All Forum Posts by: Luke J Nelsen

@Kevin Luttrell thanks for the referral. I’ll take a look!

Thanks for all the input! It was all SUPER helpful. We ended up canceling and keeping the earnest money. There have been too many price drops to even count this week. We’re ready!! Fortunately, we already have 2 cabins and a few duplexes that do well. So, we’re not going to force anything!! 

Hey guys,

This past weekend we got our what would be third cabin under contract in the Smokies. Unfortunately rates went crazy on Monday before our rate was locked and now were looking at 6.5% and 3 points. This has put a dent in our returns but it still cash flows decently at about $800/mo. and about an 8.5% cash on cash return. Just curious your thoughts on walking away and risking our $2,000 earnest money or sticking with it? We'd love to re-negotiate with the sellers but they really have no incentive or reason to do so. We also have an inspection contingency to fall back on if needed.

I hate to pass up on a deal but don't want to take on a big risk in such an uncertain time when we don't need to do so. Any insights would be greatly appreciated.

Thanks!

Luke

I live in WI and homes close to Lambeau can rent well during home games but keep in mind there’s only 8 guaranteed home games per year. What other factors are going to be driving demand? 

 I own near Wears Valley. And things have slowed down in April and May significantly. This seems to be the case all across the board based on all the owners I have spoken with. There has also been a shorter lead time for reservations. Lots of last minute bookings. And the fires may have freaked some people out too. 

I learned that you typically will need 35% down as a foreign investor per CIBC and they were only offering a 15yr ARM or 5yr fixed lending options when I spoke with them in March.

I use Zetronix solar cameras. Simple and easy. I don't need anything fancy.

I own 2 cabins in the Smokies and we're also struggling to find "good deals" in this market. So, don't feel bad. The crazy prices and rising interest rates have squeezed margins from what they used to be. However, relatively speaking the returns are still stronger than most other assets I have looked at. Last year we saw 30-40% cash on cash returns. This year on market deals are still showing 15%ish returns and prices seem to be softening based on the amount of price drops I am seeing. That is still good in my opinion. Just not AS good. I am personally still looking to acquire another asset in the Smokies if I can find the RIGHT deal. I am underwriting very conservatively with all of the uncertainties our country is facing at the moment. I believe that ADRs and occupancy will drop if/when the economy dips in the near future. If the economy does enter a recession, I do believe that cabins will still rent. During the last recession, there were over 9 million ANNUAL park visitors between 2006-2010. And that figure does not even include people that just visited Pigeon Forge and Gatlinburg without entering the park. Therefore, I am targeting cabins with great views and/or distinguishing features like water views etc. to help stand out if there is a dip in visitation and demand.

Just my 2 cents.

Luke

HER Photography. She does our photos. Check them out at smokyretreats.com

@Sean Bramble We are putting 10-15% down. In one case we put a bit more down but that was when rates were in the 3's. Now at 5.5% and higher asset prices, the equation definitely changes.