Smokies: The juice still isn't worth the squeeze

[Collin Hays]

We are seeing asking prices at approximately 10-12X the trailing twelve months rents (only rents).  That's too high.  This is why there is so much inventory, and so few takers.

My measuring stick is "Would this be a good investment for a cash investor seeking income?"  The answer is, not particularly.  If I have $500,000 to invest and am looking for income, I can draw around 4 percent from a high yield money market brokerage account through Schwab or Fidelity.  That's $20,000 a year without lifting a finger.

If I take my $500,000 and invest in a Smokies cabin earning $50,000 a year, I am buying a part time job and probably only netting $27,000 to $29,000 per year after the following expenses:

Insurance - $3500 per year

Taxes - $2000 per year

Utilities - $6000 per year

Repairs & Maintenace - $7500 per year

HOA fees - $2000-3000 per year.

Total expenses:  $21,000-$23,000 per year

If I can earn $20,000 per year on my $500,000 with virtually no risk and no effort, versus another $6-8K for much more risk and headache, the juice isn't worth the squeeze.

[Jay Hinrichs]

Quote from @Collin Hays:

We are seeing asking prices at approximately 10-12X the trailing twelve months rents (only rents).  That's too high.  This is why there is so much inventory, and so few takers.

My measuring stick is "Would this be a good investment for a cash investor seeking income?"  The answer is, not particularly.  If I have $500,000 to invest and am looking for income, I can draw around 4 percent from a high yield money market brokerage account through Schwab or Fidelity.  That's $20,000 a year without lifting a finger.

If I take my $500,000 and invest in a Smokies cabin earning $50,000 a year, I am buying a part time job and probably only netting $27,000 to $29,000 per year after the following expenses:

Insurance - $3500 per year

Taxes - $2000 per year

Utilities - $6000 per year

Repairs & Maintenace - $7500 per year

HOA fees - $2000-3000 per year.

Total expenses:  $21,000-$23,000 per year

If I can earn $20,000 per year on my $500,000 with virtually no risk and no effort, versus another $6-8K for much more risk and headache, the juice isn't worth the squeeze.

wow Property tax's only 2k a year on a 500k asset thats really really low..