Building in 2020

As we approach spring of 2020, we continue to see a strong sellers’ market for our vacation cabins here in the Smokies, meaning we have a low number of cabins for sale and a rising market value for properties with strong rental potential. Our theme for last year was “building is making a comeback,” and our theme for this year is “a season of building.” Many new construction projects planned in 2019 are now underway and more lots are continually being developed as places to construct cabins (and traditional homes, too).

If you currently own a vacation cabin, this is the best time to sell. The market value compared to building has not plateaued, and if you’ve owned your cabin for a while, it’s likely you could take what you make from your sale and put into a new construction. This will mean new amenities, updated designs in line with the current trends, and a concept utilizing both of those ideas that will translate into higher passive income for you. For example, cabins with indoor pools are performing better than ones without because they attract people at times of the year such as January when there are less people coming in for a visit. The National Park is closed during the winter, but people will still rent a cabin to go swimming in its indoor pool.

Those of you who have followed my newsletter will know our top local resorts are Sherwood Forest, Starr Crest, and Legacy Mountain. Last year, cabins in those resorts sold at prices that hadn’t been seen since before the downturn in 2008. Along with that, we saw the time to receive an accepted offer for many cabins – not just in those resorts, but in general – drop from a few weeks to a few days. This trend is continuing even now. So if you’re thinking about selling, now is the time.

One of the first steps to take in considering selling is to see for yourself what your cabin is worth in today’s market and compare it to the price you paid when you bought it. We can definitely help you with finding those two things out! Just give us a call or send an email or text. I look forward to hearing from you! I can be reached at 865-765-6157 or 865-654-2111, or by email at deborah@deborahkorlin.us.  You will be pleasantly surprised by what you discover.

And if you’re considering buying, this is a great time for you as well if you are able to make the decision quickly. I’ve talked before about how to put the strongest offer forward for the cabin you want. Although prices are higher, the rental income for these properties continues to be strong. You will want to hold onto the property for as long as possible until you reach a point where you can sell it and invest the money in what you have planned for your next season, whether that is a bigger cabin or another life goal you are working toward. Our tourism industry attracted a record number of people in the last year, with totals breaking more than 12 million people. And we know that the majority of people who come here want to stay in a vacation cabin.

If as a buyer you are more interested in building, that is definitely an option. The most important thing to keep in mind is that you will have to wait a little while to start making money, as it takes between six to nine months to build. Some builders are financing their projects and then selling when completed, but most are requiring buyers to secure their own construction loans to fund the project.

Remember, now is the time.

Finding the Win in Real Estate in 2020

Throughout 2019, our theme has been “building is making a comeback.” And it has. We’ve seen so many new cabin construction projects over the last year, including a few resorts we helped developers and builders to implement. Hibernation Station was one of our team’s most exciting projects! We absolutely love some of the new products!  In particular “log” cabins that are being constructed from a special concrete that is not only indistinguishable from a traditional log cabin, but also higher quality and lower maintenance.  Carpenter bees aren’t going to bore into concrete! 

Part of what has made building so popular is the fact that we have a shortage of available cabins for sale. As early as last spring, we began to see prices climb on vacation rental cabins due to the high demand among buyers, and if it was an awesome cabin, the demand was even greater. This past year, it was not uncommon to see a cabin receive multiple offers within days, sometimes hours, of coming on the market. And the later it was in the year, the more those offers were. Our team has had several cabins listed that were under contract within a day or 2. The demand has just pushed the prices higher and higher, until we will very soon reach a point where the cost to buy a cabin matches the cost to build one.

So going into 2020, the most important thing to keep in mind when building a cabin is that you need to build with the current trends in mind. You want to stay on the front of the changing designs.  You will want your new investment cabin to reflect what people are looking for now and tomorrow. Before you all go away screaming and pulling your hair out, here are a few tips to keep in mind that will make the project easier to manage.

Choose the floor plan that best fits the most popular desires. Some of the concepts that are out of date now are elements like tiny kitchens where the refrigerator is positioned up against the stove, whirlpools in the bedroom, no game room, no special media-theater amenity and non-existent outdoor areas because the cabin is sitting at the edge of a wooded cliff overlook. Instead, the next generation of cabins will have larger kitchen spaces, a defined dining area, a private bathroom for every bedroom, and space for outdoor living, kitchen, fire pit area. Indoor pools and swim spas are also popular if you have the space in your floor plan to include them. All of these amenities will add to the gross rental income and should pay for themselves. Elements that have never gone out of style; walls of glass, rustic elements, the cabin look and feel, drama and openness to the floor plan, lofts.

Be patient with the construction process. As building becomes more popular, the wait time for a cabin to be built can increase. Even after you pick out the lot that can accommodate the design you have selected, you may find that you need to wait a little while due to other steps before building can begin. You will need to secure permits and HOA approvals, conduct surveys and appraisals- all before you break ground. So while you’re waiting, you’re obviously not making money on your investment. You need to make sure you can manage the long game until your cabin is finished. As a good rule of thumb, plan on about a sixteen months from start to finish.

Be willing to sell an existing cabin to finance your new build. If you have a rental cabin already, don’t remodel it – sell it. It’s less expensive to build something correctly than it is to remodel. Additionally, new cabins are at the top of the rental market because of the adjustments in the amenities. So it will cost as much or more to remodel something existing to make it match what’s being built new (where it’s even possible), but probably won’t increase the value to match that of a new cabin. The value of a new cabin is between 20 to 25 percent more than an existing cabin of similar size. In fact, many of our top investors making their living on vacation cabins are selling their existing cabin to build a new one. Roughly 90 percent of our Hibernation Station clients were people who owned in another popular resort, Sherwood Forest.

In the coming months, we will be sharing details on new resort projects that are developing and what is happening with the existing cabin market. I expect the trend of multiple offer situations on existing cabins to continue, so if you prefer to buy than to build you will need to prepare yourself to win the bid. I will share more on how to do that in my next blog article.