Cabin expansion: Can you guys give me your thoughts?

Question

Hey guys!  Can I get your thoughts on whether I should expand my cabin near Gatlinburg?  It is currently 1100 square feet on the first floor, 1100 square feet finished basement, and 300 square feet sleeping loft.  It is a beautiful tract in the Smokies, on 2 acres, and 300 feet of Cosby Creek, a nice trout stream.  I've had it since 2005 and we have many memories there.  It current fetches about $55K a year in rents.  I've never marketed it to groups larger than 8, so I don't get as much rent as I could.  But our familiy has grown!

I am considering a 20 foot extension to my cabin - a new master suite with bathroom and fireplace, that would take me to around 2900 feet.  It would sleep 10 instead of 8.  Perfect and comfortable for two families, children, and maybe gramps and gramma!

If it would fetch another $10-15K a year in rents, what would it be worth paying to do the addition?  $100K?  $150K?  I wouldn't have to borrow the money.  I talked to a good builder yesterday and he's hungry for work - not much going on right now in the Smokies.

Thanks everyone for your input on this decision!

Bruce Woodruff · Answer

20' x 20' would be 400 SF..... @ $250 SF, you're at $100k. How much more could you get per night, maybe $50-$100...? 200 nights per year is $20k, so a 5 year payback (looked at simply of course).

Then also, would it add to your family's personal enjoyment? That does come into play as well.

Personally, given your current financials, I'd just leave it as is. Simpler is usually better....(If it works, don't fix it :-)

Just my $0.02

Nathan W. · Answer

One cost to consider is downtime. I've built two cabins in the smokies and they both took about 18 months from start to finish. There's no reason why it should take that long but everything there seems to move on mountain time. I would not be surprised if an expansion like this was estimated at 5 - 7 months and for it to actually take 8 - 10 months. Would you host guests while construction was going on? If you do, you risk getting bad reviews even if you warn people. If you don't, you lose out on a lot of income and there's a risk that Vrbo and Airbnb might drop you in their algorithms.When I built my cabins, I placed them on the right hand side of the lot so that I would have room to build a small pool house someday (about the size of a two car garage). I know the added revenue would more than pay for the cost in the long term. But the idea of taking my cabins offline for that long is painful.

Nathan Gesner · Answer

Easy math. Invest $150,000 and arn $15,000 = 10% return. That's worth it.

Michael Baum · Answer

Hey @Collin H.. Another thing you should calculate is the after build value. How much will it add to the homes value in the long run.

You might have 10 years to recoup the overall investment simply as a STR but might net quite  a bit more in the long run in equity.

Alone it might not be worth the squeeze to get that juice, but adding in the equity, you could come out far ahead.

Also, If you added slightly more space, could you add the master and another bedroom/bath? 400sqft is a pretty big master/master bath.

Nancy Bachety · Answer

You have great feedback. But what jumped out to me was the immeasurable in terms of dollars:

“But our family has grown!”

I would do it for that reason alone, since your numbers makes sense without that added value.

Collin Hays · Answer

Our cabin is about 20 miles from Gatlinburg, so it doesn't fetch in rent what Gatlinburg cabins do. I also lend it out to friends and family quite a bit.  Really good point on the "cost plus" deal.  It sure makes sense  - the builder has no skin in the game in controlling costs whatsoever. I've never really considered that but makes perfect sense.

JD Martin · Answer

You've got it exactly right. Mountain time is like Island time is like Italian time. No one is in a hurry to do anything around here, keeping employees in this field is a joke, and it just flows downhill like that through subs, suppliers, inspectors and the like. The only real exception to that is contractors that have all their own subs, and the corporate homebuilders that bring in their own crews to do entire subdivisions. Everything else takes twice as long as it should take anywhere else. 20 years ago I had a developer in my office that had just relocated up here from Florida and was complaining about how long everything takes, how slow subs were, and how impossible it was to keep anyone on payroll. I told him he might as well accept it as it is or go back to Florida as that's just the culture.

Collin Hays · Answer

I am talking to a higher-end builder who lives literally 300 yards from my cabin. I ordinarily doesn't do smaller jobs, but he said "Right now I would...there's no new construction right now."

John Underwood · Answer

Will this require the septic tank to be replaced with a larger one to meet code?

I would want a payback that is quicker than 10 years.

I can buy a LTR property that has 3 to 5 year payback, so these are better investments for me.

Andrew Steffens · Answer

Im certainly not an expert in the Smokies other than a semi frequent guest - but if you have the cash I would think anything north of 10% is a good way to go.  Just make sure you account for everything as I see people mentioning septic and grading etc (things I am no used to and would probably forget).  Sounds like a cool project and I wish you the best of luck!!

Cabin expansion: Can you guys give me your thoughts?

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