is positive. Like you said, I have an awful lot to learn. I would rather all those lessons not me on my very first property, if you know what I mean.
- 4yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
Many realtors in 2022 are the 2008 version of loan officers, getting people in over their head with really bad advice. We're lucky around here on BP to have some of the world's best STR realtors who truly understand the STR market and are realistic about it, but I've come across a ton in FB groups, markets I'm looking in, etc that are really misleading new STR buyers, especially in terms of presenting what the possible risks are.
Cosmic Vacations4.9172 Reviews - Investor · Greenville, SC · Member since 2020 · 210 posts · 302 votes4y
Quote from @Ryan Moyer:
Many realtors in 2022 are the 2008 version of loan officers, getting people in over their head with really bad advice. We're lucky around here on BP to have some of the world's best STR realtors who truly understand the STR market and are realistic about it, but I've come across a ton in FB groups, markets I'm looking in, etc that are really misleading new STR buyers, especially in terms of presenting what the possible risks are.
100%
- Austin, TX · Member since 2013 · 153 posts · 104 votes4y
I think in 8-10 months there are going to be some killer deals. I would wait.
The one exception to that advice would be if you are dependant on a DSCR or other "specialty" loan product to close the deal. I could see the availability of those types of loans decreasing if some of their investments start to tank.
- Realtor · Pigeon Forge, TN · Member since 2018 · 230 posts · 111 votes4y
@Arthur Means
We own in Gatlinburg Pigeon Forge area and are one of the longest owners here for the Smokies. I agree with the last few posters.
The prices right now are so hard to impossible to make real reliable consistent year after years returns. Even with a zillion amenities if gas prices keep going up and food prices something has to give. Keep your eyes peeled. The next few years.
This resembles the market in Orange County. Investors were buying with monthly losses gambling on future appreciation. This area is getting closer and closer to being that type of market.
- Real Estate Agent · Knoxville, TN · Member since 2020 · 54 posts · 42 votes4y
Underwrite your deal conservatively. If you think 2020-2021 data is an outlier, scrap it. Use 2017-2018 rent data in the Smokies and underwrite your deal with those numbers.
People will continue to visit the Smokies and rent cabins. Use the data before the boom. Below are GSMNP visits by year. You can see the increase in visitors to the park in the data below, 11-12MM is what I see before COVID and the craze of cabin STR investing (15-25% reduction). I'm not saying park data translates perfectly to rent data (occupancy or nightly rate), I'm merely using the park data as an example.
Stats Report Viewer (nps.gov)2010 9,463,538
2011 9,008,830
2012 9,685,829
2013 9,354,695
2014 10,099,276
2015 10,712,674
2016 11,312,786
2017 11,338,893
2018 11,421,200
2019 12,547,743
2020 12,095,720
2021 14,161,548
- Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes4y
Quote from @Corbin Loveless:
Underwrite your deal conservatively. If you think 2020-2021 data is an outlier, scrap it. Use 2017-2018 rent data in the Smokies and underwrite your deal with those numbers.
People will continue to visit the Smokies and rent cabins. Use the data before the boom. Below are GSMNP visits by year. You can see the increase in visitors to the park in the data below, 11-12MM is what I see before COVID and the craze of cabin STR investing (15-25% reduction). I'm not saying park data translates perfectly to rent data (occupancy or nightly rate), I'm merely using the park data as an example.
Stats Report Viewer (nps.gov)2010 9,463,538
2011 9,008,830
2012 9,685,829
2013 9,354,695
2014 10,099,276
2015 10,712,674
2016 11,312,786
2017 11,338,893
2018 11,421,200
2019 12,547,743
2020 12,095,720
2021 14,161,548
But to me what makes that area more attractive is the data that is missing on what you showed, and that is the park visitors after the tech crash in 2000 and then again with the housing market crash in 2008. In 2000 there was roughly a 10% drop in visitors after the tech crash in 2000, so it went from just above 10 mill to just above 9 mill. It then kind of bounced around that number up or down probably less than 3-4% each year until 2008 in which it took maybe a 3-4% drop after that crash. After that, modest changes in the number of visitors until it started increasing quite a bit in the following years. To me this says that this area, has way more ability to handle a drop in the market than perhaps other areas. I agree too that you can't base rental stats off of these numbers, but it does show you how many people are continually drawn to the area and all those people have to stay somewhere ;) Again, you still have to buy right for it to work, and right now, that is very difficult.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @Ken Boone:
Quote from @Corbin Loveless:
Underwrite your deal conservatively. If you think 2020-2021 data is an outlier, scrap it. Use 2017-2018 rent data in the Smokies and underwrite your deal with those numbers.
People will continue to visit the Smokies and rent cabins. Use the data before the boom. Below are GSMNP visits by year. You can see the increase in visitors to the park in the data below, 11-12MM is what I see before COVID and the craze of cabin STR investing (15-25% reduction). I'm not saying park data translates perfectly to rent data (occupancy or nightly rate), I'm merely using the park data as an example.
Stats Report Viewer (nps.gov)2010 9,463,538
2011 9,008,830
2012 9,685,829
2013 9,354,695
2014 10,099,276
2015 10,712,674
2016 11,312,786
2017 11,338,893
2018 11,421,200
2019 12,547,743
2020 12,095,720
2021 14,161,548
But to me what makes that area more attractive is the data that is missing on what you showed, and that is the park visitors after the tech crash in 2000 and then again with the housing market crash in 2008. In 2000 there was roughly a 10% drop in visitors after the tech crash in 2000, so it went from just above 10 mill to just above 9 mill. It then kind of bounced around that number up or down probably less than 3-4% each year until 2008 in which it took maybe a 3-4% drop after that crash. After that, modest changes in the number of visitors until it started increasing quite a bit in the following years. To me this says that this area, has way more ability to handle a drop in the market than perhaps other areas. I agree too that you can't base rental stats off of these numbers, but it does show you how many people are continually drawn to the area and all those people have to stay somewhere ;) Again, you still have to buy right for it to work, and right now, that is very difficult.
@Collin Hays mentioned in previous posts that during the 2008-2012 crash that rental rates plummeted and cabin prices dropped over 50 percent. So while the drop may have only been 5 percent in visitors, the impact to rental cabins was much more substantial.
- Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes4y
@John Carbone I definitely have not been in the STR business as long as @Collin Hays so I don't doubt about what happened with rental rates during those times. That just makes sense, supply and and demand, in a recession the supply of STRs will be up and the demand will be down so you will have to adjust rates accordingly to compete well. That is why I stress that you have to buy right. I can handle a 50% drop in all of my cabins, and still profit. I would venture to say that a good percentage of folks who leveraged to purchase an existing STR in the past 12 months in the Smokies is going to have have a real hard time handling just a 10% drop in revenue, much less a 50%.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4yYeah i agree. 99 percent of people who bought in the last 18 months are likely going to get slaughtered here, especially on pool cabins.
Quote from @Ken Boone:
@John Carbone I definitely have not been in the STR business as long as @Collin Hays so I don't doubt about what happened with rental rates during those times. That just makes sense, supply and and demand, in a recession the supply of STRs will be up and the demand will be down so you will have to adjust rates accordingly to compete well. That is why I stress that you have to buy right. I can handle a 50% drop in all of my cabins, and still profit. I would venture to say that a good percentage of folks who leveraged to purchase an existing STR in the past 12 months in the Smokies is going to have have a real hard time handling just a 10% drop in revenue, much less a 50%.
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