Due to our low number of properties on the market, we have seen prices continually climb on what’s available over the last nine months.
Many of you who follow our monthly newsletter and keep up with the articles we write each month about buying and selling properties in the Great Smoky Mountains region either currently own, or have owned properties, here in the past. Many of you also are in the market for something else to own, either in addition to what you have now or as an “upgrade” to your current vacation/rental cabin. And you’ve probably been keeping up with our articles about how the market has changed. It’s a sellers’ market – not just here, but in a lot of places around the country. The number of homes for sale is down from where it was a year or two ago. So when something new comes on the market, it really doesn’t stick around that long.
It’s true. Many listings in our market have offers within a matter of days if they are priced correctly (especially when they are priced a little under) current market values. My agents and I have had listings that were “under contract” within as few as three days. We frequently tell clients at showings, “This won’t be on the market next week.” It’s just where our market is right now.
So what can you do? Well, the first thing to keep in mind is that the deals of last year are gone. If you do stumble upon something that’s brand new to the market and it is priced low, the offers that come in are going to be above asking price. The winning buyer won’t be placing any sort of contingencies on the offer, and you can forget about negotiating back and forth through a series of offers and counter offers. While you’re trying to get a discount on the price, someone else is coming in with a full price – or above asking price – offer that’s going to win. It’s a tough place for a lot of buyers to be, especially ones who have bought in our market in the last few years after the downturn, but it’s important to know that going into any offer you want to submit. Those days are over, at least for the time being.
Secondly, as prices are going up on properties, rental rates are rising along with it at many of the rental companies in our area. Large cabins are not as readily available for purchase as they once were, and so smaller cabins have quickly become the focus. We’ve also seen a significant reduction in sales of cabins in our more popular resorts, such as Sherwood Forest and Legacy Mountain. Where once there were about a dozen or so cabins for sale in each those areas at any given time a year or two ago, today there is half or even less than that. But the good news is that there are still strong investment properties to purchase that will cash flow positive every month. We are also building again so new construction may be a really good option for you. This market is not for the timid.
This year, about a third of the properties I’ve listed have sold at or above asking price. We’ve had some where we ended up with multiple offers, even in places that haven’t traditionally been high demand areas in the past.
When national investors have analyzed the entire United States, Sevier County comes up in the top ten places to invest for overnight rentals. It’s also one of the most beautiful and inexpensive places to retire. So be a good student of what is available and don’t be shy about an offer on a good property. If you can accept that, you will have a solid investment for years to come, whether it is your personal residence or an overnight cabin or chalet.
In the meantime, if you’d like to know more about the current market and where we are probably headed – whether you are buying or selling – my staff and I are always here to answer questions.
Are you looking to own a profitable cabin in the Smokies? Then this article is for you.
When buyers contact me about buying a vacation rental cabin that is at least partially for investment purposes, the hottest question on their mind is how well a property will do as a rental! They are looking for a profitable cabin, and their focus is right where it needs to be. Finding a property that will perform well on rentals is essential! Sometimes the next thing I hear from them is, “I only want to look at cabins that have a great rental history.”
I love their spirit! However, as I share at this point in the conversation with them, just because a cabin isn’t currently earning a high dollar amount, doesn’t mean it won’t. As a matter of fact, I usually am most interested in finding them a cabin that someone is making a mistake on because my staff and I are able to analyze the mistake and correct it.
The ability of a cabin to be profitable is based on a variety of criteria. Perhaps the current owners prefer to use the cabin more often than a new owner will. Maybe the cabin doesn’t have the right decor to attract guests. Sometimes it’s not being marketed as competitively as it could be. Once we identify the exact causes of a low rental income report, we can determine whether or not it’s something that can be corrected before we decide if this is the right cabin for you. If you purchase a profitable cabin that is already performing at the top of its potential, you are most likely going to pay the highest price possible. This is not usually how I like my buyers to spend their money. I love to find a cabin that we can purchase, say, for $300,000, then make about $10,000 worth of changes to make it a profitable cabin worth $350,000. And where it was doing a gross rental revenue each year of $40,000 before, now with our changes it is going to reach $60,000. That is the win we are looking for to make it a profitable cabin!
