Finally some good sense being used by Smokies investors!

[Collin Hays]

I often visit with potential Smokies investors, asking "Is this a good time to buy in the Smokies?"

My answer to that question is always, "what is your financial goal?"

From 2020 through 2022, I felt that investors had an unhealthy, and unrealistic, view of investing in a vacation rental.  "How much money will this cashflow me each month?" was the common question.  That sounded dangerous to me then, and it still does to me today.

I have been investing in the Smokies since 2005, and there has only been a couple of "windows" in that 19-year span, whereby an investor could reasonably buy a property and earn much more than break-even in the early years.  A temporary market imbalance, combined with cheap borrowing costs (ultra-low interest rates). The latest window, which required a purchase from 2018-2020, is firmly shut.

Today, we are in more of a state of normalcy.  Sales prices are fairly accurately reflecting a multiple of annual rents.  So, if I am putting down say 20 percent on a new loan for a vacation rental, my realistic goal should be "Let other people pay off the rest of my investment for me."

What other investment do other people pay for the bulk of your investment?  This is the beauty of investing in vacation rentals!  On a 15-year note, other people are paying for your lovely retreat, and after the loan is paid off, it could be worth double or triple what you paid!  

Today, many investors are understanding this, which makes finding an appropriate property much easier and less stressful.  If you need your vacation rental to produce a positive cash flow immediately, I do not recommend the investment.  Instead, buy some Altria (symbol "MO") stock, which has 58 years of steady to increasing dividends, and is yielding around 10 percent.