Smokey Mountains current situation on the ground

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Smokey Mountains current situation on the ground

Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes

Hello, I have been following and searching threads on the Smokey Mountains. I am going to have some funds available soon, and am very interested in this area. I am just looking to get an update on expected gross income vs purchase price/bedroom. I fully plan to self manage, and have been taking a lot of notes from the forum. I am hoping to be able to buy 2 within the next 1.5 years hopefully. Hopefully the big fish from this area will chime in with some excellent intel as usual. I always vote for sage advice. Thanks in advance.

Ryan

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Julie McCoy

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

Hey @Ryan Proffit! Glad to share what I know. The charts @Lauren Kormylo linked are really where I point people to, those have more thorough information than the broad strokes I'm about to give. My rules of thumb - that is, conservative, middle-of-the-road estimates on gross annual income - are as follows: 0-1BR $35k/yr, 2BR $45k/yr, 3BR $55k/yr, 4BR $70k/yr, 5BR $85k/yr

That's readily achievable for a middle-of-the-road cabin within 15-20 minutes of either downtown Pigeon Forge or downtown Gatlinburg if you're a competent manager.

As for correlating with purchase price, while of course there's a general correlation of higher price = nicer property = higher rent potential, it's not necessarily going to scale proportionately. You can mismanage a nice cabin and do poorly, or be an awesome manager of an average cabin and do really well (though I think we all want to be awesome managers of awesome cabins and KILL IT!!!).

Performance comes down to management in so many ways - which means I can't predict how you'll do as a manager, but the awesome thing is it means you control your own destiny! (This does not mean you have to have handmade gift baskets for every guest; it mostly means being prompt and clear with your communication, responsive to any issues, and providing a clean, comfortable place to stay that is accurately reflected in your listing)

So, while I know we all want plug-and-play numbers, there's too many variables for something like that to be effective; this is what I have to offer. :)

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Jay Fradd
Real Estate Agent · Gatlinburg, TN · Member since 2015 · 67 posts · 70 votes
6y
Originally posted by @Luke Carl:
Originally posted by @Allan Smith:
Maybe I'm missing the forest for the trees, but I looked into buying a short term rental in the Pigeon Forge area and didn't feel like the income was worth the risk. 20 -30 K net by the time you pay a manager. But the house is 300k. If economy slows down I'm losing money and equity overnight.

None of us are paying a manager. Plus your numbers are too low. Hell I’ve got one that’s 550 sq ft that does 40k every year

Some on here definitely use property managers. In today's current market environment with the increased prices self managing makes sense in most situations. But a lot of people paid around half of what properties are currently priced and are more profitable (and/or have a better ROI) using a management company than people buying today self managing.

Are you saying your 550sf NETS $40k per year? If so that's impressive. If your number isn't a net number and a gross, then what Allan wrote is pretty near spot on. He is talking about net and you are talking about gross. It is realistic to say generally that a property grossing $40k can net around $20k. And the price he mentioned of $300,000 isn't too far off either. In 2019 within the Smoky Mountains MLS the average GRM of cabins that had their rental income listed was 7.58. At $40k gross that equates to $303,200.
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Kyle H.
Investor · Bryson City, NC · Member since 2013 · 162 posts · 122 votes
6y
@Ryan Proffit Don't discount looking on the other side of the Smoky's in the Bryson City/Cherokee area, while not as much of a hotbed for investor activity as the Gatlinburg/Pigeon Forge area we have returns very similar to those @Julie McCoy described in her post. While I believe the Tennessee side rightly sees a higher volume of investor activity due to a variety of factors there is still money to be had over on this side of the mountain. I would echo the comments of @Collin Hays and @Luke Carl, in regards to purchase price vs. rent. I have 3 units under 450 sq/ft that all do over $32k-45k/yr and we built all of them for less than 90k (full disclosure my business partner and I have a building business so this is our cost).
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Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
6y
@Jay Fradd thanks for pointing out the spreadsheet typo! I'll have that fixed immediately.
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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
Originally posted by @Jay Fradd:
Originally posted by @Luke Carl:
Originally posted by @Allan Smith:
Maybe I'm missing the forest for the trees, but I looked into buying a short term rental in the Pigeon Forge area and didn't feel like the income was worth the risk. 20 -30 K net by the time you pay a manager. But the house is 300k. If economy slows down I'm losing money and equity overnight.

