Step-by-step Instructions requested for first STVR

12 Replies

This may sound silly, but I'm looking for step-by-instructions for buying and renting out a short term rental.  I'm would like to buy a 2-5 room cabin in the Gatlinburg/Pigeon Forge area, but feel like it's a waste of time to look for properties until I have all of my other ducks in order.

I'm not sure what to do first. For example, I'm not sure how to begin calculating a ROI if I don't have an idea of what it will cost for cleaning, maintenance, etc. I haven't tried asking for any estimates because I don't know where the property will be exactly or how many rooms.

And what about financing?  Should I be going to the bank first to get a pre-approval?  

From what I've read, Avery Carl is the go-to person in the area I'm interested in.  I'd also like to avoid using an expensive property manager and would be happy to use vrbo.com.  I currently live in NJ so it's difficult to try to sit down with anyone face-to-face at this point.

I'm so happy to see so many people taking the time to go on this site to help others.  I appreciate any advice or comments you may have.

@Eugene Cyckowski, Jr Everyone is right about @Avery Carl trust me I’ve bought 5 from her. You’re also welcome to contact me! We own 5 log cabins in Pigeon Forge Gatlinburg, we self manage, and we’re happy to share our recourses :)

Step 1:  Find your budget.  Call Parker  at Mortgage Investors Group. (see @Avery Carl )

Step 2:  Decide your market strategy.  This is not talked about much on BP about STRs in Sevier County.  Who are you trying to rent to out of the 11-13 million tourists each year?  A 2 bedroom can bring from $75-$475 a night and most depends on your strategy, location and product.  I personally call them Class A, B, C STR properties and Class D is a money pit someone is dumping that no one rents but could be a potential BRRR candidate. I am not a realtor, but I study the Sevier STR market like crazy.  Me personally am shooting for Class A or B+ properties.  More cost upfront (down payment), but higher returns.  I rather run less properties and get the same cash flow as more cheaper Class B-/C properties.  If you are just barely able to enter the market start with a Class C with the idea you will move-up or add Class A/B as you build more cash.  Again this is just my assessment and others might disagree.


Step 3/4:  Get a property in contract (they go fast) and get a team in place.  This is where a good realtor will help you (hint: @Avery Carl).  They have the contacts already for cleaning and maintenance.  Most cleaning is passed onto the guests.  Maintenance budget depends on size/age of the property.  This year I am projecting under $1K, but the A/?C could go out tomorrow.

Step 5:  While in contract and inspections are done begin setting up VRBO/Airbnb and/or your own website.

Step 6: Run it and learn from it.

I am in the DC area and work near BWI.  So if you need to sit down maybe we can meet for lunch or coffee.

@Eugene Cyckowski, Jr Welcome to the world of Short-Term Vacation Rentals! We own and self-manage 4 VRs in TN and FL. Glad to help in any way. BP is a wealth of knowledge, and there are quite a few VR-specific resources out there as well. 

One way to begin gathering data is to browse the big listing sites for properties similar in geography, amenities and size to what you envision buying - see what their rates are and check out their occupancy by looking at their calendars. This will at least begin to give you an idea of the gross revenue you could expect, which would then lead you to your potential numbers for your target properties.

As others have mentioned, putting a team in place is essential. Even more essential the further away you are from your property. Your most valuable team member will be your housekeeper.

Originally posted by @Matthew Cole :

@chris Watson 

What criteria do you use for your A, B, and C properties?

Newbie starting search for first STR in Gatlinburg/Pigeon Forge area. Some rental experience but no STR.

Thanks 

Matt

Matt,

I thought about sitting down with @Lucas Carl and @Avery Carl to discuss this and see if there is a better way to codify the concept.  They can definitely chime in with their more in-depth wisdom and might even say I am misguided (which I might be, but it is my current operating parameter).

C - A good ol' workhorse.  It does not have a view, creek, river or phenomenal amenities.  It is a no niceties plain Jane cabin/chalet-- bedrooms with a hot tub.  It is going to pull the lower end (1-bedroom $75-$125 2 bedroom $85-$140ish a night).  It will book 300+ days a year.  Clientele is upper lower class, middle class and thrifty people (which could count me since I stayed in a tent the night before paying all cash for my first cabin:).  For the size these are hard use people and more house rules breakers/partiers, BUT less complainers because they have low expectations overall, so cleaners don't have to be the best in Sevier County. OK can cut it for 90% of your guests. Think 2 Bedroom Gross $15K-$30K

B - Well decorated cabin with some amenities (pool table, fooseball, air hockey or HOA pool/minigolf). Tends to be older, but kept in nice condition (not excellent...think KBB resale terms). Some type of view or close location to town. Your target audience is middle class to upper middle class. Expectations are higher and good cleaner is a must. Avg nightly rate 1-bedroom $130 2-bedroom $160-$200ish. Think 2 Bedroom Gross $35K-$50K

 B+/A -  Clean as a whistle, great mountain view or location (near sports complex or Dollywood) and nice.  Clientele is millennials with money or a credit card, upper middle class, honeymooners who spend big (whether they have it or not), retirees with a nice nest egg to spend.  Might have it's on pool, indoor pool nicer, great rec room/theater room (not just a theater chair and a big tv).  1-bedroom - $175-$250 a night 2-bedroom $230-$400+ a night (an indoor pool can get you anywhere from $75-$200 more a night).  Think 2 bedroom Gross $55K-$80K.  Certain communities are seen as B+/A properties so talk to your realtor (i.e...The Summit). 

Remember insurance and property taxes are not that significantly different between the classes. What is different is upkeep, expectations and standards also prices. I see longer stays in the A & B properties with less turnover. I wanted to BRRR a C - property last month which @Avery Carl put the offers in for me, but others wanted to pay more than what the numbers said it was worth for my strategy of turning it into a B+/A property. Instead I locked in a contract last night to build a pool home and am now designing my 5th build for this year starting today to hopefully have it under construction by October. See my other posts regarding build vs. buy. I am military and am use to having multiple projects I am working across the world, so to manage 5 constructions from 7 1/2 hrs away is easy for me and I have a sister who just located to Sevierville who can check on things for me. I do not recommend it for most people.

@Chris Watson Thank you. That helps a lot. I’ll be looking in the B range from what it sounds like. Any insight into what you feel has most nights booked per year in pigeon forge/Sevierville/Gatlinburg area as far as number of bedrooms 1,2, or 3? Appreciate the help Matt
Originally posted by @Matthew Cole :
@Chris Watson

Thank you. That helps a lot. I’ll be looking in the B range from what it sounds like.

Any insight into what you feel has most nights booked per year in pigeon forge/Sevierville/Gatlinburg area as far as number of bedrooms 1,2, or 3?

Appreciate the help Matt

 I believe 1 and 2 book easily 300 nights.  3 bedroom isn't too far behind, but you get more per night.  Remember more nights doesn't mean a higher return.  I raised rates 20% and saw only 2 nights less a month.  I saw a greater return and less work because less stays.  Show me a cabin booked 300+ nights and I see the opportunity to increase the return.