STR in Smokey’s / 1031- too risky?

Short-Term & Vacation Rental Discussions
6yFollow

STR in Smokey’s / 1031- too risky?

Leora Merrell
Rental Property Investor · Member since 2019 · 276 posts · 235 votes

Hi everyone.

I've been researching STRs in the Smokey's for a solid 8 months now. I owned a small business and sold it in March of this year leaving me with some cash to reinvest into something else. We own a few SFH LTRs and after a visit to Gatlinburg three years ago became sold on the area and doing a STR.

I couldn’t compete with the cash offers sellers were getting the same day their cabin was listed within my price range (up to $250k). So I’ve stepped back from making offers the last while and have come up with a new plan.

I have a SFH in Utah that I have tenants moving out of in January. My plan is to list it for sale after they move. This area is growing like crazy and homes do not sit on the market longer than a week if priced correctly. I believe I will walk away with $150k (on the low end). My plan is to 1031 that money (most but not all) and bump my shopping budget in the Smokey's to $450-$550k. However, I am limiting myself to the properties that come up for sale in those 45 days after I close on my Utah home. I'm hoping I find a property shortly before we list the Utah home and be under contract contingent on when the Utah home sells. I don't know if that will fly either. Competition is fierce.

I’m all for risk but am wondering if this is too risky. I’ve run the numbers so many times on STRs that I have them memorized so I would know when to jump on one quickly. But what if nothing good comes up in that short window? Am I overthinking this?

1Reply
97 views

Most Popular Reply

Paul CoxPro Member
Rental Property Investor · Manassas, VA · Member since 2013 · 194 posts · 156 votes
6y

@Leora Merrell

So we just closed on our new cabin in the Pigeon Forge area on Tuesday with many thanks @Avery Carl and @Luke Carl and their team in the area, especially my realtor Gennifer and lender @Parker Borofsky with MIG. We spent the week getting it furnished and equipped for a STR and should be listing it with VRBO and AirBnB later today. Many of the cabins as you have probably seen, come furnished though ours came completely unfurnished but we were able to get a 15K furniture credit with a local furniture store their in Pigeon Forge. Our new cabin was just built last year as the previous cabin on the lot burned in the fire back in 2016. That fire, horrible as it was has given new life to the area our cabin now sits as well as a much bigger clearing from the trees, so it has a decent view off the back deck, and you can hear the train whistle blow from Dollywood. This is our first STR. It's officially classified as a 1 Bdr with a loft, but we'll be listing it as two Bdr that sleeps 6. We probably paid a little more than we should have, but it's a beautiful cabin in a great area and so we feel that we'll do very well with it. In the lead up to the purchase I spoke with Avery and Parker in great detail as we were both excited and nervous about the prospect of having a cabin in the Smokys. We paid $333,900 for the cabin and thankfully the appraisal came back at $350 so a plus there. The cabin is just about 1400 sq feet and on .7 of an acre. The whole process from start to finish has taken just about 30 days and when I looked on VRBO and AirBnB for cabin rentals over the Thanksgiving period coming up, there were none. So my biggest question right now, is what should I put the cabin on for the nightly rental at a 4 night min rental for the holiday? I can't say enough good about the STR team. So as Lucas says, don't sweat the small stuff and just jump in and get started. I'll give a bigger picture of the process on a separate post later.

5Reply
See this reply in the discussion

34 Replies

Jump to latestLatest
  • Richard Lee
    Contractor · Knoxville, TN · Member since 2018 · 77 posts · 44 votes
    6y

    Our cabin is sitting at around 90% booked and though it requires hands-on time, sure - it's not a problem. There are several realtors in the area that can support you - get a feel for them. We put in a couple offers but none were much under asking.... the one that won was slightly OVER asking, though it went down a bit due to inspection issues they ultimately agreed to. 

    Any number of different spots are desirable for various reasons, and other factors include types of properties, the costs associated (taxes, septic, grounds keeping, state of furnishings, etc), the type of guests they'll likely attract, and so on.

    0Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Paul Cox congrats on closing. What store gave you $15k credit for furniture? Terms? We’re in escrow on a cabin in Sevierville and hope to join the str ranks very soon!

