How to proceed in smokies?

[Lauren C.]

Hello all,

I'm in contract for my first property in Wears Valley: 4bed/4bath w/indoor pool and media room, 3600 sq ft for 900K. My intention was to go as big as possible right out of the gate for better returns. However, I initially began putting in offers in the 500-600K range because I qualified for a second home (10% DP), thinking that I'd exhaust that option before buying a larger property. (I'm planning to buy a few in a relatively short period of time, if things go well.) I put in bids for 2/2s in desirable areas/resorts that were expected to gross about 65-70K and it was just insane: people coming in with cash, waiving appraisal contingency or providing gap coverage, etc. The only reason I got my deal is because I joked to my agent that I should just give up on this range (since it's clearly too competitive right now) and go for a larger house....she just happened to have this one, which was off-market, price was firm, and I took it. Commercial loan, 20% down, higher rate, but expectations for 150K. 

So, are people "overpaying" for these smaller homes? I am getting double the gross returns (150K +/-)for a house that's only 50% greater, not double, the purchase price. I know I had to put more % down, but there's no way around that at this price point, anyway. 

And then the obvious follow-up: do I take that 10% dp and use it somewhere else (PCB etc.) or just forget it entirely and use that cash towards the next 20% DP on a very similar property to the one I'm getting in the smokies? I'm leaning towards that, but maybe I'm missing something. 

Plus, if I don't take the DTI hit from the second home loan, I'll be able to cash-out refinance my primary residence for a lower rate (home is 60% paid off and has 3.5% interest rate) and put it towards the next deal.

Thanks in advance.

[Conor Shinnick]

Bigger is definitely better if you can afford it. We started with a 2 bed pool cabin w/good views and then followed up with a 6 bed pool cabin w/stellar views. Both take the same effort to manage, but the 6 bed brings in double the revenue. My next target is 7 bedrooms w/even better than stellar views.

Everybody has to start somewhere, but buying the highest revenue generating property is the fastest way to get where you want to go.