Making the Most from Your Cabin Investment

As we near the end of 2019, we’re reaching that time of year where cabin owners who are thinking about their taxes in the spring make the decision to sell their investment/vacation property. Maybe that’s you. In terms of where the market is at, this is the time if you’re thinking about selling.

In my November blog, I talked about why that is true. Low inventory coupled with a flurry of buyers that hasn’t really slowed down despite the lack of properties to choose from has resulted in a resurgence of new construction. 2020 will be a season of building and property values will start to plateau once the construction projects takes root. So if you’re holding an older cabin, now could be a super good time to take advantage of the cycle and sell it. You can purchase something new for just a little bit more. 

The question we are hearing from our buyers and sellers now is how long until we reach the top of where cabins can cash flow positive? Until about two years ago, we were seeing cabins gross roughly 15 percent, on average, of what they sold for. So this means a cabin that sold for $200,000 was yielding a return of about $30,000 gross rental income. Then you’d have the split with the rental company if you were using one, and pay your expenses from your net income. That amount would vary based on taxes, HOA dues, amenity fees, etc. Now that same $200,000 cabin is likely to sell for $325,000 but with about the same gross rental income. You might be able to negotiate a slightly better split with the rental company, but you’re probably looking at around 10 to 12 percent of the sales price in gross rental income, rather than 15. So it will still provide positive cash flow.  We have also seen gross rental revenue increase in cabins that were upscale, fully outfitted and had amenities like a fire-pit;  therefore it is possible that the reduction is actually an increase for some.

So when will we plateau, or slow down in terms of market prices?  I believe it is likely when the purchase price rises to the point that the revenue only covers costs and no longer makes an income.  Then our properties become attractive to those who desire a true second home. Those in the market will be owners who only want revenue to defer some of the cost, whereas a true investor will look elsewhere for passive income. It will be much like you see at the beach where those who are wealthy and have discretionary excess income purchase a second home for their enjoyment and if rentals defray maintenance cost and HOA dues they’re pleased. 

But right now is a wonderful time to sell high if you bought low and a wonderful time to buy something that will cash flow positive pay for itself and give you a tax write off.  Where else can you stay in your investment and watch the sunset? Not in your stock and bonds!

If you’re thinking about buying a rental cabin as an investment, there’s a win for you, too. What’s important is that you buy sooner rather than later and prepare to hold it even if the market plateaus or enters another downturn. Even in the downturn more than a decade ago, our clients who prospered through it did so by using the rental income to pay the cabin off. Then, they waited until the market was on the upswing before selling. Even in those years when property values were low, rental income didn’t change.  In a downturn we become an even more attractive destination.  Vacationers who were going overseas playing in the Caribbean decided to stay closer to home and to drive to their vacation destination rather than fly. Americans believe in vacationing! It’s very close to mom and apple pie. And since we are within a day’s driving distance to 75% of the population of the United States.

Whenever you can it is always a good move to own the latest, greatest, newest, largest in short to have the best.  And sometimes that means remodeling, refreshing, or just buying new. As time marches on, make sure your investment stays strong and at the top of its potential performance! 

My team and I are always here to answer any questions you may have about our local real estate market. Call us at 865-654-2111! We would love to talk with you! We never mind giving you specific values on your property so you can make informed decisions. 

Design your own cabin at Cobbly Nob

This month’s cabin of the month is a pre-construction build in Cobbly Nob. In this 3 bedroom, 3.5 bath you can pick your finishes and colors. The cabin design included more than 2800 square feet in the desirable Cobbly Nob community. Located on a beautiful, private wooded lot, the cabin design also includes two master suites each with private baths, and one large bedroom downstairs. The cabin’s open floor plan offers high quality, brand new materials! The kitchen opens to the great room, with the dining room located in between. Other amenities include a half bath on the main level and the downstairs has a super large recreation/media room.

This cabin is perfect for a second home or as an investment overnight rental property. Pics are of like construction by this builder. To learn more about this cabin construction, click or tap here.

If you’d like to visit the property or talk with us about this build, please call me and my team at 865-654-2111 or 865-765-6157.

What’s next for investment cabins?

