Smokey Mountains current situation on the ground

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Smokey Mountains current situation on the ground

Ryan Proffit
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
6y

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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  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    6y

    @Collin Hays,lets go back to your numbers on your mother s house.What do you mean taxes of $700, RE taxes on a $270k prop are only that much? Can t be. What about sales tax and any lodging tax, where is that accounted for? What about reserves for replacement of items as linens and towels, etc.?

    0Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    6y

    @Collin Hays,just as you said the S&P went down so can your cash flow in RE. There is no guarantee that the market in your area will never be over saturated with rentals thus. Ringing down income. You have no idea if platforms like Airbnb won t raise fees. You can t guarantee appreciation either in RE. I have seen RE values be underwater for 10 year stretches.

    There is always more risk in running a business which STRs are as compared to passive investments like LTRs or mutual funds or bonds. So it's unfair to say that a STR is a better investment especially over a 1 year period as you are comparing.

    0Reply
  • Alan Ford
    Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
    6y

    @Todd Goedeke actually this is true. My 395,000 property taxes is $1084 a year and my 280,000 property is $684 a year. This is in Sevierville.

    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    6y
    Originally posted by @Todd Goedeke:

    @Collin Hays,lets go back to your numbers on your mother s house.What do you mean taxes of $700, RE taxes on a $270k prop are only that much? Can t be. What about sales tax and any lodging tax, where is that accounted for? What about reserves for replacement of items as linens and towels, etc.?

    Yes, the property taxes are correct.  This is partly why eastern TN is so attractive for STRs.

    Occupancy taxes are a surcharge on top of rents.  If I add in those charges, her total income is more like $46,500.  

    Linens and towels run $300 a year and ads included in repairs and maintenance.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    6y
    Originally posted by @Todd Goedeke:

    @Collin Hays,just as you said the S&P went down so can your cash flow in RE. There is no guarantee that the market in your area will never be over saturated with rentals thus. Ringing down income. You have no idea if platforms like Airbnb won t raise fees. You can t guarantee appreciation either in RE. I have seen RE values be underwater for 10 year stretches.

    There is always more risk in running a business which STRs are as compared to passive investments like LTRs or mutual funds or bonds. So it's unfair to say that a STR is a better investment especially over a 1 year period as you are comparing.

    There are risks.  But we owned (and overpaid) for a couple of STRs pre-great recession. Values plummeted but rents stayed steady.  We found that people were still making reservations, but were coming in from Charlotte, Nashville, and Atlanta instead of far-away places that would require a flight.  

    “More risk” is a purely subjective term.  I respectfully disagree with your opinion.  I have 15 years of returns to base my opinion on, through ups and downs.

    Of course there are no guarantees.  The industry could change dramatically in some way.  That’s just life.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    6y
    Originally posted by @Todd Goedeke:

    @Collin Hays,lets go back to your numbers on your mother s house.What do you mean taxes of $700, RE taxes on a $270k prop are only that much? Can t be. What about sales tax and any lodging tax, where is that accounted for? What about reserves for replacement of items as linens and towels, etc.?

     Just listen to bigger pockets podcast #364

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    2Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    6y

    @Collin HaysAlready listened to it. No new marketing technology, nothing innovative. Watch out for new providers of STVRs who don t rely on Airbnb or VRBO.

    1Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    6y
    Originally posted by @Todd Goedeke:

    @Collin HaysAlready listened to it. No new marketing technology, nothing innovative. Watch out for new providers of STVRs who don t rely on Airbnb or VRBO.

    Right now, Airbnb and VRBO are the Amazons in this space. It could be that rivals emerge, and frankly that would provide some security for self-manage STR owners. But there is nothing on the horizon. Maybe you can share some of your own insight?

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    1Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    6y

    I will second this.  We had a cabin in Gatlinburg burn to the ground in the fires several years ago, and were completely ripped off by not one, but TWO general contractors in trying to get it rebuilt. I ended up moving to Gatlinburg for almost a month myself.  I hired a crew and we went 12 hour days 6 days a week to get it done. I was going broke getting ripped off and I had to take action.  I would say I lost a solid $100K in being ripped off. And what should have taken 6 months took 18.  The folks at the city inspector's office also tend to use out-of-state 'ers as their whipping boy on all of their regulations. They'll flunk you on all sorts of silly things and simultaneously turn a blind eye to significant infractions at your next door neighbor's house because he's a local and in tight with the committee.  Lots of "who you know" in the Gatlinburg area. 