    1Reply
  • Paul CoxPro Member
    Rental Property Investor · Manassas, VA · Member since 2013 · 194 posts · 156 votes
    6y

    @Brian G....The sellers initially were offering a 13K furniture credit because the cabin came unfurnished.  When I made my offer I asked for that 13K to be 15K as well as a slight reduction in price. They countered with asking price, but raised the furniture allowance to 15K and we accepted.  I originally thought that we would be given 15K at closing to go buy furniture, but then saw that the 15K was actually a credit at Smokey's Furniture there in Pigeon Forge.  They specialize in furnishing cabins.  I reached out to them before the closing to explain what was happening and the Owner or store Manager (David) went up to the cabin and was let in by my realtor and he measured the cabin for furniture.  Then after closing we went by the store, gave him the 15K check from the Title company and began to shop to fill our cabin. The furniture and furnishing would probably be considered higher end stuff, but at the end of 2.5 hours, we had furnished the entire cabin to include 3 televisions with install for $28 dollars over.  They had a truck up to my cabin the next day and moved everything in and assembled it within the space of about 3.5 hours. Definitely a positive experience

    3Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    6y

    @Paul Cox  I'm on the other end of the spectrum.  $15,000 will buy a 3BR house and fill it with furniture and all appliances.  It'll bring in $600/week when rented.  But nobody comes here for a vacation.  They are all refinery contractors.  Welders, fitters, boilermakers.  Big burly guys with neck tats driving jacked up 4x4s.  They smell like diesel fuel and chew tobbacoo for breakfast.  They work on those large erections of steel you see at a petrochemical refinery.

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    6y
    Originally posted by @Paul Sandhu:

    @Paul Cox  I'm on the other end of the spectrum.  $15,000 will buy a 3BR house and fill it with furniture and all appliances.  It'll bring in $600/week when rented.  But nobody comes here for a vacation.  They are all refinery contractors.  Welders, fitters, boilermakers.  Big burly guys with neck tats driving jacked up 4x4s.  They smell like diesel fuel and chew tobbacoo for breakfast.  They work on those large erections of steel you see at a petrochemical refinery.

    SSSSSSSSSSHHHHHHHHHHHHHH !!

    You keep it up someone will comprehend what you are saying and your area will be flooded.  Not many people can say that they get back more than double the cost of the total furnished house in rent EACH YEAR!!!

    And renting to decent hard working folks that will actually pay the rent.  A little rough on the edges, but generally good people.  Not like the gangbanger, criminals some rent to...

    You start getting competition, how will you keep the renters in your place?  Restock the frig with beer each week?  Give out a certificate for a free tat with 6 months of renting?  You got a good thing going!

    2Reply
  • Ken Latchers
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    6y

    Not many people are trying to head toward Hades intentionally. The AC cost alone is amazing 

    0Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Lynnette E.:

    You keep it up someone will comprehend what you are saying and your area will be flooded.  Not many people can say that they get back more than double the cost of the total furnished house in rent EACH YEAR!!!

    And renting to decent hard working folks that will actually pay the rent.  A little rough on the edges, but generally good people.  Not like the gangbanger, criminals some rent to...

    You start getting competition, how will you keep the renters in your place?  Restock the frig with beer each week?  Give out a certificate for a free tat with 6 months of renting?  You got a good thing going!

    8 years ago there was myself and probably 4-6 other individuals doing STRs to refinery contractors.  Those other 4-6 are now doing LTRs.  Before they switched to LTRs, they asked me if I would buy their houses.  There was a person that never approached me, but they have a sign for "Furnish Houses" by the refinery.  It's been there years.  The spray paint is completely gone.  It's just a plain piece of white wood.  Oh, my official day job is doing pre-employment drug screens for the contractors before they start work in the refinery.

    1Reply
  • Ruth Blue
    Realtor · Pigeon Forge, TN · Member since 2018 · 230 posts · 111 votes
    6y

    @Leora Merrell

    My family did a very similar transition starting in 2017. We sold our 2 single family rental properties that were located in St George Utah and used @Dave Foster to do a 1031 exchange and moved our investments into short term rentals. 

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free