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Updated over 3 years ago, 06/04/2021
Gatlinburg Deal Analysis
Hey All Gatlinburg STR Gurus!
I'm very interested in getting involved in the Gatlinburg STR market and have spent countless hours researching, listening, lurking and basically soaking up any info I can in this specific niche. I love the smokies specifically because of the long history with short term rentals (no new regulations popping up suddenly), low taxes, and obviously high year round demand.
What I don't understand is the complaints I hear of rising prices and having difficulty reaching the benchmark 20% CoC return. Yes, the market prices have risen compared to 2-3 years ago (or even 9-12 months ago) but the demand seems to have grown along side that, and it seems that positive cash flows can still be had, even with purchasing a home/cabin at full market price.
Take for example a specific deal I am seriously considering presently:
New construction 3BR/3BA with an indoor pool. Purchase price 850K furniture package included. Seller projects 120k gross income, and is supported by a local PM. I did not speak directly to the PM so I would need to verify if these numbers are inflated, whether they include cleaning + state and local taxes, or not, as those are pass through. I also don't know exact costs for utilities, maintenance etc but I guesstimated in my attached proforma, and I invite people with experience to chime in to see if these numbers are realistic.
Bottom line- If you look at the right side which is using a conventional 80/20 loan my CoC is right around 20%. But the real winner would be if I would be able to secure a second home loan at 90/10 which is presented on the left side of the screenshot. These numbers seem to good to be true, and this is for a home purchased at full market value. This also includes 20% taken off as PM fees, (even though legally I cannot hire a PM if I get the 90/10 loan...) which according to most experts you can't use if you plan on earning a positive cash flow. I am considering managing myself remotely, which would make this even sweeter.
I feel like I'm missing something something here. Is there a big line item expense I'm forgetting? Did I seriously underestimate expenses? Is the projected gross way off?
I would appreciate all help from the experts-
@Avery Carl
@Lucas Carl
@Jay Fradd
@Julie McCoy
Thanks BP friends!