Gatlinburg Cabin Target Cost in current market

[Arthur Means]

Hey all,

sorry for the short question here, just wondering if someone can help me with what I should be looking for from a cost perspective when buying my first or short-term rental.

I saw a one bedroom one bath cabin today that looked decent, it was about 720 ft. It's sold in 2020 for about 200,000, now the owner wants $450,000. Which is $625 a square foot

obviously this is just one example, but have prices really changed this much in 2 years? Seems like it would be pretty difficult to cash flow positive on something that's small for that much money. Any type of guidance here for what the overall market looks like would be super helpful

[Ken Boone]

Quote from @Luke Carl:

it’s all about you. I have one 550 sq ft and it grosses about 65k. Use the enemy method. Run your numbers. 

In STR the question is more-so "CAN I DO THIS" and many people cannot

Yea but to be fair, 65k on a 1 bed 550 sq ft is not the norm. Can it be done? yes Will any 1 bed cabin do that? no way. A lot has to do with location and the amenities in the cabin. It also has a lot to do with how many 5 star reviews you have and how well you manage it. Will a first time STR buyer do that - no way. He will have no reviews. He will not be able to command the same price point etc.. He has a lot to learn.

You also have to remember that prior to covid most folks would tell you the norm for that area was 20k per bedroom average - now I blow those numbers away but I also brought properties that I knew would blow those numbers away with the right amenities.   That per bedroom average has gone up quite a bit the last 2 years for various reasons, but there will be a pull back coming and people are going to get burnt.  It will be the people jumping in at these high prices for the first time with no experience that will get burnt and its gonna happen.  Can you still cashflow in this market?  Yes you absolutely can, but you have to buy right.  What properties will cash flow well at these price points has narrowed quite a bit in the last few years.  

Yes the prices have changed even more so than that.  The cabin I just finished, built with August 2020 pricing I can sell for almost 3 times that today.

At that price point on a typical 1 bed cabin, you will be lucky to break even, and if you profit, it won't be much.  And the amount of profit you might get would have to be debated whether or not it was worth your time and energy to manage it. 

For the last year, people have been selling all kinds of things and people have been so frenzied they are buying - even if they don't make sense.  I have seen some realtors jump in and help selling stuff that don't make sense.  i.e. selling building lots that wont get a septic permit, selling a cabin that did xxxx last year, which turned out was completely trashed and most likely didn't rent at all last year.  You have to be careful what you are buying, and have a  good realtor as well.

Now perhaps your reasons for buying a cabin are not purely investment related.  Maybe you want the cabin for your use and you want to rent it out when not using it just to help cover the cost.  Then that is a different story and purely up to you at that point.  I am giving my response based on your purchase being solely investment driven.