All Forum Posts by: Collin Hays

 I'm not exactly sure why it works out this way, but rarely have I had a new property just take off. It always seems like the first few months are fraught with problem guests and unexpected issues. Maybe the cabin gods are testing my mettle in the early going? 

If you have cash you're fine.  I would expect and plan for the first few months to be slower than you projected, however. That way you can sleep at night.

A Short Term Rental is a business.  Like any business, you need to have plenty of "powder in the keg" (available cash) to carry you through short term challenges.  Viruses, recessions, hurricanes, etc. 

If you are stretched too thin on your available cash, you won't have a happy ending.  If you have a $50K slush fund that is ready to be deployed, you can sleep at night.

We have a rule that we keep $50K sitting in an interest bearing account for catastrophes, which can and do come up.  Three years ago, devastating fires came through the Smoky Mountains and not only burned one of our cabins to the ground, but sent shock waves through our Property Management company that lasted 14 months.   $50K wasn't enough.  Needed to be more like $200K for our situation.  Luckily we were able to tap some other resources to get us through.

Cash is king.  Keep plenty.  If you don't have it, don't go into business.

If you think the booze is good, I'd drink it. We don't leave any food products for guests.  Maybe I watch too much TV, but it would be my luck that the previous guests contaminate the salt with VX or something.

It’s a thread epidemic!  Let’s start another!

 I can’t self promote here, but we had a cabin called Moonshine Manor that did about $22K a year.  We implored the owner to let us rename it.  After 3 years, they allowed us to, and it did $31K over the next twelve months.

Product names matter.

You are definitely paying yourself to be the property manager.  It all depends on what your time is worth, and whether you reap more from your time - $$ or pleasure - from doing something else.

I own a property management company, and our clients are mostly upper middle income or what I would consider to be wealthy.  Some of them have never even seen their property!  They look at it as a corporate bond paying interest every month. No more, no less.  There is no emotion. 

If you look at what other passive investments pay, STRs are a wonderful option even if you pay someone else to screw with it. I mean 10 year treasuries are now paying less than 7/10ths of a percent annual right now!

Can you make substantially more by self managing?  That depends!   If you are a GOOD MANAGER and stay on your toes, YES!   Can I save money by repairing the engine on my car?  Absolutely YES!  But I had better have a Chiltons repair manual nearby and read the thing cover to cover.  Some screw ups under there could cost me even bigger dollars.  Same concept with STRs!

 We will likely do that. We haven't ever fired a client before, but this one might be the first.

So we have a new property on our program.  A very nice, two bedroom property just outside of Gatlinburg.  We projected that it would easily do $40K a year and were planning for that. But the owners jumped in and made a few decisions that would kill the thing.

Number one, they wouldn't let us name the cabin.  They wanted to do it because it was "their cabin" and they wanted their personal touch on it.  Now, we have several examples since 2011 where the name of the cabin makes a huge difference in annual revenue.  I am not going to reveal the name of the cabin in this situation, but suffice to say that it wasn't appropriate for the area and quite silly.  

Next, they decided they wouldn't allow children. Children would translate into more repairs and maintenance.  Wow.  You just made a $20K a year decision there.  Good job.

Next, they decided to go without either a hot tub or a game table.  Now I don't have either of these in my personal home, but when I am surfing homes to stay in in the Smokies and practically every home has these amenities, yours sticks out like a soar thumb.  Sure, we can discount it to overcome these deficiencies, but at what ultimate price?  

We manage 29 properties, and this weekend, 28 of them are booked, except for this one. We project it might rent 3 nights in March.

Some people are too smart for their own good.

Our properties in the Smokies are as busy as ever.  I’m shocked by that, but my working theory is that folks still want to vacation, but they would prefer to drive there than fly or cruise, and they’d like to stay in a secluded private residence.

I know this has been beat to death, but the Smoky Mountains region represents the best yield I have been able to find.  I live 1,100 miles away.  

That said, there will be a point when the prices in the Smokies reach a level where the price-to-earnings isn’t as attractive. They’ve gone up substantially.

Perhaps Lucas Carl could jump in and give an opinion of where we are in that cycle.