Build or not to build

[Kyle Smith]

I know there is a lot of uncertainty coming from all directions about the next 1-3 years in short term real estate.  I am all the sudden on the fence about building.  I built a pool cabin with a great view in the Smokies and closed on it in January of this year. I have had incredible returns this year.  I just went under contract for a new lot and I’m looking to duplicate this particular cabin.   If occupancy rates stay as they are now for the next year or two, I will still cash flow around 50k-80k with this new cabin build.   Knock on wood..

Should I wait and build once we have more data about the future economy or take the plunge? My gut tells me to build and scale this thing ASAP! But there’s so much negativity out there and even the old timers are saying the incoming storm will be pretty bad.  People still vacation right now, but will they vacation at 2019 occupancies the next 2 years? Will employment tank and take the vacation market with it? What are your thoughts? Build with my proven formula or hold onto my money and wait? Thanks in advance.

[Scott E.]

Right now you're sitting on a piece of raw land. This isn't going to produce any cash flow for you now, if the market goes up, or if the market goes down.

If you have the cash to build, I'd build. Don't expect your cash flow to be as good as your first build. You're in one of the most competitive markets in the country. So your cash flow will take a hit, but at least you'll have some cash flow.

There is a lot of negativity out there (and you say from "even the old timers" ... what I've found is that "only the old timers" are the ones preaching doom and gloom). But nobody knows where the market is headed. My opinion is that markets like yours will probably hit harder, just because they have been over bought the past couple of years. But what do I know.

Anyways all that being said, I think you build with your proven formula. If the market tanks, just keep renting these cabins out until the market recovers.