NC - Beech Mountain v Sugar v Banner Elk - STR - Buy v Build

[Jeff Pullman]

Hello, 

I am considering a short term rental - Single family home, mountain views, 3-5br, 1500-3000 sqft in the Banner Elk/Beech/Sugar area and have several questions that I am hoping the excellent resources on this forum can assist with. 

1) Thoughts on the relative strength of each area for STR potential

2) What demographic is the most common source of rentals in the area - i.e. single families, group vacationing, etc? 

3) We are familiar with beach (not beech) property in NC and have learned that there are certain sectors of the market that are easier to make money on (i.e. in Nags Head, it's really hard to make money on a $600k house...which is the low end of the market...but easier on a 2M house for a number of reasons. Is there a sector that is easiest or most difficult in this area - for example, if most vacationers are single families, I can see it being harder  to make money with a 6br home. 

4) Lots seem to be very affordable...is building a huge challenge? Obviously there are structural challenges with mountains, but I assume the builders here have it figured out. 

5) Does anyone have an idea what one could expect to spend to build per sqft, inclusive of all site prep?  If a 2000 sqft existing home was next to an empty lot, would one expect the final bill to come in more than or less than the existing home price? I wonder if the barrier to building is just not wanting to take on the headache/timeline.

6) Recommendations welcome for the following: Property managers, Builders, cleaners, handymen

7) For those of you renting in the area full time or close to it, what is a reasonable ratio of gross rents to purchase price that could be targeted in this market? Again, to compare to beach property, 10% is kind of the magic number...at 10% gross rents to purchase price, you can make money. Many of the deals out there now are more like 6-7% but you can find 10s and 11s. 

Sorry, this is pretty all over the place, but thanks for any and all help you can offer. 

[JD Martin]

Originally posted by @Jeff Pullman:

Hello, 

I am considering a short term rental - Single family home, mountain views, 3-5br, 1500-3000 sqft in the Banner Elk/Beech/Sugar area and have several questions that I am hoping the excellent resources on this forum can assist with. 

1) Thoughts on the relative strength of each area for STR potential

2) What demographic is the most common source of rentals in the area - i.e. single families, group vacationing, etc? 

3) We are familiar with beach (not beech) property in NC and have learned that there are certain sectors of the market that are easier to make money on (i.e. in Nags Head, it's really hard to make money on a $600k house...which is the low end of the market...but easier on a 2M house for a number of reasons. Is there a sector that is easiest or most difficult in this area - for example, if most vacationers are single families, I can see it being harder  to make money with a 6br home. 

4) Lots seem to be very affordable...is building a huge challenge? Obviously there are structural challenges with mountains, but I assume the builders here have it figured out. 

5) Does anyone have an idea what one could expect to spend to build per sqft, inclusive of all site prep?  If a 2000 sqft existing home was next to an empty lot, would one expect the final bill to come in more than or less than the existing home price? I wonder if the barrier to building is just not wanting to take on the headache/timeline.

6) Recommendations welcome for the following: Property managers, Builders, cleaners, handymen

7) For those of you renting in the area full time or close to it, what is a reasonable ratio of gross rents to purchase price that could be targeted in this market? Again, to compare to beach property, 10% is kind of the magic number...at 10% gross rents to purchase price, you can make money. Many of the deals out there now are more like 6-7% but you can find 10s and 11s. 

Sorry, this is pretty all over the place, but thanks for any and all help you can offer. 

You're right in my wheelhouse - I live here - so I'll do what I can:

1. 4 season is getting tougher there because it is getting warmer and there are more days where the ski resorts can't keep powder on the ground. All of these have been "discovered" so forget about getting a deal right now. Elk Park, maybe Valle Crucis are better places to find value. Overall you should be able to reasonably rent in any of those areas 4 seasons, though not at the level of a Pigeon Forge/Gatlinburg.

2. Winter: skiers. Rest of the year: vacationing couples and sporting enthusiasts (kayakers, fishers, hunters, golfers, etc).

3. I would aim small. Big group get-togethers are not that common because the terrain doesn't lend itself well to it. Few houses have driveways that can hold more than a couple of cars; parking on streets is often impossible or totally impractical (think walking up steep hills). Get togethers that do happen tend to have people in their own properties rather than 1 huge house. 5+ bedroom homes are rare.

4. Building is a huge challenge and don't assume builders have it figured out. I work with them on a daily basis and a lot of them come from South Carolina, Georgia and Florida where the land is flat. I could show you houses that had parts of them tear off and tumble down the mountain.

5. Right now, including site prep if you could GC it yourself and build for less than $200/sf I would be real, real surprised. I had an addition built onto my house this spring, GC'd it myself as well as did some of the work (insulation, HVAC, finish trim work, painting, all electrical, soffit & siding) and my site was prepped and I still spent over $100/sf. Lumber was up - I paid $8.20 per 2x4! - but the work I personally did would have added another $50-75/sf to the project easily. Not being from here you would have a hell of a time getting good subs if you GC'd it yourself - I am in this business and have a lot of subs I've worked with over the years and still had trouble locking people down.

6. Nothing to offer here. I don't give out any of my people's information except to people I know. Sorry.

7. If you bought for cash you could make some return, but I would expect it to be in the 5% range. If you have a note it will be tough.

Good luck!