As we near the end of 2019, we are in a very interesting place in the market. Inventory – the number of properties for sale – continues to run low. Why is that? The reason inventory is low is multifaceted. As many of you remember, we had a massive wildfire in November 2016. Many cabins and chalets, and some residences, were destroyed by the fires. The devastation resulted in the removal of literally hundreds of cabins from the rental market. Some rental companies lost 100 cabins overnight. While a few of the owners of those affected properties have built them back (or still are actually in the process of building back), many of those properties will never be built back the way they were. The codes for cabin construction have changed and tightened up from a decade ago. So because of the infrastructure such as septic fields, narrow winding roads, or inclines where a fire truck cannot gain access, the county or the permitting authorities – Gatlinburg, Pigeon Forge or Sevier County – might not approve a building permit.

Replacement construction was affected by other factors, too. For example, just the sheer number of those structures in need of rebuilding made obtaining the necessary materials for construction difficult and expensive. Also, the availability of contractors has been a challenge. Where so many of the projects are funded with insurance money – meaning the cash is immediately available – those will tend to take precedence over ones that are being financed through a lender where the project involves a bit more approval, oversight, and paperwork to keep the money flowing during the construction process. So if you want to build something new you’re going to be competing with that group.

What makes building the most appealing in spite of the challenges, however, is the shortage of properties for sale on the market these days. At the time of the economic downturn just over a decade ago, the resulting housing crash held the property values low, making it unattractive for sellers to sell. But with the improvement of the overall economy, prices have risen and sellers have been able to meet their goals. Now once where they were okay with delaying the decision to sell, most of them have already moved ahead and sold in that group of properties that changed hands with the first flurry of buyers after the wildfires. So, that group of properties is gone and there are fewer cabins available to sell. This whole situation causes values to climb.

Of course, real estate prices tend to cycle, and we are back where we were before the economic downfall of the overall country with values for many cabins. In other words, we are reaching the top of the market.

Will values continue to climb? That’s a difficult question because the construction industry is not at the level it was previously, it has room to grow. There is much more demand for new construction then cabins or homes being built, which would indicate we can continue to see appreciation in market prices. Interest rates might remain low and visitation to the area is at an all time high. We are a top choice among retirees looking to relocate and those who just prefer a slower pace. 

On the flip side, what would cause the high market prices to end or slow down? One very dominant reason why it would slow would be the competition of more new construction projects. As the construction industry makes a come back and its infrastructure is filled, supply will begin to meet the demand once more. We’re reaching a point where new construction is the preferred purchase, as the price of building something new and the price of buying move closer in line with each other.

In addition to price comparison, the other biggest reason that building will become more appealing is because new construction takes into account the new desires and amenities of that renters look for, such as theater rooms, large game rooms, large luxurious bathrooms, indoor pools, etc.  Also new construction will have less maintenance cost appliances. HVAC systems, water heaters, etc. will last longer then something that has some age on it so it will tend to compress the price of older cabins. Generally speaking, they will not be able to rise any further in price than new construction prices.  

So if you are thinking about selling, this is the time. I hope you will choose wisely. And remember – there’s always a win in real estate. We’re always here to help you understand and sort out what that win is for you based on your personal goals.

Vacation rental cabins provide great investment opportunity

Our real estate market in the Great Smoky Mountains is known among investors as one of the top 10 places to invest for overnight rentals. Vacation cabins are incredibly popular, and we attract millions of visitors every year. What makes this region such a draw for so many is the variety of offerings. We have the Great Smoky Mountains National Park at our doorstep. Pigeon Forge and Gatlinburg work to be the absolute best at hosting festivals, parties, and other events. Outside of the holiday festivities which always leave our rental market “sold out,” our local communities play host to car shows, concerts, and all sorts of other activities throughout most of the year. On top of that, our local attractions – Dollywood is well known, but also the museums, go-cart and miniature golf, and many other family-themed local businesses that cater primarily to our visitors – provide plenty of fun and entertainment.

So over the years, the vacation rental cabins have added to the experience of being in the mountains. Our rental companies have worked hard to continually develop the cabin model so that it best accommodates guests’ needs, from everything to including game rooms with pool tables to the eventual construction of indoor swimming pool areas within cabins. The goal has always been to make the cabin as appealing as possible to guests so that it stays booked as many nights of the year as possible.

If you’ve been seriously thinking about buying a vacation rental cabin and have been watching our market these last few months, I’m sure you have noticed the trend of our region as a sellers’ market hasn’t slowed down from a year ago. In an article I wrote a year ago, I shared with you that the number of available cabins on the market had begun to slow. Since then, we’ve seen that number continue to decline while the prices have continued to climb. As the prices have reached a point that is almost in line with the price to build a new cabin, we have seen building begin to make a comeback this year.

