All Forum Posts by: Ken Boone

@Jon Martin I don't think AirBnb is going to be a problem. If you are doing VRBO, they will be a problem. In their rules, it states that selling a property is not a valid reason to cancel a booking without penalty. Typically in your situation, bookings need to be cancelled and then re-booked with the new host. VRBO does not care if they are rebooking. 

On my last call with my VRBO account manager, I told them I thought this was a bad policy and I will drop VRBO 6 -9 months before I sell and let AirBnb and my direct guests take all the bookings.

Quote from @John Underwood:

Always buy a great property with great views and great location and have cash reserves.  You will likely get through any downturn and be better off on the backend.

 Bingo. Buy right and have cash reserves.  I know people that jumped in and used every dime they had on the purchase. 

Quote from @Mike H.:

2) The covid years created a bubble for the bigger cabins.  During covid the numbers on the smaller one and two bedroom cabins were not that great.  Paying 450k to 500k for 1bed cabins that rented between 45k to 55k.  Or Paying 600k to 625k for 2 bed cabins that rented between 50k to 65k.

I don't know where you got the smaller cabins were not great. I crushed it those years as well as everyone in my circle that had smaller cabins. My numbers were absolutely blowing through the roof those years. 

We are no doubt in a cycle, but what we absolutely know for fact is that a lot of people bought in at 2023 and 2024 prices, expecting 2021 and 2022 rents. Many realtors pushed the idea of these numbers continuing, many pushed the 10% down loans cause you are gonna make so much money. And those people that leveraged heavily at the 2023 and 2024 prices are not going to make it through this next year. I don't know how many there are but I personally know several myself. They are going to have to eat heavy losses or sale at a loss to get out. Right now most of these people are not there yet, but a lot of them will be soon. I think most of them will hold on through summer because just about everything is going to book for summer, but when they hit the September lull it will be back to reality for these folks. 

Right now the prices are all over the place. Most are priced too high and most are priced where they will not cash flow in a leveraged situation. We are back to the days where you buy a cabin now because you want a second home and you rent it out to help pay for it, not the days where you buy a cabin for the great cash flow. 

The cycle will have to continue on a downward trend before we get to that point again. You are at an advantage building yourself at 65 to 70 cent on the dollar. That is about the only way to make money if you are investing in this market today at the current prices.

You are right about opportunity. It will be coming but we are not there yet.

Honestly I would not have expected you to see many foreclosures in the last 4 years. The people that bought up through 2022 had no reason to go to foreclosure. They were killing it. It's the people who bought in the last 2 years that are purchased leveraged and way over priced, that have the potential to hit foreclosure. It takes time to get to the point of foreclosure and not enough time has passed at this point And you might be right that we may not see it happen that way, but you are going to see some heavy losses.

Quote from @Collin Hays:

Quote from @Ken Boone:

Quote from @Collin Hays:

Quote from @Ken Boone:

I’ll add this.  In the 2017-2018 time frame the general consensus was that given any cabin in the Smokies, most realtors were projecting income at 20k per year per bedroom. From what I saw at the time, these were good numbers to go by back then.  @Collin Hays would you say those projections back then were on target?

I had forgotten that, but now that you mention it, I recall hearing that. Probably a decent rule of thumb even for today. 

 And if we return to those 20k per bedroom numbers there will be wailing and gnashing of teeth! Because NOBODY that bought at 2023-2024 prices and leveraged it will make money.

 Yeah I don't think those numbers are going to be very far off of reality. I have a number of clients who we have managed for many years that are doing just fine at $20K a room.

I visited with a gentleman this week who bought a 3/2 in May of 2023 for $810K-ish, and he is listing it for $650K-ish.  He will probably get $550-600K.  If he waits much longer, it will be $450-500K.

 Yea that is gonna hurt! I got a buddy that's in a bad mess like that too.

Quote from @Collin Hays:

Quote from @Ken Boone:

I’ll add this.  In the 2017-2018 time frame the general consensus was that given any cabin in the Smokies, most realtors were projecting income at 20k per year per bedroom. From what I saw at the time, these were good numbers to go by back then.  @Collin Hays would you say those projections back then were on target?

I had forgotten that, but now that you mention it, I recall hearing that. Probably a decent rule of thumb even for today. 

 And if we return to those 20k per bedroom numbers there will be wailing and gnashing of teeth! Because NOBODY that bought at 2023-2024 prices and leveraged it will make money.

I’ll add this.  In the 2017-2018 time frame the general consensus was that given any cabin in the Smokies, most realtors were projecting income at 20k per year per bedroom. From what I saw at the time, these were good numbers to go by back then.  @Collin Hays would you say those projections back then were on target?

Quote from @John Underwood:

What I see as crazy is that someone down the street from our cabin just built a brand new cabin to rent out. How in the world are they going to even break even after paying for a new construction cabin? I don't see them faring well.

On the plus side our June and July look to be the best ever at our 6 bedroom cabin. Maybe because we are very established?

It seems word of mouth helps us a lot. Someone stays with us then their cousin, aunt etc end up direct booking with us.

Yea that is crazy and you are right they are not going to fare well.  

One other thing I was told by my VRBO rep is that if you do a discount for week long stays, if it's not at least 10% VRBO will not promote in the listings. 

So the travel issue is really on I-40 through the Pigeon River Gorge. That is a stretch of about 15-20 miles near the NC/TN border. If you were traveling from Asheville, NC to Gatlinburg or Pigeon Forge, or even Knoxville, this would normally be the preferred route. It is open but down to 1 lane through parts of it. I made it through twice last week with minimal delay. It will be bogged down during heavy traffic or if there is an accident.

There alternate way around is to from Asheville to Cherokee and then over Newfound Gap Rd / US-441 to Gatlinburg.

There really are no problems with the Gatlinburg area. The travel problem area is about an hour away on I-40. Not sure where you are coming from though. The damage area was really one county over from Sevier County. Sevier county didn't take the hit like its neighboring counties.

Quote from @Andrew Steffens:

Are seller's remaining stubborn there?

Many of them are. I still see many owners in the Denial phase with many more in the fear stage in that market right now. But @Collin Hays is dead on when he said many properties need to be cut 50% or more to make numbers work.