Gatlinburg Cabin Post-Covid Rentals

[Arthur Means]

I have done single family rentals in the Midwest and enjoyed it.  Prior to moving to NC for work, Gatlinburg and the surrounding areas are my most frequented vacation destination.

Some background information...

1.  I understand that every month will not be profitable. I am ok with this, but I do generally expect a positive annual cash flow

2.  I don't need the money to live, which is why I'm ok with some months being negative

3.  I work for a Fortune 500 company and receive annual stock awards. I'd like to use these to finance the down payment for this business. 

4.  The end goal would be to have 2-3 fully paid off properties and potentially retire and live off the monthly income (10-15k per month)

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All that being said. I have some very basic questions that I'm hoping someone with experience in this market will be willing to answer. 

1. I read that property management companies charge near 30% for their services. I feel like this is essential for the success of this type of rental. What are the signs of a good management company?

2. Am I correct in assuming that if I purchase an established property with a documented history that my management company can maintain this from a marketing standpoint?  Is this the right move for someone new to this rental type?

3.  I also read that there are numerous additional maintenance requirements for cabins such as regular staining. How much reserve cash should a person keep for this type of rental? (I am planning 50k)

4.  How do I find the right realtor for cabins?  What type of downpayment and financing can I expect for a cabin with a history of profitability?

5. Assuming covid will not be our final pandemic, were you offered assistance when the city was shut down?  How did you survive?  What would you have done differently?

6.  Lastly, if you've had this type of property, what do you wish you would have known ahead of time?  Would you buy another one?

[Ken Boone]

A few points - I am profitable every month generally, the only time I "might" not be profitable for a month is if I do a major upgrade in Jan or Feb.. i.e. new roof, staining etc..  Jan and Feb are the slower months but that does not mean it will not be profitable.

As far as your questions..

1. Most people on this forum manage themselves - however if I was going to manage I would talk to @Collin H who is on this forum.  Not sure if he is interested in taking on new clients or not and I do not know him personally.  What I do know is that he manages a smaller set of cabins than what the big guys do.  The way I see it, he has more time to deal with the critical details than the big guys do.  From the things I see him post on this forum, he is very knowledgeable in this realm, so if I was going to have a mgmt company, I would talk to him first.   When I said I am generally profitable every month - consider that I self manage - I don't pay the mgmt fees, but I still have things I have to pay for.

2. Past history really does not have much bearing on future profitability.  It can tell at the minimum what a property is capable of, but that is it.   If you hire a management company future profitability is going to depend on how well they manage the property.  I have heard numerous stories, of profits either went crazy up or down, due to switching management companies.  It also depends on how well you keep the property maintained as well.

3. For this is really depends on the size of the cabin, and what kind cap ex things might go bad.  50k is plenty, but this is a personal decision, do you want extra to cover you for x amount of months in case of say a fire...or some other disaster?

4. Realtors for these cabins are everywhere ;)  There are a few on this forum.  Down payments can vary from 10 - 25% depending on the type of loan you get, mostly will be 30 year loans.   Possible to do a second home 10% down loan or a 20% investment loan at a higher rate.  Just depends on your situation.

5. Covid hit, and we lost like tens of thousands of dollars in bookings in a matter of 3 weeks, then we started booking again about 3 weeks later, and went on to have a record year.  This year will beat last year for us.  I would not have done anything differently and I did not get any assistance.

6.  If I knew then what I knew now I would have bought a bunch more cabins back when I started when prices were much much lower.  I will buy another.

Having said all that, you need to be very careful, because the prices are at an all time high and I keep seeing people that know nothing of this market buying very expensive properties that simply just will not cash flow well.  You have to have the right deal.  I have been calling that market the wild wild west for quite some time and there is a reason for it.  Everything is nuts there.  I will buy another, but I am not in any hurry at these prices - if a deal comes up sure, otherwise I am waiting for the market to change.