Vacation Rental in Smokey Mountain (Qs with partnering + prequal)

11 Replies

Hi,
I'm looking to purchase a vacation rental with a friend in Gatlinburg/Pigeon Forge area. I have a couple questions:
1) What would be a fair way to split the deal with my friend. I would be the one doing the work (finding the deal, setting up property management, doing the paperwork), and he would be more of the silent partner. Not sure how to split it but we could split all costs 50/50 and I get 60% profits for doing the work. Or 50/50 and he puts up the down payment?
I'm not sure, I just want to be fair, but also want to get paid accordingly. 

2) Any recommendations on how or who to get pre-approval from in Tennessee. The guy I use in NY isn't licensed down there. 

Thanks 

The fair way is what you both agree on! But having him put more money in than you, but you taking more money out is fair also. You should probably calculate how soon they gets their ROI back.

I do a preferred payment method for the first six months until they get back 50% of their ROI. The faster an investor gets their initial money back, the happier they are I feel.

@John W.  

1) If your partner is putting up all of the $ and you are doing all the work, figure out what you would charge for the work portion and your time and compare that to your partner's financial investment.  Having said that I agree with @Andrew Wong the fair deal is the way you two work it out.  If it were me I would want to pay back the silent investor first and split everything 50/50 but I wouldn't agree to doing all the work indefinitely for their small up front investment.  

2) Can't recommend anyone in Tennessee but I would do a ton of research on the short term rental laws in the area and make sure you pick a realtor who is familiar with short term rentals.  What you don't want to do is buy a property that isn't set up ideally for a short term rental.  Some cities have tricky laws (such as here in Denver) and having an experienced realtor is imperative to your success. 

Hope this helps!

I don't know if you have found a company to work with yet, but I know a broker in that area. His name is David, and you can find his information with a quick search for Eden Crest Vacation Properties. He is one of the top guys in the area, and I'm sure he would be happy to help.

Originally posted by @Andrew Wong :

The fair way is what you both agree on! But having him put more money in than you, but you taking more money out is fair also. You should probably calculate how soon they gets their ROI back.

I do a preferred payment method for the first six months until they get back 50% of their ROI. The faster an investor gets their initial money back, the happier they are I feel.

 Thank you, that was very helpful and he would be happy to see an immediate return of his money. I think I will see if he is open to putting up down payment, and he will get 70/30 profits until he gets 50% of his money back and then figure out the rest from there. 

@Tyler Work I found a realtor that owns vaca rentals in the area, there are many to choose from and coincidentally she texted this morning for the first time in a couple months with one across the street from hers that just dropped the asking price substantially. 

Looping in @Avery Carl and @Lucas Carl because they own several in the area.  (not sure why I can't tag you, Avery!)

@John W. PM :) 

Hi John!  @Lucas Carl and I have 5 properties in that area, and we have put together partnerships with a colleague on a couple of them, so if you PM either Luke or myself we can tell you how we did that and what the ins and outs are.

I also have my license and specialize mainly in clients interested in self-management, a lot of agents in the Smokies don't understand the concept of self-management and work for or have agreements with the property management companies.  If you want to connect I'm happy to chat about how we have structured our partnerships or any other questions you may have!

Also, not sure if you are interested in self-managing, but it's pretty standard for the vacation rental management companies in the area to take 40% of your gross.  I don't know which one you may be considering going with but it's definitely something to consider when structuring your profit split with your partner.  I know Evolve takes less but I have bought 2 deals in the past year from owners who weren't profiting with Evolve and didn't want to pay a higher split to a management company.  Just food for thought!

@John W.  if it’s  been sitting there for a couple months and it’s in Gatlinburg/pigeon forge/sevierville..... don’t touch it. Talk to Avery if you want the real deal. 

@John W. what’s the address I can tell you if it’s any good. Very good chance Averys already been inside. Might even have videos. 

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