Rental Property Investor · Pigeon Forge, TN · Member since 2011 · 58 posts · 26 votes
I own a ±0.61-acre / 26,533 SF C-2 Tourist Commercial site in Pigeon Forge, TN, just off the Parkway in an established hotel, condo and vacation-rental area.
We've had preliminary site plans prepared for two development concepts, and I'd appreciate input from developers familiar with Pigeon Forge/Gatlinburg or similar tourism and STR markets.
Option 1 – 18 Condos
15 two-bedroom + 3 three-bedroom units
Approximately 22,692 SF total building area
30 parking spaces shown
Elevator, balconies and outdoor pool
Option 2 – 4 Detached Vacation Homes
3 two-bedroom + 1 three-bedroom
Pool area shown on the preliminary plan
Potential ability to build, sell or place into STR operation in phases
For this analysis, I'm using the property's current $1.499M asking price. That equals approximately:
$83K land basis per condo
$375K land basis per home
I also ran current AirDNA Rentalizer analyses specifically for (redacted).
AirDNA projects approximately $40,600/year in gross revenue for a 2BR/2BA and $54,200/year for a 3BR/2BA.
Applied to the preliminary plans, that's approximately:
These are AirDNA projections, not operating history or guaranteed results.
The tradeoff I'm trying to evaluate is density versus development cost and time to revenue. The 18-unit project provides substantially greater density but should take longer to build and bring online. The four homes could potentially be developed in phases, allowing individual homes to be sold or begin producing rental revenue while construction continues.
I'd especially appreciate developer input on:
1. Which concept would you investigate first at a $1.499M land price?
2. What construction cost per SF and construction timeline would you underwrite for the 18-unit project?
3. Would you build the condos to sell, hold as STRs, or use a combination?
4. What finished sales values would you underwrite for new 2BR and 3BR STR-eligible condos here?
If you think the $1.499M land price doesn't pencil, what land price or land basis per unit would? What drives that number?
If you'd pursue a different concept altogether, what would you build here instead and why?
I'm flexible on how the property could be structured and interested in whatever approach best fits the ultimate use of the site and makes the development economics work.
I also have the two preliminary site plans and AirDNA reports available for anyone who wants to dig further into the numbers.
I'd particularly appreciate input from anyone who has developed in Pigeon Forge, Gatlinburg, Sevierville or another tourism-driven market.
Jerry
1 vote total
$1.499M works for the 18-unit condo concept
$1.499M works for the 4-home concept
The land price needs to be lower — comment with the price that works
I'd pursue a different concept — comment with what you'd build
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
5d
Are both by-right? If not, does one present greater obstacles, barriers and entitlement risk? How confident are you in your cost projections? In most municipalities the cost of building a multi-family building has outpaced the cost of building single family because of evolving commercial building codes that must be applied to multi-family development. Are all of the civil engineering costs accounted for, including storm water management if applicable? Those are often more difficult to absorb with fewer housing units. Still, I am seeing more and more sites that would have traditionally be viewed as a denser multi-family use being developed with lower density single family, particularly higher end homes because the costs are easier to absorb in today's environment with a clearer exit plan.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5d
great points as usual STuart .. I will just add as I have zero experience in that market. but looking at the photo he posted I dont see how you build hi end lux single family in that location.. it screams small condo.. at least to me.
Rental Property Investor · Pigeon Forge, TN · Member since 2011 · 58 posts · 26 votes
2d
Thanks for the suggestion, Jules. I’ll do that. I’m still learning the best sections to reach the right audience.
For this project, I'm trying to get input from both developers and STR investors since we're considering two different concepts — an 18-unit condo project or 4 detached vacation/STR homes. I appreciate you pointing me toward @CollinHayes and the STR section.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5d
At some point though you have to do a turn over meeting.. with the Hoa's I set up on my projects ( been two I think) I waited until I was 100% sold out before I did the turn over meeting. But lots of paper work with those things.
Rental Property Investor · Pigeon Forge, TN · Member since 2011 · 58 posts · 26 votes
2d
John, sorry I'm a couple of days late getting back to you, and thanks for the input. I especially appreciate your perspective given how active you've been in the STR market.
Your point about demand for smaller properties is one of the things that interests me about the condo concept. The preliminary plan is 15 two-bedroom units and only three three-bedroom units, so it would provide a very different product from the larger cabins that dominate a lot of the Pigeon Forge/Smokies market.
I also agree that keeping the HOA fees under control would be critical. Jay made a good point below about the eventual HOA turnover and the amount of work involved in setting it up properly.
From what you're seeing in the Smokies market, do you think the 2BR condo size itself is the sweet spot, or would you change the unit mix if you were developing this site?
