Finding a Profitable Cabin

profitable cabinAre 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 focusing right where we need to: 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 décor 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 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 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.

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?” 

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Buying property in a sellers’ market

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.

Winning the bid for the cabin in a seller's market isn't easy.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.

Gatlinburg investment property is fantastic opportunity!

Our featured “Cabin of the Month” for June is a great investment property in Gatlinburg!

Measuring nearly 3,000 square feet in all, this investment property’s 4 bedrooms, 4 bathrooms and 2 half baths offer plenty of space for vacationing guests! Located right next to the National Park in Gatlinburg Falls Resort, this cabin is performing extremely well on the vacation rental program!Gatlinburg investment property
It’s open concept floor-plan is perfect for entertaining all of your guests. Equipped with multiple fireplaces, a home theater, and a game room offering a billiards table, air hockey, flat screen and arcade games, the guests at your investment property will never be bored! What’s more, all four bedrooms are set up as their own master suites with fireplaces and a television!
Outside, the cabin offers plenty of space for guests to relax and enjoy the outdoors on any of the three covered porches, either from the comfort of the hot tub on private back porch or while sitting by the fire pit in the back yard.
This investment property is nestled in a prime location with less than a 5 minute drive from Gatlinburg to Pigeon Forge and Dollywood!
If you have questions about or would like to visit this cabin, call me at 865-765-6157 or my support line at 865-654-2111.

You can learn more about this investment property here.

Enjoy the ‘Blue Smoke’ views of the Great Smoky Mountains

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-Heyblue smoke”!  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.

blue smoke

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.

If you want to learn more about the science behind Blue Smoke, check out this article on the subject here.

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Picking the best color of paint for your home is critical

Last month, I shared some important tips about what to look for when buying an investment and what to be thinking about during the search process. Once you’ve found the right property that meets your goals and meets those criteria, the next thing to be thinking about is what improvements you can make to it that will increase its overall value without costing you too much money. First and foremost, you want the investment property to be the best color it possibly can be.

Finding the best color

Sometimes it’s just a matter of painting, but don’t kid yourself – if you aren’t using the very best color choice, painting can ruin you as easily as it can profit you. Take that seriously. Don’t just let someone pick a color. Use a palette to compare colors before you start so that you pick the best color of paint for your home. And if you make the mistake of picking the wrong color, don’t be so prideful that you keep on painting with that bucket of paint because “it’s paid for.” I’ve done this.

True story! It was years ago when I was much younger and inexperienced, but an art major! As a matter of fact, I was fresh out of college and had started teaching art at a local middle school. So that made me a professional, right? Wrong! My sister asked me to choose the color for their new West Knoxville house. I was so excited! Armed with many paint chips, I chose the most darling shade of blue. Now, in my defense I need to tell you she loved blue and requested blue. However, there is blue, and there is blue! In a few short weeks after the paint dried on this marvelous shade of blue for the exterior of her house, the whole neighborhood was devalued due to the over the top Easter egg blue color of my sister’s house. Oh my!  I learned a terrible lesson, and so did my sister! She has forgiven me, but the roughly 2-inch by 3-inch paint chip does crazy things when you blow it up to about 100 feet by 20 feet. At least, that was my excuse! By the way, her three young sons loved the blue house (which in hindsight should have been a hint that it was inappropriate).best colors are found in nature

So here is the trick to figuring out the best color for your new investment.

Get paint samples and get the color you want. Then get all the shades around the color you want – dark ones, light ones, muted ones. I repeat, muted ones – with grey and brown mixed in! Then, take them to houses and commercial buildings you like and match them. You are going to be shocked at how muted the shades you like are once they are on an exterior wall with the sunlight beaming down.

You can also use the paint brochures and the photos they provide to indicate the color used at the paint store. That can help you determine the best color to use. And if you aren’t sure, start by buying a small sample and try a small area. (You’ll thank me!)

Another excellent idea is to talk to your agent before you remodel. A good agent will know the best colors, materials, design, and décor to attract buyers. If you remodel it correctly, it could save you $20,000.

Also remember, something bought as an investment can be rented immediately (generally speaking). A property that was someone else’s mistake because it wasn’t reaching its potential for gross rental income numbers but is still showing rental history means it can continue to make at least that amount in the meantime.

