Gatlinburg Pigeon Forge cash flow str rentals

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I am heading down to the Smoky Mountain Gatlinburg Pigeon Forge Tennessee area on vacation and wanted to check out some Str cabins for a possible AirBNB model. I am wondering if anyone would share what areas are best or worst, what size units stay rented the most, What amenities are must haves? Obviously brand new with granite counters and a killer Mountain view would be ideal but that comes at a cost. I am trying to figure out if there is a sweet spot when you compare acquisition cost, rental rates and occupancy. Also are there any meet ups in the area that run in the middle of the month?  Thanks

Every size home has a niche. There are a lot of 2 and 3 Bdrm units on the market, fewer 4 bedroom units. It is actually more about how many they can comfortably sleep. All three areas do well -- Pigeon Forge, Gatlinburg, and Sevierville and each has an attraction to a different type of renter. PF people tend to prefer the attractions, Dollywood, and the shows. Gatlinburg folks like the small town and being in the park more, which Sevierville is more of a getaway. But they are all similar enough. Best views tend to be in Gatlinburg though, especially of Mt LeConte and that does bring more rentals if you have some view of that. Wears Valley area is growing in popularity with folks looking to avoid the hustle and bustle. Many residences there have a Sevierville mailing address.

Amenities: hot tub, hot tub, and hot tub. Also, either a game room or media room. Personally I think a game room is better if your renters can gather in the living area for TV. A game room can also usually accommodate a pull-out for additional sleeping capacity.

Important note: it is ILLEGAL in TN to advertise a building that is on a septic system for sale or rent with more bedrooms than on the septic permit. Although illegal, many people do it. Lesson is, bedroom count in listings is not to be taken as gospel.

I have seen better slightly better performance for 3+ bdrm homes that have access to a pool -- usually in the community. Factor that into your decision making.

Cobbly Nob, White Oak, Cosby, and the areas out the East Parkway of Gatlinburg are not very popular and do not perform as well as other locales.

The Glades, aka The Arts & Crafts Community, does okay and tends to attract an older crowd and has easy access to Pigeon Forge and Sevierville.

Chalet Village in Gatlinburg is a big area and pretty popular, with units seeing better than average bookings. However, some have high mandatory HOA fees while others have small optional HOA fees for access to the pools.

It might be worth looking for something with proximity to the new Cal Ripken Experience in Pigeon Forge or close to the Rocky Top Sports complex in Gatlinburg. Both are seeing dramatic growth in bookings and sports events/tournaments and being nearby can certainly help keep you booked.

Meetups -- sadly no. Closest is in Knoxville, about 45-60 mins away and is not well attended. Plus, many of the old-time locals don't like us "outsiders" coming in. Remember, this is still a small mountain area.

Bottom line: look inside Pigeon Forge or just outside the city limits for places with Sevierville mailing addresses, as well as the Gatlinburg area. Avoid homes with steep roads or driveways as they will discourage some winter rentals.

Another tip: when talking to local RE Agent or even owners, beware the "gross rental" numbers. If self-managed using AirBnB/VRBO, these often include the 12.75% in taxes as well as pass-thru cleaning fees. OR it could be a gross number from a local rental mgmt company that then takes 40% (on average) and is sometimes inflated.

If you are going to self-manage remember when doing your evals to include the Gross Taxes which vary from 0.5% to 1.75% depending on location and are not pass-thru.

Avery Carl is here on BiggerPockets and works realty in the area I understand. I can offer up a few contacts, but local REAs are really busy this time of year and may "vet" people based on their gut feeling regarding level of seriousness, loyalty/appreciation of their time, etc.

Thank you for the shoutout @Chuck Kramer@Ray Thorsen   everything Chuck mentioned is spot on.  To add to what he said, you actually do not have to have granite counter tops, etc.  Rustic is chic out here, and granite upgrades and stainless appliances are value I prefer to add myself later rather than pay a premium for it up front.  While it is not necessary to have a view to make some serious cash on cash return, it's definitely a huge bonus.  You can fix up a cabin, but the view is either there or it isn't. So if you happen upon a property that has a fantastic view but needs some fixes, I would seriously consider buying it.  I am slammed but I can always take the time to chat and show investment cabins to other BP'ers!

@Chuck Kramer Thanks for the insight I will print this and use it for when I am driving the neighborhoods. Are you self managing units in the area? Do you have a turnover repair crew on the ground there?

@Ray Thorsen I am currently using EVOLVE and been happy so far, not that there haven't been a few hiccups. For me, I feel like they have found about the right balance between revenue and booking %. My 2 current rentals are around 60'ish % booked and my revenue is matching others that are at 80+%. I feel like I am coming out ahead with less wear/tear and lower utility costs. I could be wrong, but the numbers work for me.

I connected with an EVOLVE partner in the area so they have access to my booking info, get alerts, etc. I hardly do anything at all except pay my bills. They handle cleaning, maintenance, renter contact, etc. 