None of us are paying a manager. Plus your numbers are too low. Hell I’ve got one that’s 550 sq ft that does 40k every year

Some on here definitely use property managers. In today's current market environment with the increased prices self managing makes sense in most situations. But a lot of people paid around half of what properties are currently priced and are more profitable (and/or have a better ROI) using a management company than people buying today self managing.

Are you saying your 550sf NETS $40k per year? If so that's impressive. If your number isn't a net number and a gross, then what Allan wrote is pretty near spot on. He is talking about net and you are talking about gross. It is realistic to say generally that a property grossing $40k can net around $20k. And the price he mentioned of $300,000 isn't too far off either. In 2019 within the Smoky Mountains MLS the average GRM of cabins that had their rental income listed was 7.58. At $40k gross that equates to $303,200.

Yes jay I have a 550sq ft cabin that NETS 40 grand into my pocket per year after taxes. Don’t be ridiculous. If that were the case jobs wouldn’t even exist. Everyone would buy one cabin and retire.
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Jon Hilfiger
Investor · Mount Pleasant, SC · Member since 2017 · 19 posts · 9 votes
6y
We just closed on a 3 bed/4 bath cabin less than 1 mile from the main road in Pigeon Forge. Rental history is strong at 65K as an STR. For now we are sticking with the same prop mgt. company as the past owners as they have nearly $40K in bookings on the calendar and we would have lost that. The 20% hit is tough to swallow on the mgt. fee but covering 100% of our year 1 costs from day 1 is nice. It's a very competitive market with deals going quickly - and some at or over asking. Good luck.
1 Reply
Ryan Proffit
OP
Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
6y
@Kyle H. Thank you! You mind if I discuss with you further in a dm?
0 Reply
Jacob Compher
Real Estate Broker · Asheville, NC · Member since 2019 · 4 posts · 3 votes
6y
Market is hot here in Asheville. Deals are out there but go quickly. You can find some cheaper properties as you move closer to the state line for prime vacation spots which are deeper in the Smokies. Great for a nice secluded retreat. You should be able to fill year round. Summer is definitely the more popular time for tourists, but Cataloochee, Pigeon Forge, and Wolf Laurel are close ski resorts that should keep you booked in the winter. Best of luck, and I'm glad to see more interested investors in the area.
2 Reply
Tim Schroeder
Rental Property Investor · Castle Rock, CO · Member since 2017 · 335 posts · 387 votes
6y
Originally posted by @Kyle H.:
@Ryan Proffit Don't discount looking on the other side of the Smoky's in the Bryson City/Cherokee area, while not as much of a hotbed for investor activity as the Gatlinburg/Pigeon Forge area we have returns very similar to those @Julie McCoy described in her post. While I believe the Tennessee side rightly sees a higher volume of investor activity due to a variety of factors there is still money to be had over on this side of the mountain. I would echo the comments of @Collin Hays and @Luke Carl, in regards to purchase price vs. rent. I have 3 units under 450 sq/ft that all do over $32k-45k/yr and we built all of them for less than 90k (full disclosure my business partner and I have a building business so this is our cost).

I am interested in looking outside Pigeon Forge/Gatlinburg too. As prices continue to skyrocket buyers will look elsewhere. So, the big question is, "Where is the next Pigeon Forge going to be", in terms of STR success AND potential for price appreciation? When you mentioned Bryon City/Cherokee I went and did some poking around. On Realter.com there are ZERO 4BR+ for sale in Cherokee, and only 14 in Bryson City, most of those were 700k-1.5m. I found that surprising, and I'm not sure what to make of it.