    One problem is, there is a gross undersupply of contractors there right now, which means you are ripe for the pickings. There are many hundreds of unscrupulous "contractors" over there that will rob you blind.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    3Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    6y
    Originally posted by @Collin Hays:

    I will second this.  We had a cabin in Gatlinburg burn to the ground in the fires several years ago, and were completely ripped off by not one, but TWO general contractors.  I ended up moving to Gatlinburg for almost a month myself.  I hired a crew and we went 12 hour days 6 days a week to get it done. I was going broke getting ripped off and I had to take action.  I would say I lost a solid $100K in being ripped off.

    The problem is, there is a gross undersupply of contractors there right now, which means you are ripe for the pickings. There are many hundreds of unscrupulous "contractors" over there that will rob you blind.

     Good luck finding a decent contractor in any part of the nation. 

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    1Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    6y
    Originally posted by @Luke Carl:
    Originally posted by @Collin Hays:

    I will second this.  We had a cabin in Gatlinburg burn to the ground in the fires several years ago, and were completely ripped off by not one, but TWO general contractors.  I ended up moving to Gatlinburg for almost a month myself.  I hired a crew and we went 12 hour days 6 days a week to get it done. I was going broke getting ripped off and I had to take action.  I would say I lost a solid $100K in being ripped off.

    The problem is, there is a gross undersupply of contractors there right now, which means you are ripe for the pickings. There are many hundreds of unscrupulous "contractors" over there that will rob you blind.

     Good luck finding a decent contractor in any part of the nation. 

     I've built a lot of houses. I've never quite seen anything like the dishonesty and lack of work ethic in eastern TN. Punctuality and completing a good job on time are completely foreign concepts.  If you want to build in Gatlinburg, you'd better go out and do lots of hand shaking, get to know some locals, and settle in for a long project.  It will take triple what it should.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • Account Closed
    Investor · United States · Member since 2018 · 565 posts · 356 votes
    6y
    Originally posted by @Ryan Proffit:

    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

     I was just there. Someone I met had two properties. The first made 150K last year and the other made like $60K, that's net.

    0Reply
  • Ryan Proffit
    OP
    Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
    6y
    Originally posted by @Account Closed:
    Originally posted by @Ryan Proffit:

    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

     I was just there. Someone I met had two properties. The first made 150K last year and the other made like $60K, that's net.

    Nice!!

    0Reply
  • Brian Dickerson
    Rental Property Investor · Delray Beach, FL · Member since 2017 · 102 posts · 44 votes
    6y
    Originally posted by @Julie McCoy:

    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. :)

     When you and others are stating gross yearly numbers like this, are you including the 13% or so in local taxes that have to be remitted?  I am trying to project net #s and wondering if I need to be taking an immediate 10-13% off the top of these gross #s.  Thanks!

    0Reply
  • Ryan Proffit
    OP
    Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
    6y

    @Ryan Proffit nice!!

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    @Brian Dickerson The way the different OTAs handle taxes is complicated but the simplest answer to your question is assume 3% is occupancy tax (AirBNB collects and remits sales tax on your behalf, it never hits your gross rental numbers.

    0Reply
  • Ruth Blue
    Realtor · Pigeon Forge, TN · Member since 2018 · 230 posts · 111 votes
    6y

    This thread has gone in many different angles and touched on tons of awesome Smoky Mtn issues. Sadly builders do seem to look at out of state owners who want to build as a cash cow. I'm local and we have been helping some other buyers of land get quotes and set up info. NOT easy. Such a beautiful place but wow. What @Collin Hays said about shaking hands and face to face especially helpful if your a man are true. Anyway, Wish the prices for new build listings were not going up so so high, Wondering where the cap will be. 

    1Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    6y

    @Ruth Blue, why do people use local builders if one can bring their own builder?

    What is best place to look for available building acreage?

    0Reply
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