Are things really that slow in the Smokies? It depends...

[Collin H.]

If you own a vacation rental in the Smokies, it might feel like demand is soft. And it is soft. But compared to what?

As I look at my company's pace report, most properties are merely reverting back to 2019-esque numbers.  But from 2020 through 2023, we experienced a market imbalance fueled by a number of factors:  Revenge vacations resulting in not enough supply, cheap money, and lots of sunshine pumping by "seasoned" real estate pros.

So if you bought in 2019, it's likely that today's numbers are working out quite good for you. Certainly not like the bubble years, but a fair return nonetheless. If you overpaid in 2020-2023, based upon bubble multiples, the picture isn't as rosy.

You have a choice to make:  Cut your losses or grind it out. I bought right before a bubble bust once - back in 2005. It was painful. But I chose to just hang on, and today I am glad I did.

[Michael Baum]

Yup. That is what I think as well but I don't have a place in the Smokies.

We are pretty flat year over year. This is the first year we have a few holes but it is early still for those 3 day mid week stays. I am expecting them to fill up.

[John Underwood]

Our PF cabin seems slow, but the numbers aren't really that far off from last year.

I heard Dollwood has record numbers year after year.

[Chris Watson]

I agree with "Revenge vacations resulting in not enough supply, cheap money, and lots of sunshine pumping by "seasoned" real estate pros."

I also jJust ran a report for "total rent" (w/o cleaning fees & taxes) and while the 1st QTR(Jan-Mar) trailed lower, all my Smokies properties exceeded last April's total rent except one was lower by $98.  My April total rent revenue was up by 4.65% and occupancy on my worst performer hitting 60% and all other properties were 74% to 100% for April.  Also for the properties I had since 2019 total rent revenue for Jan-April 2024 exceed Jan-April 2019 by 19.76%. The sky is not falling, but I agree if your carrying costs are high and owners did not budget earnings from last year to cover costs of the first slower months (Jan-May) then they are hurting.  I believe a lesson to be learned is the dollar earned today should not be spent for 6 months.  

[John Underwood]

Absolutely save money for reserves.

When I first started in Real Estate investing, I reinveted every earned dollar back into the business.  It took me about seven years to be able to quit my job as an engineer.

This was mainly from buying inexpensive properties from motivated sellers for cash.

Buying nice STR's with leverage is a much longer game especially this environment.

[V.G Jason]

Quote from @John Underwood:

Absolutely save money for reserves.

When I first started in Real Estate investing, I reinveted every earned dollar back into the business.  It took me about seven years to be able to quit my job as an engineer.

This was mainly from buying inexpensive properties from motivated sellers for cash.

Buying nice STR's with leverage is a much longer game especially this environment. 

 The former point--- all the investors in the last 12 to 27 months are feeling this now. And it'll be getting deeper and deeper.

The latter point-- maybe it's just me but I prefer to buy my STRs with very to no leverage. It lets me operate with really any scale of NOI, and I actually believe I'm the STR owner the nearby folks hate cause I can read & react aggressively.

[John Underwood]

Quote from @V.G Jason:

Quote from @John Underwood:

Absolutely save money for reserves.

When I first started in Real Estate investing, I reinveted every earned dollar back into the business.  It took me about seven years to be able to quit my job as an engineer.

This was mainly from buying inexpensive properties from motivated sellers for cash.

Buying nice STR's with leverage is a much longer game especially this environment. 

 The former point--- all the investors in the last 12 to 27 months are feeling this now. And it'll be getting deeper and deeper.

The latter point-- maybe it's just me but I prefer to buy my STRs with very to no leverage. It lets me operate with really any scale of NOI, and I actually believe I'm the STR owner the nearby folks hate cause I can read & react aggressively.

I don't put all my eggs in the STR basket.

I like them as I buy fun ones I like to stay at.

I do buy LTR houses where I am making 30 to 200% return on investment. 

[Andrew Steffens]

@Collin H. are you seeing your better units (location, amenities, decor, etc) outperform their numbers YoY and the opposite true to average and below average units?

In the Tampa market the best located, best furnished, "coolest" units are doing great, average are sort of breaking even, and subpar are withering on the vine.

Curious if that is the norm in most markets.

[Collin H.]

Quote from @Andrew Steffens:

@Collin H. are you seeing your better units (location, amenities, decor, etc) outperform their numbers YoY and the opposite true to average and below average units?

In the Tampa market the best located, best furnished, "coolest" units are doing great, average are sort of breaking even, and subpar are withering on the vine.

Curious if that is the norm in most markets.

Andrew, generally speaking, the properties that are in Gatlinburg or are very close, are doing better. Gatlinburg has always been ground zero because there is an entrance to the National Park just outside of town. It is also a tourist magnet due to its charm and history. 

As you get further from Gatlinburg, there are fewer reservations.