A look at the second half of 2020 in Smoky Mountains real estate

As we move through the second half of the year, many of the people who contact us about buying cabins first ask if the challenges from COVID have affected the market. It’s a great question, and something we are constantly monitoring. The answer, though, is not really. The condition we were in with our market through most of 2019 still holds true today. We have a shortage of properties – especially with vacation cabins – and a flurry of ready, willing, and able buyers who are looking to own a second home or investment property in the Smokies. I do still expect there to be some people who need to get the cash out of their cabins for other life pursuits and may be under some pressure to sell, but this is still a sellers’ market. I don’t foresee that changing this year.

The number of buyers hasn’t dropped off, either. This is due to lowered interest rates on financing and a strong tourism market that keeps the rental cabin business profitable. Cabins are booked solid through September and we are seeing an uptick in the number of visitors to the area. Many of those bookings have been scheduled at the last minute. Our guests can stay in a cabin and practice social distancing just as easily as they can at home, so many people find that appealing.

New construction is still an option, too. It’s taking a little longer and it’s still as painful as ever. We’ve seen price increases in lumber and other materials, but lenders are still offering loans on new builds and the rates are as competitive as buying an existing cabin. So, it’s still a viable option if you’re in the position to be patient with the process of waiting to make your money back while it’s being built.

The most important thing to keep in mind is that the rental vacation market is still very strong. We are excited for people to come and visit our area, enjoy the national park, and enjoy the comforts of our vacation cabins. Just remember to be wary of your surroundings, be respectful of our residents and other guests in what is a difficult, stressful time for a lot of people, and bring your mask. But most of all, enjoy the treasures that are here, and enjoy the time with family and friends who come with you!

July featured ‘Cabin of the Month’ in Sherwood Forest

Sherwood Forest’s “Splash Lodge” is our featured “Cabin of the Month” for July!

Splash Lodge is one-of-a-kind spacious 11-bedroom luxury cabin with all the amenities you could ask for or think of – a fantastic investment, and the cornerstone of the Sherwood Forest Resort! It is positioned right beside the resort pool for flat huge parking of buses and lots of guests! The drive to the resort offers easy access and no winding roads. With the most dramatic grand floor plan of the large cabins, it is open and airy. You have a large over-sized kitchen and a dining area that can accommodate up to 44 guests. The cabin also comes equipped with a game loft, a game room, and a theater that is second to none offering a 60′ TV- luxurious tiered seating! Hot tubs are located on the outside decks, but the best of all: a huge indoor pool anchors the fun! It absolutely doesn’t get any better than this!

Over 8,000 square feet of the most upscale design and appointments possible. This cabin is sold fully furnished. The owner’s expectation is this cabin will bring in gross rental of $300,000 by the end of the year. (The owner has another large cabin that generates this level of revenue and this cabin has just been switched to that same program.)

To schedule a showing at this cabin, call my team line at 865-654-2111. To learn more about the cabin, click or tap here.

The future of rental cabin investments

As we continue to navigate the global challenge of the coronavirus and its impact upon the economy, many are asking what the effect on the real estate market will be over the next few years. In a recent article, I shared about what we learned from the downturn in the last decade when we saw foreclosures and short sales. I don’t expect we will see that sort of thing this time around, for several reasons.

One of the main differences this time is the stimulus and business loan programs that are being offered. The federal government has already issued one-time payments to families – something that didn’t happen during the crash in the late 2000s – and they are considering more. Also, even people who aren’t normally eligible for unemployment are being allowed to sign up for it now due to loss of work. These stimulus packages, if they are all approved, will lead to people earning up to three times as much than they made when they were working – particularly those who were considered lower income earners. The result of this will be seen as early as the third quarter of next year, with an inflation increase of 3 to 4 percent. It will also probably lead to increases in mortgage rates during that same time period, probably closer to where they were before the current pandemic all began.

Right now, interest rates are incredibly low and it is a fantastic time to buy, especially if you are looking at options for long-term investment. As we move into a new season, property values for the strongest investments are expected to increase. Coupled with higher interest rates in that next season, the window of opportunity to buy will close.

On the sellers’ side of things, this is a fantastic time to sell if you own a investment or vacation/second home cabin. Inventory continues to be low and market prices are holding steady, however we know from our past experience that as summer approaches there will be people who need the cash equity from their cabins. Perhaps it was something they were using strictly as a vacation property or it wasn’t earning enough on rental to help the owners stay ahead of the mortgage payments. Those cabins will be priced below market value and their sales will impact appraisal values on cabins that are sold after. So sometime around September we will begin to see a slight shift in appraisal values. Cabins that continue to cash flow will be less likely to be sold during this time, and so inventory will continue to be low. This will also mean new construction will continue to be a popular option for many people.

