In the Smokies, size matters

[Collin Hays]

I have watched, with interest, the rental activity of each cabin in our portfolio since 2019.  We have a number of properties that have remained pretty consistent in rental income throughout that time.  I will profile one of those today.  It's called Bare Hugs, and you can find it on our website if you want to have a look at it.  Bare Hugs was purchased in 2018 for $270,000. It is only 900 square feet - a one bedroom + loft, in Blackbear Falls Resort, and has a wonderful view.  Repairs and maintenance are probably $3,000 per year - not a lot of moving parts to this cabin.  

Here is the rental revenue, by year, for Bare Hugs:

2019  $31,712

2020  $39,028

2021  $46.322

2022  $51,412

2023  $53.364

2024  $50,817

The consistency of this small cabin is astounding. We have several others that are similar. Meanwhile, the giant cabins have seen some significant declines in the last 3 years. Perhaps a good ROI strategy in the Smokies is, keep things simple. You don't need a 3,000 square foot cabin to make money. Bare Hugs is a money machine, and looks to stay that way.

[Leora Merrell]

Quote from @Collin Hays:

For whatever reason, "big" has been an irresistible lure in the Smokies. I spoke with a potential investor a few weeks ago who wouldn't hear anything but spending at least $1 million for a cabin. Everyone seems to be caught up in the aura of "McMansion" cabins. Even through the busiest years, our experience has been that large cabins do not provide the same ROI as small cabins. There is more wear and tear, there is much more that can malfunction, and they often require two families to afford.

I dare say a big part of that is realtors. After we bought our first, we worked with the builder to buy four more from him. We had two homes we sold and 1031’d into these other four cabins. Both the realtor we used for the first cabin AND the loan officer encouraged us to ditch the two bedrooms and “go bigger since we had access to so much 1031 cash.”
We ended up doing it all without a realtor. It was a very, very common encouragement in 2019 (when we first started buying) until mid 2023 when things started looking down. I have severely acquaintances who fell for it. They’re hurting. 
I have a farmhouse that sleeps 14 in wine country in NOVA. Mostly just books weekends. Still has more wear and tear than my 2 bedroom and 1 bedroom cabins that book 85-95% several months of the year.