Lastly, land is always king. If you have a choice between buying an investment property with land or one that is in a Planned Unit Development subdivision where the only land you actually have all to yourself is the part the structure sets on, go with land.

Make this 2-bedroom cabin your vacation home

For our March “House of the Month,” we’ve selected this beautiful 2-bedroom cabin in Parkside Village.

2-bedroom cabinNow you can own your own perfect getaway with this cozy two bedroom and two bath cabin smack dab in the center of Wears Valley! It’s located just minutes from town and offers easy access to either Townsend or the National Park. This is a mountain lover’s dream!

Well maintained and newly stained, this 2-bedroom cabin’s open floor plan will offer you the chance to relax with family and friends or enjoy a nice game of pool in the downstairs game room.

You can learn more about this 2-bedroom cabin here.

Turn this into your cash-flow nest egg today! Contact me at 865-765-6157 or call my support line at 865-654-2111 to visit this 2-bedroom cabin.

This 1-bedroom cabin is March feature

For our March “Cabin of the Month,” we’ve chosen this 1-bedroom cabin nestled in Parkside Village.

Taken care of by a great owner, this 1-bedroom cabin offers the perfect opportunity to get away from it all and just relax in the quiet of the woods. Located in the heart of Wears Valley, this is your1-bedroom cabin chance to own your very own quaint one bedroom and one bath. Make it your second home or continue to enjoy it as an income producing rental property!
The great open floor plan flows well and is perfect for you and your closest family. Adorned with small handcrafted details that really make this cabin stand out from the rest. Step out onto your back deck that is wonderful for grilling or enjoying a cup of coffee on a crisp Tennessee spring morning.  And of course, it comes equipped with a covered hot tub so that you can enjoy a relaxing soak, rain or shine!

To learn more about this 1-bedroom cabin, click here.

If you would like to schedule a visit to see this 1-bedroom cabin, contact me at 865-765-6157 or call my support line at 865-654-2111.

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Buying smart as a real estate investor

The most common type of phone call we receive from buyers looking for real estate in our market usually starts out something like, “I’ve never really owned vacation rentals before but I want to buy one with great rental history!”

real estateI always tell them, “Awesome, you want to become an investor! I can definitely help you with that!”

The conversation then turns to identifying what exactly they are looking for in an investment property and what their budget is for buying real estate. Once we have those parameters figured out, the next point to focus on is understanding what their long term plans are with buying real estate. Always be looking for real estate property with the expectation that you will sell at some point.  This is the first, most important step in the process of buying real estate. We have found that it is fairly common for investment cabin owners to relist their cabins within five or so years.  Either their investment strategies evolve leading them to buy other cabins or to invest in other ideas, or life happens and their focus on where they want to spend their investment dollars changes. So, always buy with the sale in mind. What does that mean? Well, it means there are several criteria you want to do your best to meet as you search for the best investment.

  1. It’s got to be in a great location. Location is everything, as I’m sure you know. You’ve got to buy something in a great location. You can change almost anything about a home but you can’t change the location. You can’t move a house if it’s in a bad location. So how do we define “great location?” Well, in the Smokies, a great location is generally something that has a beautiful view of the mountains, is close to attractions, and is relatively peaceful. If your investment property doesn’t meet at least some of those criteria, it had better offer something incredibly unique that renters will find appealing.
  2. Buy the lowest priced property of the best quality on the block. You definitely don’t want to own the most expensive home or cabin in the resort, and the reason is this: when you get ready to sell, you will have a hard time getting that piece of real estate to appraise for what you want from it. Appraisers look at similar properties in the same area of the property for sale as much as possible, and often times a property that is priced higher than the ones around it sold for has trouble getting approval for the price you are being offered. Without an appraiser’s stamp, a lender won’t be able to authorize the deal unless the buyer is willing to pay the difference up front. Most buyers using a lender usually can’t (or won’t). By going after something that is less expensive, you have enough room to maneuver as it appreciates in value.
  3. Buy as high quality of property as you can afford. People are always looking for the best deal, and I personally love helping them finding someone else’s mistake that they can turn into a win. But even with that goal it’s important to remember that the cheaper something is, the more you will have to spend to turn it into a gold mine. You want to buy real estate property with good bones that will hold up better without much maintenance. On that subject, don’t buy something with an outdated, obsolete floor plan. You want to buy something that can be changed to keep up with the interior design trends. So buy something with potential to be great without having to completely rebuild from scratch.

