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Updated over 4 years ago on . Most recent reply
Gatlinburg TN Rental Cabins
Hey All,
Just wanted to bring up a possible idea I have been having to you guys.
SO currently me and my father have been looking at putting our cash together and purchase a log cabin in Gatlinburg for a vacation rental. The main purpose of the property will be a secondary income and an investment. We have found one cabin that is listed for $249,000 and rents for approximately $30,000 per year.
We are completely new to realestate investing and kinda would like to grow this into a business and at one point (hopefully in the next 5 years) manage multiple properties.
Does this sound like a direction we should be heading or should we focus on something else? Anyone who has rental properties in the area have any tips or advice?
We are open to any ideas so if you guys think we should do something completely different let us know.
Thank You
Most Popular Reply
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It can be done profitably, but Sevierville is a "less desirable" overall market than Gatlinburg. We have several in the area and did some pretty good market research before buying initially. Here are some things to consider:
More tourists flow through Gatlinburg than either Pigeon Forge, Wears Valley, and Sevierville.
Based on a slightly less than formal analysis of AirBnB and VRBO (which is "king" in that area), cabin utilization in the Gatlinburg area is higher than the Pigeon Forge and Sevierville. My personal opinion is that Gatlinburg has more year-round attraction. Not everyone will have that same opinion.
Each area attracts a different type of renter. Sevierville cabins are more traditionally "out of the way" and quieter (at present). Wears Valley fits this description as well. People who are more into the attractions, like go-carts and amusements, prefer Pigeon Forge. Gatlinburg tends to get more folks who want to be deep in the mountains, close to town, or have easier access to the GSMNP. Also, there is currently a shortage in Gatlinburg due to the fires, but a TON of new construction. However, only about 70-75% of lost homes will be rebuilt and many are going larger, leaving market-space unfulfilled in the 2-3 bedroom area.
Doing all the management yourself can increase your returns for sure. Personally, I use EVOLVE for listing and reservations, then have a local EVOLVE partner handle my cleaning/maintenance/renter calls. It works well for me and our margins are pretty good as a result. If you are interested, I can connect you with the regional for EVOLVE so you can find out more.
There are a LOT of factors to consider with a property in this area.
Is it within a city's limits? What permits are needed, or does is the property already on a rental program?
How steep are the roads? The driveway? How easy is the access to the property from the main road? What kind of view does it have, and of what? Is the view year-round or seasonal? HOA/PUD fees? Some places are mandatory and others optional.
All of these will affect your rental prices and income. For example, a steep access or driveway -- or even a winding drive up a mountain -- will hurt rentals from late-Nov thru early March as snow/ice will impact access.
Water - is it well or city provided? If not on city sewer, then you have septic issues to deal with, the biggest impact of which is the septic permit which limits how a property can be advertised. If your septic permit says 2 bedrooms but you have 4 sleeping areas, you cannot advertise it as anything except a 2-bedroom unit.
Since the fires of 2016, insurance rates are higher too.
Then there is collecting and filing the TN sales tax (6.75%), local sales tax (mostly 3%), the lodging tax (mostly 3%), gross sales tax (1-1.5%). These are done monthly, due on the 20th for the preceding month.
Be cautious of any ads that include a gross rental number. That likely includes all taxes, cleaning, mgmt company share (local companies there charge 30-40%), and anything else collected at the time of rental. Be absolutely sure to run your own numbers. Having said that, you can ask for rental history information. That will usually help you see what a property rented for per night, number of rentals per year, and weather the property had year-round appeal.
As a general guideline on self-managed properties there, I use 20% to determine if I should spend more time on a property; can I gross 20% of the purchase price annually. If so (or there are other mitigating circumstances that cause me to go further), I run the numbers.
So it all comes down to picking the right property. There can be good prospects in Pigeon Forge and Sevierville, but if you are looking purely at an investment play, I would suggest focusing on Gatlinburg.