New to Real Estate · Cincinnati, OH · Member since 2018 · 2 posts · 2 votes
Hi BP! First time poster, couple month lurker ;)
Looking for advice for buying a STR in the Smokies. My sister bought 2 cabins recently from @AveryCarl and I think I've finally convinced my husband to get in on the action!
At this point in life, we are not interested in taking on self managing. I know that's the way to make the most and some of you are rockstars at it, I just don't think I can swing it right now. Through researching here I'm leaning toward one of the smaller PMs, but have not done a ton of research in that area.
My questions are around age and size...
1)Is there any way a new construction would make sense? From what I see on MLS i'll pay maybe $100k more for a new 1br vs an old one... can you charge higher rent for new in this market, or do people not care? Presumably there would be fewer repairs for new consruction... could that make the numbers work out? Obviously the newer ones are pretty to look at but I'm wondering if the numbers would ever work
2) I have read that there is a niche for all numbers of 'bedrooms' (sleeping spaces)... if i had enough money to buy a couple small cabins or 1 bigger cabin, any recommendations? It seems like multiple cabins would be more difficult than 1 big one, but then the big one would likely be more unpredictable, more seasonal, more likely to get trashed by big parties, etc. And if im paying for PM, maybe it doesn't matter to me? Will I pay a higher % PM on different size cabins or does that all work itself out in the price?
Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
6y
@Karen Lomison Very exciting time for you! I started off with small 1BR cabins, even though @Avery Carl advised me to go bigger, and just like @Justin Anderson suggested in his post, Avery was right re: go big if you can. While my 1BR cabins do great and cash flow very well and are consistently booked year-round, I now have 4 small ones and I've replaced 3 HVACs, 2 roofs, one well... you get the idea (they are all a bit older). I also have one brand new 3BR that I closed on in June, too early to do ROI analysis but I'm confident it's going to be better.
I do not regret my small purchases at all (eh, the one with the well issue I have a little regret about, LOL!) but were I to do it again knowing what I know, I'd definitely make a play for fewer big cabins vs. many smaller ones.
The other thing is - so many people feel more comfortable starting with small cabins, they are REALLY competitive to buy! Multiple offers/selling for over asking is very common. While that's still a possibility with a larger cabin, it's not quite as common.
Orlando, FL · Member since 2017 · 241 posts · 254 votes
6y
Lots of great advice from people here, you came to the right place. I agree with the thought of going large for the LONG term, but you have to make sure you have sufficient reserves.
The here with large cabins with pools will continue to do well, most likely, as they can go self-contained. But we don't know what the next 2-4-8-12-24 months will look like due to the current COVID situation.
We use PriceLabs and also AirDNA. Large cabins (6+ BDRM) w/out private pools in Sevier County are only running an average of 63% booking for June/July. They also have a 51% cancellation rate (which includes future dates). Large cabins means large groups and it often only takes a couple people to back out due to a travel restriction or mandatory quarantine period for the whole reservation to fall through.
As a semi-local, I have gotten to know a lot of other, smaller PMs that have those exact experiences - larger cabins book but also cancel a lot. > 50% is a huge number. A long-time local PM, one of the better ones that was family-owned, just sold out to one of the big ones. They managed a lot of big units in Gatlinburg and just found this season to be too difficult and gave up. For those who still rely on AirBNB, it can be even worse. AirBNB will still allow last minute no-penalty 100% refund cancellations if a COVID travel restriction is in place. At the moment, 23 states have mandatory quarantines for people traveling from TN. Try filling an 8-bedroom vacancy that cancelled 3-4 days before arrival.
If governments start mandatory shutdowns again, and some nearby states (KY and IL for example) seem to be seriously considering it, large cabins will take the brunt of that. Every time a new state adds TN to the 14-day quarantine list, we get cancellations across the board. The smaller places usually rebook but notice is often too short to rebook the larger ones.
We have a 2, 3, 5, and an 8 bedroom rental. We have done a little work on the 8 bedroom that makes it easy for us to also rent as a 4-bedroom. We set it up so we could lock-off the entire lower floor without affecting amenities. That has helped us fill schedule gaps. This is a feature or capability worth looking for as you can increase occupancy and flexibility. Private pools were big this year, likely driven by COVID concerns. They will likely remain popular even after this passes.
Having ZERO bookings for the 8 bedroom from late-Feb thru late-May was a tough thing to handle but we had our reserves to fall back on. We complied with the County and City requests to not actively advertise our rentals during that time. Listings were ok, but ads, mailers, etc., were not.
Lastly, I know all local governments are seriously considering regulating pools (and elevators) on STR properties the same way they do in resort communities and hotels. I am not sure that means much. Most likely, it will require occasional inspections along with increased procedures & record keeping to ensure safe water quality. That will put more importance and reliance on the quality and thoroughness of your cleaners or pool maintenance folks.
So this was a long-winded way to simply say "be sure you have 6+ months reserves for a large cabin. They are likely the better long term investment after this COVID stuff eventually blows over."
Looking to invest in the smokies and my agent has asked me to sign a deficiency acknowledgement and agreement. I’ve never signed one before and it looks like if the sellers broker doesn’t pay them enough I may have to make up the difference. Am I reading this incorrectly, seems odd to me