Remember, the goal in real estate investing is to make money with the property, both on the front end over the years as you rent it and on the back end when you sell it for a profit. If you’re not striving to reach those two goals, it might be someone else buying your mistake instead!

Next month, I’ll take you through some of the strategies I encourage my buyers to use once they’ve found the “diamond in the rough” so that remodeling the home increases their profits rather than cutting into it.

In the meantime, if you have any questions about the local real estate market, my team and I are always here to help and answer questions.

This cabin can be your vacation home

For our “Cabin of the Month” of January, we’ve selected this vacation home in Cedar Falls.

Level lovacation homets are hard to come by here in the Great Smoky Mountains region, but this cabin is on one! It’s the perfect spot for enjoying time with your family around the fire pit! Enjoy the private setting of this vacation home located in the beautiful Cedar Falls resort, just minutes from Pigeon Forge! Step onto the wrap around porch with your fresh cup of morning coffee and take in all that nature has to offer, including your very own stream that runs right across your property.
This one bedroom, almost 1,400 square foot vacation home cabin utilizes an open concept floor plan with soaring ceilings, hand crafted gorgeous fireplace, wood floors, upscale furnishings and over-sized windows to take in nature. It is handicap accessible with a ramp entrance and wide doorways. You’ll find the cabin is a well maintained vacation home that comes equipped with 2 Master suites. Both have their own attached baths. The cabin also comes with its own unique carport for parking your vehicles.
This property has never been on rental but is in pristine condition and has excellent income potential. You can see other details about this vacation home here.

To learn more about this vacation home or to schedule a showing, call us at 865-654-2111.

Sellers’ market for rental cabins likely to continue in 2018

We are finally reaching the end of 2017 and wow, what a year it’s been! We started with one of the worst tragedies our region has seen as we watched the Smoky Mountains and parts of Gatlinburg burn just over a year ago. So many vacation and rental cabin owners were devastated by the wildfires and we worked with many of them as they made the tough decision to either build back or buy something else. As the costs of materials and construction climbed over the year due to catastrophes in other parts of the country, even people who planned to rebuild their rental cabins slowly abandoned those plans because the price of doing that was just too much.

The rental cabin market in 2017

Not everyone who owned a cabin was eager to sell, though, so what we ended uprental cabin market with was a market of anxious buyers without enough cabins on the market to meet the demand. And many of them had cash from their insurance checks, so they were willing and able to pay a little more than someone who was new to the idea of buying a cabin, or who was working with a lender. The result was that prices of existing cabins began to steadily climb as well. The price to buy remained lower than the price to build throughout the year, and we still haven’t reached the point where building and buying are equal in price.

The number of residential properties, including rental cabins, didn’t quite reach the number sold in 2016, but the average price of such properties increased roughly $25,000 on average and our total sales for the Great Smoky Mountains region passed $540,000,000. Nearly 1,100 of the properties sold were vacation and rental cabins. With the flurry of buyers, we saw properties on the market sell very quickly, sometimes in less than a week if they were competitively priced or in a fantastic location for the right buyer.

So what does all that mean for 2018? Well, the number of residential homes and rental cabins for sale in our market will continue to be down and the market for buyers will remain a competitive one. This is good news for sellers but not good news for buyers. If you are thinking about buying a cabin, sooner is better than later. The longer you wait, the more difficult it will be to find a property within the price range you want to be in and the more competition you will have for what’s available. The market price for residential property will continueBlack Bear Ridge to climb until it reaches a point where the cost of building is a reasonable option. The most important thing to understand in that statement is that the cost of building isn’t likely to go down in the foreseeable future, either. So as the price of building climbs, it will be that much longer before building and buying are the same price.

Finally, none of this is exact science. In fact, there’s a lot more art to it than science. But what we do know is that the vacation rental cabin market is booming and because of that, cabin owners generally aren’t likely to sell their investment properties as long as they can make more with the rental income than they can from the sale of the cabin. The other factor for owners is the tax depreciation. Until that is used up, they will keep going. (Talk to your tax attorney if you want to understand more about how tax depreciation can be beneficial to you in the vacation cabin market.) And, the increasing number of buyers, especially people who are moving their investments from the coast line to the mountains, is expected to continue. This high number of buyers will drive the market.

As always, my staff and I are here to answer any questions you have about the rental cabin market.