Over the years, I have put together a list of resorts based on discussions with past clients, with rental companies we maintain great relationships with, and from reviewing listings based on how they tend to perform on the rental market. From those discussions and reviews, I am able to keep track of how the rental cabin market is doing overall and which ones are producing the highest levels of income overall for their clients. When it comes to resorts, the ones that generally perform the best on the rental market are located in places that are easily accessible, have great mountain views or pristine Smoky Mountain forest views, are close to shopping and/or tourist attractions, or some combination of the above. While this is not always true for every single cabin, it is a great rule of thumb for our area. One to two bedroom cabins on rental with the strongest performing resorts will be routinely earning up to $45,000 in gross rental income, while 3 to 4 bedroom cabins in the same locations will be performing around $60,000 on up. Larger cabins will produce $100,000 and above with the right combination of amenities, marketing, and views of the mountains!
Average rental incomes in profitable cabins
The “medium range” resorts tend to do a little more than half what the top-end resorts collect in rental income based on cabin size, number of rooms, and amenities. Meanwhile, 1 to 2 bedroom cabins at the lower end of gross rental amounts will bring in between $18,000 and $30,000 and 3 to 4 bedroom cabins will generally produce between $25,000 and $38,000, on average. With that being said, I do tell prospective buyers not to discount a cabin based on rental history – even if it’s in a lower producing area – until we’ve had a chance to look at why that might be happening. For example, if the cabin is on a high point in the resort and has a great view into the Smokies, it could produce a great deal more than the average for that particular area. Or maybe it’s being used primarily as a vacation destination for the owner during peak season. In that case, the next owner looking at it strictly for investment purposes will do far better with rental income than the current owner has. So it’s an art and not a science, but the performance of cabins can be predicted.
Know the amenities of a profitable cabin
The search for the “perfect” profitable cabin will be an analysis of a group of important characteristics. By the way, we do have a report that just targets those characteristics. It is called “What Makes a Profitable Cabin?”
Click here to learn more about this Shagbark cabin.
If you’d like to schedule a visit to see this Shagbark cabin call me at 865-765-6157 or my support line at 865-654-2111.
We – like many communities around the country – are in a sellers’ market.
If you’ve discovered that finding the perfect vacation cabin or second home in the Smokies hasn’t been the dream you imagined this year, don’t fret – you aren’t alone.
We have had a shortage of properties for sale this year. Even now, there are only about 1,000 active market listings for sale in our local Great Smoky Mountains MLS association. At the same time, we have seen our number of buyers increase, but with less properties to consider, it’s definitely driven the demand, and the sales prices, up.
However, if you’ve found a property your heart is set on, there’s hope. There are things you can do and ways you can approach the seller with an offer that will make them choose yours over everyone else’s. Here are few ways you can make the successful bid.
Be prepared to go above the asking price. This is just the reality in a sellers’ market. When supply isn’t keeping up with demand, the market value – what someone is willing to pay – inevitably goes up. We’ve seen a number of properties on the market sell for an amount above asking price, particularly when the property is in what agents will call a “multiple offer” situation. This is where the seller has received more than one offer, and instructed the agent to give all of the people making offers the chance to submit the very best offer they can within a set amount of time (usually a day or two). So if you had offered a little less than asking but someone else offered asking price or even just a couple of thousand dollars more, it’s more likely they will take that bid over yours.