We just closed on 2 more units, 1 of which is a 5BDRM and will be an immediate rental and will be our 3rd. The other is a 6BDRM and needs work but it has a million-dollar view. Probably flip it for the cash, but may change my mind and keep it. I am confident it will do about $90+K annually.

We may be nearing the point where it makes sense for me to just hire local cleaners but I like the service I am getting (but quality is not cheap). One really big issue in the area is quality employees and how cleaning/maintenance companies have a hard time with high-turnover rates.

@Ray Thorsen I have two cabins in the area and am closing on a third on Friday.  I've been focusing on smaller rentals - I have a studio cabin and two 1BRs - as they're reliably booked 80-90% to adult couples.  It's a demographic that travels year-round and the cabins are too small to attract parties or many families (kids are messy!).  The gross numbers aren't as flashy as the bigger cabins, but when you look at the cash-on-cash, it's tough to beat.  All three cabins are technically in Sevierville, which sort of encircles Pigeon Forge; none is further than 10 minutes away from the main drag of Pigeon Forge.

As for gross numbers provided by selling agents, the gross includes taxes, housekeeping fees, any PM fees, etc. etc. - it's all moneies coming in, same as a gross operating income on a LTR.  Some sellers will provide P&L sheets, but I recommend doing your own math regarding expenses; I place no value on gross numbers, because they can vary so widely depending entirely on management style and have very little reflection on the property itself.

In the area, you're required to remit a 9.75% sales tax (combined state/local), as well as a local lodging tax that varies by jurisdiction (my rate in Sevierville is 3%) so I'm paying 12.75% taxes on my gross income.  AirBNB will collect and remit this for you; VRBO will add it to your guest's booking fees but you're required to remit it.

@Avery Carl has been my realtor for all three transactions and I couldn't be happier with her knowledge of not only the area and market, but also of local vendors who do all my boots-on-the-ground.  That knowledge (and willingness to share it!) has made it incredibly easy for me to build an excellent local team - my TN cabins are easier for me to self-manage from CA than my one CA house that I have a part-time PM for.  

Good luck exploring the market!

I have purchased 5 cabins from Avery. I also live with her. There is no chance you’ll find an agent with more knowledge than her. She bought her first investment property at 26. She has an MBA and reads 3 books per week. She has run 3 marathons and one ultra marathon. She’s amazing. 

My cabins gross 2.5-3% of purchase price every month. I self manage 5 from a distance with a day job and LTRs in different markets that’s I also self manage. I’m in 3 different markets. I also read a lot of books. I have run 21 full marathons and 2 ultra marathons. I don’t watch TV, I’m 37, a sagittarius, and happily married to one of the top 5 agents in the state of Tennessee; which neither of us are originally from. 

I also eat lightning and crap thunder. 

Oh, and Julie rules big time. 

TLDR 

@Lucas Carl is definitely the William Wallace of the Southeast! LOL. Great discussion! Ray I have sent a number of people from all over the country down to the Smokies to do their research on the STRs in the area with many of them absolutely loving the area and ultimately purchasing. I will say, however, that the last investor I sent down to the area was someone I met here in the forums in the STR/Vacation Rental discussions who also happened to be from my hometown here in CT. She passed on the area due to the massive price appreciation the area has seen the last 18+ months and I would agree there is some concern that the valuations are inflated a bit. I just recently had a valuation done on my 2BR in Gatlinburg and it had appreciated over 20% since our purchase in May of 2016. As @Avery Carl stated, if you can find something that might need a little fixing up then it becomes more of a no brainer.  And I agree that a view is nice, but not a must.  My cabin only has modest views and I kick but self managing with a full time job from 700miles away.  I think bottom line is you have to do your due diligence and run the numbers and try to sneak into a good deal because prices might be getting a bit hot right now but I would love to be corrected by the professional realtors if I might be wrong!  Good luck!!!

@Chuck Kramer   I will check out evolve Thanks. @Avery Carl I look forward to connecting. @Julie McCoy thanks for your insight on size and location. I like your thinking and it should be a lower cost of entry to start with a smaller unit. @Lucas Carl it looks like I need to change my diet so I can run more marathons. @Jeff Piscioniere I am concerned about prices in almost all markets right now. I would love to acquire something I could force appreciation in. I would be a little concerned managing that from a distance though. Maybe Avery and the thunder crapper have contacts for that.

@Chuck Kramer   I will check out evolve Thanks. @Avery Carl I look forward to connecting. @Julie McCoy thanks for your insight on size and location. I like your thinking and it should be a lower cost of entry to start with a smaller unit. @Lucas Carl it looks like I need to change my diet so I can run more marathons. @Jeff Piscioniere I am concerned about prices in almost all markets right now. I would love to acquire something I could force appreciation in. I would be a little concerned managing that from a distance though. Maybe Avery and the thunder crapper have contacts for that.