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
Originally posted by @Tim Schroeder:
Originally posted by @Kyle H.:
@Ryan Proffit Don't discount looking on the other side of the Smoky's in the Bryson City/Cherokee area, while not as much of a hotbed for investor activity as the Gatlinburg/Pigeon Forge area we have returns very similar to those @Julie McCoy described in her post. While I believe the Tennessee side rightly sees a higher volume of investor activity due to a variety of factors there is still money to be had over on this side of the mountain. I would echo the comments of @Collin Hays and @Luke Carl, in regards to purchase price vs. rent. I have 3 units under 450 sq/ft that all do over $32k-45k/yr and we built all of them for less than 90k (full disclosure my business partner and I have a building business so this is our cost).

I am interested in looking outside Pigeon Forge/Gatlinburg too. As prices continue to skyrocket buyers will look elsewhere. So, the big question is, "Where is the next Pigeon Forge going to be", in terms of STR success AND potential for price appreciation? When you mentioned Bryon City/Cherokee I went and did some poking around. On Realter.com there are ZERO 4BR+ for sale in Cherokee, and only 14 in Bryson City, most of those were 700k-1.5m. I found that surprising, and I'm not sure what to make of it.

Lest anyone forget the market is incredibly high in the ENTIRE country. We are still and always will be spoiled with the best STR market in the country. If you ask me P Forge is the next P Forge
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Ryan Proffit
OP
Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
6y
Originally posted by @Luke Carl:
Originally posted by @Tim Schroeder:
Originally posted by @Kyle H.:
@Ryan Proffit Don't discount looking on the other side of the Smoky's in the Bryson City/Cherokee area, while not as much of a hotbed for investor activity as the Gatlinburg/Pigeon Forge area we have returns very similar to those @Julie McCoy described in her post. While I believe the Tennessee side rightly sees a higher volume of investor activity due to a variety of factors there is still money to be had over on this side of the mountain. I would echo the comments of @Collin Hays and @Luke Carl, in regards to purchase price vs. rent. I have 3 units under 450 sq/ft that all do over $32k-45k/yr and we built all of them for less than 90k (full disclosure my business partner and I have a building business so this is our cost).

I am interested in looking outside Pigeon Forge/Gatlinburg too. As prices continue to skyrocket buyers will look elsewhere. So, the big question is, "Where is the next Pigeon Forge going to be", in terms of STR success AND potential for price appreciation? When you mentioned Bryon City/Cherokee I went and did some poking around. On Realter.com there are ZERO 4BR+ for sale in Cherokee, and only 14 in Bryson City, most of those were 700k-1.5m. I found that surprising, and I'm not sure what to make of it.

Lest anyone forget the market is incredibly high in the ENTIRE country. We are still and always will be spoiled with the best STR market in the country. If you ask me P Forge is the next P Forge

I hear ya cluckin big chicken. I need to make a trip out.
1 Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
Cherokee NC isn’t going to have RE for sale unless you are Cherokee Indian. That is a reservation.
And just because a 4br house is priced at $750K doesn’t mean it is “high”. High relative to what? If it produces $75K a year in rent, it’s high. If it produces $150K a year in rent, it’s a bargain.

It’s all about the yield!
[email protected]806-672-7102
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
This was a screaming bargain, producing over $57K in rent last year. Was going to put an offer in on it when I got back home this week but too late. Literally right on the Pigeon River. You just don’t find these any more. Sheesh.

https://www.realtor.com/reales...

[email protected]806-672-7102
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Todd Goedeke
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
6y
@Collin Hays when you give out numbers and say a property "does" so much, you are referring to gross correct?
0 Reply
Todd Goedeke
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
6y
@Alan Ford as long as you are speaking of absolutes and hard numbers, when you speak of numbers per month, what did you pay for property after rehab expenses? Does your net figure take into account RE taxes, maintenance, insurance and interest expense?
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
Originally posted by @Todd Goedeke:
@Collin Hays when you give out numbers and say a property "does" so much, you are referring to gross correct?

