Questions for the Sevier County cabin rental cabal

Joel Hollingsworth · 2019-07-02T04:58:46-07:00

Hello world! First post on BP. Be nice.First, a quick note about me. I'm a formerly-retired lawyer (UT-Knoxville law school) who is now practicing again primarily for the purpose of rebuilding an investment stash I lost in a recent business venture. I spent 2011-2018 trying to sell Tennessee Volunteers apparel in upper East Tennessee and literally losing all of my shirts in the process. (Pro tip: Don't try to sell fan apparel at a time when the team is in the midst of the worst 10-year streak in the 130-year history of the football program. Woo!)Anyway, I'm wanting to join the STR cabin rental fray in Sevier County, and so I've been stalking @Julie McCoy, @Avery Carl, and @Lucas Carl, who intimidates me because he not only can digest thunderstorms, he seems to enjoy doing it.I come with questions. Here are two to get started:First, am I too late to the party? What you said about the recent appreciation bump in the area makes sense, but the higher prices are squeezing the cash flow numbers pretty good. How do you know if values are actually going up that much or if there are just too many competitors willing to overpay? Is rental revenue increasing accordingly? Okay, that's three questions already, but it only counts as one because I say so.Second, property management vs. self-management. I know from following y'all (creepy, I know; sorry, but not really) that your take on this question is, "Hey, self-management is no problem, I can even do it remotely with no hands!" Well, maybe for thunder-crappers, but what about us mere mortals? And how in the world are all those PM companies getting away with charging 40% if it's not that hard? What all is involved?Like I said, I have more questions, but those are the two biggest right now. Appreciate y'all being willing to share.Am I supposed to sign these posts? I'm behind on my forum etiquette lessons. Whatever.Sincerely,Joel

Jay Fradd

Real Estate Agent · Gatlinburg, TN · Member since 2015 · 67 posts · 70 votes

7y

Hey Joel. Welcome!

Perhaps some unsolicited answers since I'm not the Carl's or Julie McCoy..But

I'll just get straight down to business answering questions.

I think you are too late to the party if your intention is banking on appreciation or good cash flow/return while using a management company. There are a very limited few exceptions such as new construction that have all the amenities where a management company can still make sense in my opinion. A variety of factors have increased prices including a strong economy, limited inventory, and probably as much as the previous factors - management companies lowering their splits and a large portion of buyers self managing.

When management companies are lowering their splits and owners self manage it enables them to pay higher prices and obtain similar/better returns. So the prices have been going up to reflect this reality. To extract data in the macro level for rental revenue on cabins is pretty difficult. I can get that data at a management company level from companies that manage 150 to 350 cabins. And from a micro level based on our cabins and from other owners. While most cabins are up in rental income from the data I've seen, some are down (mostly older cabins that are lacking in amenities or don't have any distinguishable "Wow" factor. The number of visitors to the Smoky Mountains National Park keeps on setting monthly records. And the sales tax revenue has reached record levels as well.

Being a lawyer it may be more difficult than many others to self manage. But it can likely be done. Personally, I use a management company for our cabins because first they are able to obtain considerably higher gross rents and ADR's that would be feasible by self managing. Second, they give me an incredibly good split. Third, my net is undoubtably higher with a management company because of their higher ADR's and it enables me to work on other things. However, this isn't a normal situation with that low of a split. And the number of competent management companies that offer a good split and good management is extremely limited.

Although 60/40 isn't really the norm anymore, the more common 70/30 split still takes a large chunk of gross rents. How are management companies able to extract 60/40 splits? Ignorance from owners certainly plays a part. Not knowing there are better (and lower cost) options out there. My response is already getting pretty long winded. If you want to know the different things management companies (or self managed cabin owners) have to do holler at me and I can respond in more detail!

Thanks, hope that helps!