The good news in this is that even as the prices rise, the number of tourists visiting our region has risen with it. What’s more, we’ve seen the number of people staying a little further outside Pigeon Forge rise with it. In March, local media were reporting record numbers of visitors in places like Wears Valley, as there are ways into the National Park from that side of the county that have begun to be discovered.

For sellers, the important thing to remember is that as construction continues to ramp up, the window of opportunity to sell your cabin will begin to close. Eventually new construction will be as appealing as buying something existing, so we expect to see prices level off – not drop, but stop climbing as buyers shift to a building focus. For buyers, the important thing to remember is that even though the deals of yesterday are gone, cabins are still a very strong investment option thanks to our thriving tourist industry.

If you are planning to buy or sell a cabin, or build a cabin and would like to more about the current market, my team and I are always here to help! Call or text us at 865-654-2111 and we will be glad to answer any questions you have!

2-bedroom cabin at Covered Bridge can be fantastic rental opportunity

This extremely well maintained two bedroom and two bath cabin in Covered Bridge Resort is our featured “Cabin of the Month” for September. Currently used strictly as a second home, this cabin has never been on a rental program! It is in perfect condition and is located just minutes from all of the attractions of Pigeon Forge.

The great room welcomes you with a beautiful river rock fireplace and open floor plan. The kitchen is found just off of the living area. Including two king size bedrooms, one on the main and the other on the second floor, this more than 1,100 foot cabin is a must-see! Come make this prestigious cabin your second home or rental destination!

To schedule a visit to see this cabin, call us at 865-654-2111.

To learn more about this listing, tap or click here.

Large acreage site could be perfect development opportunity!

This incredible large tract of property located adjacent to The Great Smoky Mountains National Park could be the perfect development opportunity, if you’re looking for a unique investment. The tract is very close to the Greenbrier entrance of the Great Smoky Mountain National Park, Gatlinburg, the Rocky Top Sports Center and other major attractions in our region. This nearly 38 acre tract with incredible Mountain views, contains approximately eight acres of pasture, a mountain stream, and some basic road ways already cut in. This tract is ideal for private development, potential cabin development , campground site, equestrian activities. Contact us by phone or text at 865-765-6157, 865-680-5850, or 865-654-2111 to request to see conceptual plans for other developmental ideas. These engineered conceptual drawings offer insight for possible development.

To learn more about this property, tap or click here.

New cabin construction designed with indoor pool

Admire the breathtaking long range views from this 6 bedroom, 6 bathroom, 2 and a half bath cabin! Located just 10 minutes from the Pigeon Forge Parkway, this is your Smoky Mountains investment waiting to happen. With a projected yearly gross income ranging between $120,000 to $150,000, your second home can make you a second income! This cabin offers plenty of potential with its spacious more than 4,400 square feet, its sparkling granite counters, hardy wood-look floors, handsome tongue and groove walls, an outfitted game room, an outfitted theater room, and private indoor pool – the latest attraction for guests to the Smokies looking to rent a vacation cabin. vacation cabinOpen floor plan, high ceilings, and expansive decks are perfect for entertaining guests. Best of all, its just a short drive to the attractions. This is just one of our latest construction projects taking place in Wears Valley, so the pictures are of similar finished 6 bedroom cabins within the developing Smoky Mountain Ridge resort (actual floor plan may vary based on how the lot sets).

You can view more details about this cabin here.

To learn more about this and our other cabin construction projects, call me at 865-765-6157 or my support line at 865-654-2111.

Shagbark Resort cabin can be the perfect vacation home

Our featured “Cabin of the Month” for July is a privately located resort cabin offering Smoky Mountain living at its finest! This 3-bedroom, 3-bath vacation home sits atop the mountains in the gated Shagbark Community. With its round-the-clock 24/7 gate, the on-duty guard watches over the only entrance to the community.

Handsome tongue and groove as well as cathedral ceilings designs adorn the interior of this cabin. Its spacious open floor plan offers extra space for all the family and is great for entertaining large groups. Outside, the cabin’s large wrap around decks with covered portions are perfect for relaxing.

Privately located within a gorgeous woods setting, Shagbark Resort is just 12 minutes away from the Pigeon Forge Parkway and 12 minutes from Wears Valley and the back entrance to the Smoky Mountains National Park. There is ample opportunity to use the back roads to avoid traffic and make your way around Sevier County to just about anywhere you want to go!

Click here to learn more about this vacation cabin. To schedule a visit to see the cabin, you may text or call me at 865-765-6157 or my support line at 865-654-2111.