Top line. Gross.
[email protected]806-672-7102
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Todd Goedeke
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
6y
@Alan Ford as long as you are speaking of absolutes and hard numbers, when you speak of numbers per month, what did you pay for property after rehab expenses? Does your net figure take into account RE taxes, maintenance, insurance and interest expense?
That s terrific that your PM does not rely on major platforms like Airbnb or VRBO. It shows he is a good marketer particularly if you can keep marketing expenses at less than 6% of gross sales.
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Alan Ford
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Todd Goedeke I have no idea what his marketing budget is. A lot I think .
But yes - those numbers I mentioned are absolute profit numbers after factoring in all expenses.
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Todd Goedeke
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
6y
@Jon Hilfiger, what did you pay for your recent purchase, 3 bed/4 bath? At 65k gross what amount do you expect to net after RE taxes, insurance, maintenance and all other expenses including a PM?
0 Reply
Todd Goedeke
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
6y
@Jay Fradd, using the numbers you quoted, the net numbers don t equate to more than 8% of property value,true? That means any property manager that would lease the property from the owner triple net , furnish the property and pay the owner a lease rate/ year of 10% net would be golden? Especially for owners using retirement funds like Solo 401ks!

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Julie McCoy
Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
6y
Originally posted by @Alan Ford:
@Julie McCoy - per @Lucas Carl after my consult with him - my property manager (or my actual properties) may be an exception but I don’t think it’s right to put out a blanket statement that you can only make money through self managing. My properties both are beating the high end of the numbers you mentioned above and that is before any cleaning fees etc. $73k for my 4bd (before cleaning fees) and $38k for my 2bd (but I got it in May).

Hey I think it's awesome your PM is doing that for you! Though I do think you misunderstood where my numbers are coming from - I said conservative, middle-of-the-road estimates on gross annual income :) My properties vastly outperform those numbers, but I'd always rather underpromise and overdeliver instead of having unhappy clients who want to know why their cabins may not be doing quite as well as my own.
That said, certainly there are PMs who can provide good services for their clients, and there are certainly clients who either prefer that or it's necessary because they don't have the flexibility to self-manage. However, every day I see listings with "great" rental histories where cabins are doing pathetic amounts with PMs, so I know there's a big disconnect between what most of the local PMs are doing and a cabin's potential when self-managed.
@Collin H. said:
But...it’s not really a 25% savings, as when you are self managing, you likely have 12-16% in overhead on the VRBO or ABNB platforms.

So at the most, you are saving 13-14% to self manage.
No? My overhead in VRBO/AirBNB is 3%. And yes, they charge the guest a higher percentage than me; however, most all of the local PMs also charge a booking fee of some variety if you book through their website, so it's not like that cost goes away or gets rolled into rental rates via a PM. It's still there, so it's not cutting into my margin.
Some of this may just be a market specific thing, and that's fine, but that's how it is in my market.
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Alan Ford
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Julie McCoy I just was commenting on your post that said “self managing is mandatory to make money” that is false and too much of an absolute.
0 Reply
Julie McCoy
Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
6y
Originally posted by @Alan Ford:
@Julie McCoy I just was commenting on your post that said “self managing is mandatory to make money” that is false and too much of an absolute.

Okay, that's fair.
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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
Originally posted by @Collin Hays:
This was a screaming bargain, producing over $57K in rent last year. Was going to put an offer in on it when I got back home this week but too late. Literally right on the Pigeon River. You just don’t find these any more. Sheesh.

https://www.realtor.com/reales...

This property would not work in my system.

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1 Reply
Malgrum Holley
Property Manager · Pigeon Forge · Member since 2017 · 12 posts · 6 votes
6y
@Ryan Proffit
I think in today’s market you have to really have to search to find a deal. I personally feel that if you are buying right now, there needs to be significant renovations needed. The majority of properties I see coming across the market are way over priced “deals” being sold by folks that bought a few years ago and are double their money.
Even if you self manage....those are not deals.
I would also be cautious of what gross rent means. Each person means something different and likely includes something that shouldn’t be in there to make it seem higher. So when you hear gross rent, ask what that includes.
4 Reply
Alan Ford
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Malgrum Holley totally agree on the gross rents comment. Most people here seem to include the money collected for cleaning fee for example
Which makes sense when self managing.
When I say gross rents of $73k for my 4/4 - it does not include cleaning fees because that goes straight to the cleaner. My PM nor I make profit on it.
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