Signed,

Jay

0 Reply

Avery CarlBusiness Member

Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes

7y

@Joel Hollingsworth this made me laugh! Luckily for you, thunder-crapping is a teachable skill and not something one is born or not born with, so you can do it too haha.

@Jay Fradd is right on with his answers on appreciation and difficulty in cash-flowing with a manager. It's really just more of a personal preference on which way you want to go. @Luke Carl is on Sirius 12 hours a day to 32 million listeners and manages 5 without a manager. It takes him a little over 30 minutes per property per week. However, everyone's situation is different so that's a decision that everyone has to make for themselves based on their own circumstances!

They don't all take 40%, but even 20% is too much to pay someone for something I can do from my phone in my opinion. But, everyone has different opinions and some may find that amount worth it. @Alex M. has developed a pretty cool management model that's really cost-effective. His is the most innovative I have seen.

Long story short, you can go with a manager or self manage. If you're happy with the cash flow number, then neither is the wrong decision.

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Luke CarlPro Member

Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes

7y

Thundercrapper here. Let’s not forget the 10 LTR doors I also self manage.

Actually I just started using igms. So I’m literally doing next to nothing with the cabins anymore. No housekeeper calendars no sending boring messages to guests like a robot. igms is now my robot. I’ve even been poking around for an additional cabin.

@John Underwood self manages more properties than I do. He’s an excellent person to ask if he’s willing to contribute.

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1 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

7y

To answer your questions:

1. You are not too late to the party. Always try to find a deal on any real estate investment you purchase.

2. You are much better off to self manage. Paying a PM will likely tank your profitability.

1 Reply

Alex M.

New York, NY · Member since 2017 · 144 posts · 75 votes

7y

Thanks for the tag @Avery Carl.

Joel, the market has certainly run up, but that does not mean that there are not deals out there which make financial sense for cash flow and appreciation if you consider risk-adjusted returns on capital across asset classes (stocks, bonds, other real estate plays, commodities, etc.). I bought my first cabin last July, using Avery as my broker, and have been very pleased with my returns and with Avery's skills in helping me learn the area and choose the right cabins. I've since spent real time building a network and learning the Gatlinburg/ Pigeon Forge/ Sevierville market.

I have a slightly different take than most on cabin management, meaning I spend a lot of time playing with pricing and minimum nights (the software pricing algorithms have not been accurate in my experience). Therefore it actually IS time-intensive, and takes frequent changing of prices/ scanning the market for comparables/ analyzing supply&demand, etc. to optimize the occupancy/pricing mix, not to mention a bunch of other small strategies to maximize profits (I can run you through a couple if interested). I left my job at a top strategy consulting firm in NYC to do this full time, so I have had the time to think (probably too much) about this.

I have a strong opinion on the cabin rental programs-- for instance- I closed my first cabin on July 2nd 2018. It was rented the day after and went on to do $14k in revenue for July. The cabin rental program it had been on previously did $9K the same month in 2017. That's a 55% revenue increase (I dont expect that to hold true for every month, but I think a 20-30% bump is entirely possible with high-touch management from what I've seen)

My findings/ perspective:

1) Cabins are still a good investment but you need a good broker to find you the right deal (I recommend Avery as shes sharp, attentive, thinks like an investor, and has a good network of local contacts which is critical). Do your own due diligence.

2) Self-management may be a good strategy if you have plenty of time to learn and some tolerance for stress. @Luke Carl has a lot of experience and contacts in this area, so what he can do in his sleep may take you hours. There will be emergencies that disrupt your peace (last year during my largest Christmas reservation a well pump needed to be replaced or lose a $5k reservation). Not to mention the tons of little questions your guests will throw at you, and coordinating cleaners, negotiating with guests/airbnb, etc..

3) The cabin rental companies are awful and overcharge. So first, figure out your monthly cash flow expectations, and then figure out what # you are willing to part with to turn an active into a passive investment. I am about to launch a Cabin Rental Company of my own because I actually enjoy managing the cabins/guest experience. Our rates vary depending on a number of factors, but since we are just starting out, we would be happy to discuss a discount for our first clients.