And it will be worth the wait for the cabin to be built, as the new construction options will include newer, more popular amenities, upgraded materials and design to match what is most appealing for our guests. So when it is done it will be worth more than something that is older and outdated, and will generate more in gross revenue rental income as a result.

As always, I am always available to talk with you and answer any questions you may have about the current real estate and rental cabin market. Stay safe!

Entering a new season in 2020

I hope you and your family are staying safe as we navigate the global challenge of the coronavirus.

As a cabin owner, it’s important to me to keep you updated as to the values of your real estate in the Great Smoky Mountains. This is a very unusual time, and a very difficult time to predict what the aftermath of this crisis is going to mean to real estate values. However, we do have data from our last challenge with the National Park Wildfires. And, we have insights that we gained as we worked our way through the national economic downturn more than 10 years ago. So, we can see ahead at least to the end of this year.

To understand it a little better, let’s look at where we were right before this all began. We just came through the first quarter of 2020, with record sales and high values. Visitation to our area and occupancy rates broke records. We saw over 12.5 million visitors to the National Park (setting a new record). We climbed to the top of the market in terms of property values and reached pre-economic downturn figures. Inventory continued to be down being a part of keeping values high. Then the coronavirus happened…

So what to expect?  Of course April and May will be very extremely quiet. The National Park is closed at the moment as well as all our large venues, Dollywood Theme Park, our shows, our convention centers.  Rental income will be fairly dismal.

We believe two new sellers emerge out of this crisis.  Most of our cabin owners have significant equity in their cabins. We are fairly certain that there is going to be flurry of cabin sellers over the summer. These new sellers are going to use their cabin equity through a sale to help their families heal financially. The other seller is a second home owner who did not make a purchase that pays for itself and will need to sell as their discretionary income will not allow them to continue this luxury as the rental market makes a comeback. It will be about the middle of the summer before these sales will be recorded. This is important as these sales will almost surely drive values down. However we expect there to be continued demand among buyers.  So it’s not likely that we will see dramatic shortsales or high rates of foreclosures the way we did in the downturn. We believe that lending will continue to offer low rates making it attractive and possible for buyers to purchase. We think some of the more creative loans will disappear and banks will become more conservative on terms and approvals of loans. But healthy sales will continue but not at the level of 2019.

Therefore, we are going to recommend that if selling is to your advantage you go ahead and get ahead of this group.  If you are in a position to hold your property we recommend that you remodel, deep clean, enjoy your property. We are here for you if you want to discuss this in more detail.  We are working from home at the moment! But so are you! My cell is 865-765-6157, or you can email me at deborahkorlin@gmail.com – text is always wonderful as well. 

In the meantime, if you have time and want to read more sign up for my monthly email newsletter and get on my blog site.  I will continue to follow the results of this crisis and what it means to Smoky Mountain Real Estate values.  We will also update you on events as we open the National Park again and all our attractions, shopping and restaurants in the Gatlinburg/Pigeon Forge area.  We will also list investment opportunities as they appear, featuring homes and cabins currently on the market.  If you have money to invest in a cabin, let us know that as well. We have sellers who won’t list their properties on the market  publicly as they do not want their rental company to withdraw marketing efforts but they would sell.  They want to buy stocks – imagine that. They expect a rebound in several years, believe they will double their money, and then return to the Smokies to build some more over-night rental cabins with their profits! 

Goodness! It’s a crazy time no doubt!  My company and I sincerely hope and pray you are weathering this storm well and I know we will all appreciate the sunny days ahead.

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.

Resort cabin is ready to rent!

If you’re looking for an investment that is ready to go, you won’t want to miss seeing this recently remodeled cabin at Hidden Springs resort! The basement is finished, with a newly added game room and additional bedroom! The cabin’s recessed hot tub and generous game room provide plenty of space for guests to relax and take in the mountain location of this home. Just minutes from Dollywood and Pigeon Forge, this cabin is conveniently located within a short drive of the area’s major attractions! Resort features and indoor and outdoor pool that allows guests to swim year round!

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

To schedule a showing at this cabin, call or text our team line at 865-654-2111.

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.

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.