Do anything you can to make your offer the most appealing. Going above asking price, particularly in a multiple offer situation, isn’t a guarantee you will win the bid. What matters the most is which offer looks to have the strongest chance of making it to closing. Can you buy the property with cash? If you can, that is usually the offer that will win. If not, then you will need to consider some other ways to make the offer more appealing. Get prequalified with a lender who will provide a letter. These days, lenders can get prequalification within five minutes, and most have an app where you can do it from the ease of your cell phone. Have a larger down payment or offer a higher escrow. Agree to take the property “as-is.” “As-is” is a real thing that happens frequently these days, but it doesn’t mean you’re stuck with the property if there’s something seriously wrong. You can still order a home inspection and go through the normal procedures, and if your inspector finds a problem that the two parties can’t resolve a way to fix, you can still will walk away from the purchase. Most sellers and their agents understand that if it is a serious issue with the property, it will have to be addressed if you decide not to buy the property after all. So that tends to make the seller a little more open to negotiating the repairs for those types of issues. And lastly…
Don’t wait to make the offer if it’s the one you really want. This is the hardest part of the home search for many buyers. Buying a home or cabin is a big decision and most people, understandably, want to take some time to think on the decision before they make an offer. Impulsive buying really goes against human nature, and rightly so. Unfortunately though, time is of the essence these days. While you’re sleeping on it, someone else is making an offer that could be accepted by the seller. It’s not uncommon for a buyer to miss out on the cabin or home they really want because they didn’t want to make an offer immediately.
The bottom line is, it’s a sellers’ market and will continue to be so for the foreseeable future.
Going into the home search with that understanding in mind will make the process of finding a home in a sellers’ market much less stressful for you and give you the edge in making the best, most attractive offer you can in order to win the bid for the home or cabin you really want.
Our featured “Cabin of the Month” for June is a great investment property in Gatlinburg!
You can learn more about this investment property here.
The gorgeous views on the over sized lot of this 4-bedroom Sevierville home provides the perfect backdrop for entertaining family, friends, neighbors, and other guests.
You can learn more about this 4-bedroom Sevierville home here.
I am so excited! It’s that time of year when the Smoky Mountains show off that famous “Blue Smoke.”
Many of you are of Cherokee descent like me and it just seems right! The Cherokee called it “Land of the Blue Smoke.” Shaconage was their word for it. You pronounce it “Sha-Kon-O-Hey”! Sounds so good, right?
When thinking about the best real estate investment ever, think about purchasing a cabin with a view of the Blue Smoke. The fact that it changes all day with the weather is superb. Sometimes it disappears and then an hour later, mountains upon mountains appear like from nowhere. It’s part of the joy that visitors have when they come. It is equivalent to buying beachfront property. Of course, you may have to “wait” for the property to come along and sometimes there is a compromise on the fact the drive is a little “crazy”— but weigh it out. The drive can’t be too crazy. Maybe you should load up your grandmother and your two year old and see if any one throws up breakfast. If so, no matter how amazing the view you need to pass. But if you can put it on your list of top wants in a property that would be good.
Just as a side note, where does all that blue smoke come from? Volatile organic compounds, or VOC, is fog from vegetation. The plants take in carbon dioxide and give off oxygen. The VOC’s refract light that results in gorgeous bluish tint. They have a high vapor pressure, which means they can form vapors at room temperature. Millions of trees, bushes, and other plants create a concert of VOC’s and we have Shaconage. This is also shared with the Blue Ridge Mountain range. As I was born on the Blue Ridge Parkway in Galax, Virginia, perhaps it is in my blood. Some of you might know that Galax is an awesome mountain bush but also home of the Fiddler Festival known nationwide for great Bluegrass.
But back to great investments. So what is a view worth in dollars and cents? An appraiser will often not give value for a “view,” but in reality a lot without a mountain view might be worth $40,000. The same size lot on the top of that resort will be sold for $90,000. And rental revenue from a cabin with no view will be $70,000 a year on a typical well outfitted 3-bedroom with a view. Add another $15,000 or more of gross revenue a year. It makes me love Shaconage even more!
However, do not despair if you cannot find the mountain top view of Blue Smoke. I have several alternatives for you that will get you very close to if not on the mountain top itself. I can help you find a cabin on a water amenity, such as a creek or waterfall, or perhaps a place on a small mountain with a lake of its own! Find a cabin with a pristine private view where your guests feel like they are Adam in Eve in the garden of Eden before they had kids! When you find the private setting, place a fire pit or a garden to meditate in, or a walking path to go exploring. And last of all stack your cabin with fantastic amenities such as giant screens with a home theater, crazy arcade games, driving games, shooting games, putt- putt courses, sauna’s, and gourmet kitchens to make our local chefs envious.