If you'd like to discuss rates/options, I would be very happy to get onto a call.

All the best,

Noah Alex

1 Reply

Julie McCoy

Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes

7y

@Joel Hollingsworth I'm late to the party of this thread! LOL Thanks for the shout-out, I'm honored to be in the company of @Avery Carl and the thunder-crapper @Luke Carl.

You've gotten a ton of good information on this thread already, I don't have much to add. I'll stick to commenting on self-management - in my view, the most time-consuming part is making sure the cabin is set up/you are familiar with it so you can speak knowledgeably about it to guests. Not ever owner does this! So it's not mandatory, but that gives me a comfort level when interacting with guests because I can answer their questions authoritatively. But there's other initial time expenditures such as getting the listing up and running, etc.

After that, you'll have a little bit of a learning curve while you figure out the most efficient ways to communicate with the guests, but once you hit a pattern with that, there are tools you can begin using to automate the repetitive parts (and after awhile, a lot of it gets repetitive!). I've had that set up for awhile at my four properties (I use YourPorter, Lucas uses IGMS), and at this point I only personally message with guests when they have a question. While it's important to be able to access your phone pretty regularly just in case, I have days go by where I barely think about my properties.

Looking forward to you joining the cabal!

3 Reply

Joel Hollingsworth

OP

Member since 2019 · 3 posts · 4 votes

7y

@Jay Fradd - (1) I wasn't really planning to bank on appreciation, although I do generally like my cake with frosting, especially if it was glopped on thick two years ago. But I'm really looking at cash flow, and it's certainly sounding like self-management is the way to go, at least under the current circumstances. (2) I hadn't considered that the increase in self-managing investors would increase purchase prices, but that certainly makes sense. Thanks for pointing it out. (3) Most lawyers are terrible at managing themselves; that's why people generally hate us. :-) But seriously, I have a sweet deal that allows me all of the flexibility I want, and unless I've cranked the law machine up to 11 because I'm saving up for an investment, I generally split my time between practicing law and other, non-legal business-related activities that don't eat my soul. (4) I am intrigued by this "incredibly good split" of which you speak. Do tell.

@Avery Carl - (1) I used to write to 800k readers per month, but my goodness, 32 million listeners is A LOT of ears. Like 64 million. Or so. What in the world does he say to that many people for 12 hours a day? (2) Anyway, I was initially attracted to the higher degree of passivity that property management provides, but with splits being too high and self-managing effort being low, it's sounding like that's the way to go. I am interested in whatever Alex M. is working on, though, so thanks for mentioning him.

@Luke Carl - See above. Dude. And thanks for the mention of this Underwood fellow. I will start stalking him as well.

@John Underwood - Are you a Gamecocks fan? Stop beating my team. (And thanks for the responses.)

@Alex M. - (1) I am tantalized by your pricing wizardry, so yes, I am interested in hearing more about that if you are willing to share. (2) Um, how big was that $14k/mo cabin? Did it have its own casino or something? "High-touch management" is not a euphemism for something illegal, especially in Pigeon Forge, is it? :-) (3) Yes, I am interested in the cabin rental company you're working on, and not just because Avery digs it. Tell me more.

@Julie McCoy - Good tips. I am in Kingsport, so I'm only 90 minutes away and can get well-acquainted with the investment. And I have a confession: I have an unnatural fondness for automation, so setting things up to run themselves automatically sounds like a party to me.

Thanks, all, for the great information and the fine welcome.

1 Reply

Avery CarlBusiness Member

Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes

7y

@Joel Hollingsworth he mostly tells dad jokes

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0 Reply

Joel Hollingsworth

OP

Member since 2019 · 3 posts · 4 votes

7y

Smokey mountain cabins, 80s rock and roll, and dad jokes to boot? Dreamy. :-)

0 Reply

Paul Sandhu

Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes

7y

I've been kicking it renting my STRs to refinery contractors. But my market is not the average market. The last 2 years my town has been the worst place to live in Kansas, according to Google. Now we are the 3rd worst. My town has the lowest average mortgage payment in the country, $205. Had 5 homicides last year. On a per capita basis we are right behind Baltimore and Chicago.