Lol the Thunder Crapper and I do have plenty of self management contacts we are happy to share @Ray Thorsen .  To @Jeff Piscioniere 's point, yes there has been a ton of appreciation in the area. I don't see it cooling off anytime soon. The trend that I am seeing, especially with the clients that come to me, is that short-term rental investors who have previously invested in other cities such as Nashville, Austin, and NYC (where short term rental laws have become much more strict, some even outlawing STR's altogether) are beginning to discover the Smokies. These investors who are accustomed to STR cash flow are looking for markets where they can move their money where legislation against STR's will likely never happen. The economy in this area has been dependent on STR's for decades, so any strict legislation on STR's would be detrimental to the local economy. And compared to the Austins and New Yorks, real estate is still really cheap here. Hope that gives you some insight!

@Avery Carl is the expert, but I wholeheartedly agree with her re: appreciation - it was much trickier to find a cabin at the price point I wanted this past month than previously (and I've only been in the area since December '17).  I offered on it within 48 hours of it listing and it was a multiple offer scenario - and it was clear from the photos it needs a new roof!  So even value-add properties can be lightning hot.  

That said, it doesn't mean there aren't good investments, you just have to hunt for them a bit more.  Always run the numbers and make sure you're comfortable with the cash flow.  I haven't been disappointed.  :) 

@Ray Thorsen You're right it's definitely a lower cost of entry for smaller cabins, though competition is fierce as illustrated above.  Personally, I'd rather have multiple cabins that I can get into at a lower cost, but some prefer the efficiency of having one larger cabin for the same price as two or three small ones, that makes 75-80% of the equivalent cash flow.  I feel like that's a matter of personal opinion.  

The short answer to the OP is this.... 

Smoky Mountain Gatlinburg Wears Valley Pigeon Forge Log Cabin

2-3 Beds
PP: 250-300k (and rising every day)
Gross: 45K/Year 
Net: 25K/Year-Improvements 

3-4 Beds
PP: 350-550K
Gross: 65K
Net: 45K/Year-Improvements

Zero to 1 beds are harder to find but do put up big NET numbers. 

5-6 Beds probably gross around 100k? Total guess my cabins are small. 

I say "Beds" because "Beds" aren't always in a "Bedroom" in this market.

These numbers are LOOSE estimates and based off of self management and a cash purchase with no mortgage. And yes... Net means your Cleaners/Handymen/Occ/Sales Tax/Electric/Water have been paid.

Gross means Every dollar that comes through the door before ANYONE is paid. I hate to beat that dead horse 

Keep in mind one person may manage better or differently than the next therefore the net number is difficult to determine because it will fluctuate greatly depending on the property condition, management, and many other factors. 

Those numbers sound right @Julie McCoy & @Avery Carl ?? 

I have a few "pre-fire" properties that do much better than that. Our numbers in general are higher than what I've posted here. 

We LOVE the market and love our cabins and love our guests. So many engagements and honeymoons and hiking memories for us. This business is certainly not for everyone. But we enjoy it very much. 

Ok, it wasn't so short. 

Yours truly, 

Thunder Crapper

Great thread.  I'm feeling a little lazy and would like to get any updates regarding the market? I'm curreny IN the market if that helps ;)

Guess this warrants some background:

We just closed on a STR in Miramar Beach Fl and are self-managing on Airbnb. 3 stays so far and about 70-80% booked through Sept. Great feedback thus far and I think my wife and I are going to crush it as a team. We wanted something we could drive to in a day (live in North Dallas) and enjoy 1 or 2 times a year as a family while walkingthrough, touching up, etc.

We WERE looking in CO to do the same self-managing STR gig (love the mountains as much as the beach) but the price points are too high, STR restrictions too stringent and taxes too high (Republicans proposing 40% commercial tax??? say what?) so we've shifted to the Smokies.

The more I research it and look at properties the more I LOVE about it...


Let's gwt this party started!

@Ray Thorsen We bought our 4 BR cabin last year with the help of @Avery Carl . @Luke Carl was also invaluable in helping us get set up to self manage.

We have been very happy with our investment. We just have a small wooded Mountain View and still rent very well. Hot Tubs are a must and we also have a game room w/pool table.

Good Luck!

Oh the good old days when @Luke Carl crapped thunder!  LOL  Glad to see what we had to say then has held up to the test of time.  Welcome @Brandon Beaudoin !  (btw I closed on a 3BR cabin in June and have two 4BRs in the works so I have fully gotten on board the bigger-cabin train). @Avery Carl is still the biggest rock star around

@Julie McCoy

Tried tagging you earlier, appreciate your insight. Glad to hear you are crushing it. Lots of opportunity there and the proof is in the pudding :)

I'd like to bend your ear some. PM inbound :)

Hello all, my wife and I are also looking to buy our first str in this region. Market is hot and we have permanent residence in the Bay Area so have found it a bit tricky. We are definitely planning to self manage but biggest concern is matching with the right cabin for the moment. Looking at 3-4bd with all top amenities previously discussed in this thread. Any and all advice on how best to close this out given our distance would be very helpful.


Best! Eric