Gatlinburg/PF new construction viable?

Question

My wife and I are interested in an investment STR cabin (probably around 4-5 bedrooms, but would consider fewer for the right deal) in the Gatlinburg/PF/Sevierville area.  I've spent the last week reading through pretty much all of the dozens of Gatlinburg area threads here on BP from the last few years, as well as browsing around the listings.

Prices have definitely inflated a good bit since those discussion threads started, and as I've seen people mention in the more recent threads margins are tighter now (but still good).  However one thing I noticed in browsing around was that land there seems to be exceptionally cheap.  Does that make new construction a reasonable alternative out there?  What are the prices to build like on those pre-fab log cabins in the area relative to the price of an existing cabin that may or may not have large capex items soon in the pipeline relative to new construction?

I know people have mentioned in the threads that there is lots of new construction going on in the area.  Is any of it from BP investors?

Julie McCoy · Answer

@Ryan Moyer The difficulty is in finding an available contractor who will do a quality job for a good price.  Land is cheap, but it also needs a well drilled (not cheap) and septic installed (not pocket change either), and they've recently changed the septic requirements so the drainage field now needs to have 2x the previously required area (they now require 100% reserve field) so a lot of bedrooms is much harder to get.  Then there's the cost of the surveys, the plans, getting it all built in a reasonable time at a reasonable cost, etc. etc.

Contractors are BUSY in the area.  Wait time on just getting a survey is several weeks.

So - is it possible?  Yeah.  Is it a good idea?  That's a more difficult call.

Chris Watson · Answer

@Ryan Moyer As one who builds mine you are leaving out furnishing and hottub.  Also 9-15 months lost possible revenue if you bought a already built one. Can you get equity? Yes but be careful of all the necessary costs (unneeded upgrades) and unknown costs.  In the end the costs can be close to the same. Don't but a lot till you have a builder look at it.  Don't assume you will get a 5 bedroom septic permit.

Jeff Piscioniere · Answer

@Ryan Moyer is there a specific reason you have to have a 4-5 bedroom?  Why not get your feet wet with something smaller like a 1-3 bedroom?  As you said, prices have indeed skyrocketed which has been a blessing for the equity us owners now hold, but why lock up so much of your investment dollars if you could be earning better in a different genre of REI?

Whatever you decide, good luck!  You’ll never be disappointed by The Smokies!

Justin Tahilramani · Answer

@Ryan Moyer - you also want to consider the opportunity cost of spending 6-10 months building a property that won't be generating any income. It's almost always "cheaper" to buy existing inventory vs building.

Paul Sandhu · Answer

@Ryan Moyer if you decide to do something in Gatlinburg, I thing it would be a fantastic idea to have a fully functional Gatlin gun in your back yard.  Set up a shooting range with old cars, propane tanks and mannequins.  People would have a blast!

The closest thing I have to what was just described is a vacant lot next to my largest STR.  I keep a bucket of starling/pigeon bait in the house along with a scoped .22 pellet rifle and pellets.

Jeff Piscioniere · Answer

@Ryan Moyer what I was referring to regarding better returns in other areas would be such as buy and hold rentals in your local area vs VR remotely. This is the case where I am where buy and hold rentals makes more sense for me now.

Chuck Kramer · Answer

To make the best returns in the Smokies, you likely need to self-manage. And it is not difficult. We eased into it by starting with EVOLVE to handle listings and reservations while we handled the rest, then took over the listing/reservations ourselves. Hundreds of owners self-manage from afar. Like any RE project, you just need to assemble the right team. Many of us can help you with that.

Ken Latchers · Answer

There's nothing magical about Pigeon Forge and Gatlinburg. Is very popular thing that everyone thinks is a guarantee here, but it's not for a lot of people. Personally I think the concept of buying short-term rentals in popular areas is a mistake. I live a block away from mine, and I can handle things that constantly bubble up and not pay 30% to others.

"I am confused by the last statement though about better returns in other areas of REI. I'd thought STR in Gatlinburg to be one of the better returns around, albeit with some extra work relative to most long-term options."

Ryan Moyer · Answer

Yeah I think we are coming around to this line of reasoning.  We were initially thinking 4-5 bedroom because it sounded like (from threads around here) that's where the sweet spot was on best returns, and also because that would be the sweet spot for us using the place with family once a year.

But yes, given it's our first investment property and it's out of state and we'll likely end up buying without even having a chance to visit the area first we're now thinking it might be better to start with something in the 2-3 bedroom range and ease into a larger property in the future once we've gained some experience.

I am confused by the last statement though about better returns in other areas of REI.  I'd thought STR in Gatlinburg to be one of the better returns around, albeit with some extra work relative to most long-term options.

Thanks for the input!

Gatlinburg/PF new construction viable?

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