3BR houses in a decent neighborhood with CH/A sell for $9500 if they are a bank foreclosure. I rent them for $600/week.

Coffeyville Kansas is a nice place to invest, but you wouldn't want to live here. You wouldn't even want to visit. Crime, drugs, hookers with scams, meth addicts, arson, corrupt police in the neighboring town (South Coffeyville Oklahoma), the occasional flood, the hot and humid summers, bad roads, no decent restaurants, less grocery stores, etc.

The joy I get is when Louisiana contractors that rent from me every few months bring me 10 lbs of boudin and gator meat in exchange for rent.

0 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

7y

@John Underwood - Are you a Gamecocks fan? Stop beating my team. (And thanks for the responses.)

I am a 17 time National Championship Alabama Crimson Tide Fan.

I enlisted in the Navy from Alabama and retired from the submarine force 20 years later.

1 Reply

Rhonda Blue

Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes

7y

@Joel Hollingsworth

Not sure your a real person or a paid advertisement string but Im game.

I grew up visiting Gatlinburg at least once a year tons of families do! This area has been thriving since before I was born and is one of the original vacation destinations. After the mid 80's when Dollywood opened It has seen steady growth with just a few ups and downs. With the availability to host via airbnb/vrbo Its like the great CA gold rush here now!

Serious investors know, run your numbers and learn how to see a good investment. Don't just believe the hype.

1 Reply

Chuck Kramer

Orlando, FL · Member since 2017 · 241 posts · 254 votes

7y

Another reason to avoid PM companies; after the fires many leveraged their way into buying cabins, or lots to construct cabins. So now they have their own inventory. Ask yourself, which do you think they will fill first? Especially in the shoulder and slow seasons?

Manage yourself as much as possible. It is no longer an either/or situation as you can find service providers that will do as much or as little as you need them to do.

As for "deals", every market, no matter how squeezed, still offers opportunities where you can make money. A well-connected local source tells me that investors now represent almost 40% of the local cabin-rental market, where it was less than 10% before the wildfires in 2016. But that still means there is 60% of the market out there.

Pick a great agent who knows the market and can even tip you off to "coming attractions" or off-market opportunities (ahem, @Avery Carl). Have your financing lined up in advance as I have often seen when a family wants to sell their vacation home, a fast-close can often mean more to them than a few thousand in price.

3 Reply

Paul CoxPro Member

Rental Property Investor · Manassas, VA · Member since 2013 · 193 posts · 156 votes

7y

@joelhollingsworth, this too is my first post and likewise, I have been following the cabal here. I've been torn between the Carolina coast and the mountains of Tennessee. Thanks all for the great info and advice that you all give willingly to all us want to be STR investors

Paul

0 Reply

Rhonda Blue

Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes

7y

@Paul Cox

Everyone has to start somewhere! There are great opportunities here for sure. As owner, long time investor, and manager It has been an awesome and fun adventure that continues to give back everyday!

0 Reply

Tom Donnelly

Rental Property Investor · San Diego, CA · Member since 2017 · 66 posts · 66 votes

6y

Great info in this thread, thanks for all those who shared their thoughts and experiences. I'm analyzing a couple of deals in the market currently, that will be self managed. Can anyone share what they're paying for vacation rental insurance or a ball park for insurance on a 2/2 cabin?

0 Reply

Michael Stokes

Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes

6y

@Tom Donnelly I am paying $1200/yr on my 3/2, but I was fortunate to get USAA to write the property with a STR endorsement.

1 Reply

Questions for the Sevier County cabin rental cabal

Questions for the Sevier County cabin rental cabal

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