Buying in a sellers’ market

sellers marketAround this time last summer, I shared with you that we are living in a sellers’ market in the Great Smoky Mountains. One year later, that fact hasn’t changed. The number of properties available – particularly vacation rental cabins, since that is our primary residential market in this area – has dropped below where it was last year while the number of buyers looking hasn’t. In fact, the interest among potential buyers has continued to increase, which has in turn continued to drive up the prices of available homes. This is great news for your if you own a cabin and are considering selling it, but it has proven to be somewhat frustrating for buyers who find the prices to be a little more than they were planning or who don’t want to make a seemingly impulsive decision and end up either missing out on the cabin they love or just giving up on the idea completely.

However, if you’re in love with the dream of owning a vacation cabin in the Smokies, there’s hope. There are things you can do and ways you can approach the opportunity, even in this market. The three things you want to focus on is making the successful bid, making it make sense with your investment plans, and making sure the decision to make an offer doesn’t feel impulsive (if like many of us that is an area you struggle with).

Study the market ahead of time. We frequently send out listings via email to people based on criteria they provide us weeks, even months, ahead of their plan to visit the area and pick a cabin. Of course, just about everything you look at now will be under contract and/or sold before your trip in the fall. However, the more you know about what’s on the market and what the prices look like before you make the trip, the easier it will be for you to spot exactly what you want when you go inside the home or cabin that will be for sale when you get here. And it won’t feel quite so impulsive when it matches something else you saw weeks ago that you really loved online.

Ask your agent to preview the home. When you live in another state, making a day’s drive on a Tuesday afternoon to see a cabin Wednesday morning before driving home in the afternoon so you can be back at work on Thursday isn’t always the most practical. If you don’t have a way to view the cabin before Friday afternoon, it might be under contract by then. So one of the services we offer our clients who we know are serious about buying a property is to go and check it out for them. We know what they are looking for in a home or cabin and can usually send photos or videos, or give a call while we are at the property walking around. Then, you can make an informed decision about the specific property and if you like it based on your agent’s feedback, be able to go ahead and make an offer following the tips I suggested last year.

Consider building your own home. The other good news is that if you can’t find exactly what you want, or you have time to plan out your vision for owning property in the Smokies is that building is making a comeback because of the shortage of properties for sale. So that is an option you should consider.

If you would like to know more or need help navigating the market, my staff and I would enjoy the opportunity to work with you on your adventure! You can call or text me at 865-765-6157 or my support line at 865-654-2111. I can also be reached via email: deborah@deborahkorlin.us

Building is making a comeback

As we reach a point where listings are scarce, we are entering a new season where building is making a comeback! It is an exciting time, as we have not had much new construction since the downturn more than 10 years ago. Since that time, it’s been cheaper to buy than it has been to build, but these past few months we have seen that trend began to shift. The number of residential properties for sale in our market is the lowest it’s been in quite some time. This has resulted in prices – especially for vacation rental cabins – increasing significantly, finally reaching a point where they are selling for amounts during the peak times in the early 2000s.

The top 3 reasons to choose building over buying

Over the last year, we’ve seen many buyers become discouraged with the market prices, which is understandable. But if owning a vacation cabin is something you’d like to pursue, there are a lot of great reasons to consider building. The best reason to pick building over buying is that you can create your cabin to meet the current trends that make it as profitable as possible. For example, a cabin with an indoor pool will gross significantly more than a cabin without one, and there are options for building a cabin with an indoor pool at a price that makes sense. It doesn’t even have to be a big cabin like it once did as the price for building a 1-2 bedroom cabin is much more in line with where the prices for buying an existing cabin are now. Indoor pools pay for themselves.

Secondly, you can pick your location. That doesn’t sound like a big deal until you consider the fact that with so few cabins, the ones in the best locations that are priced correctly will have offers on them even before they are listed due to the high demand, or multiple offers on them within a day or 2 of being listed. But there is an abundance of lots in a variety of places and many of these have fantastic views. So with the number of lots so high, you can almost assuredly find a place that will have the surroundings you want, whether that be a wooded area or one up on top of a mountain where your guests can admire the view.

Third, lenders are providing competitive options for building as it becomes more popular. We’ve had several lenders reach out to us about their construction loan options in the last few months, some of whom have revamped what they’re doing to keep up with the changing market.

If you haven’t found the vacation cabin you are looking for, building may be the best option for you. We’d love to talk with you about how we approach new construction and help you find the perfect lot for your goals!

(Or if you just want to know more about the pros and cons of building, we are here to help with that, too!)