opportunities in Gatlinburg

[Bryce Stclair]

Hey BP! 

Has anyone looked into the land opportunities in and around Gatlinburg TN? With the recent fires there are a lot of properties for sale at what seems to bring a pretty good price. Any locals know on how the fires have affected the economy? 

[Jay Fradd]

Hi @David R., your question isn't directed toward me, but I have 13 years experience in Sevier County as a Realtor and investing myself in the area. So I felt like I could answer your question(s) appropriately. In my opinion Cobbly Nob isn't too far away from Gatlinburg for a lucrative cabin investment. As long as it has a view or some other significant amenity that makes it stand apart from the thousands of other rental cabins in our area. As I'm sure you saw while driving through the area, the golf course at the bottom (designed by Gary Player) is pretty decent. The wildfires from November 2016 destroyed quite a few homes in the subdivision, so that does play a part in the decision making.

Generally speaking a 6.95 gross rental multiplier (800k price with $115k gross) is a little under the market average for GRM. So that is a good sign. When you get in the larger cabins as it sounds like this is, then it gets even better with a GRM under 7. It's difficult to give a real accurate opinion without knowing if the $115k gross was owner managed for with a management company. If owner managed at $115k on a $800k purchase the numbers work pretty well. However, with a typical management company the return, although respectable, wouldn't be as high as some other opportunities in the area. There are a lot of other factors to take under consideration. But I certainly wouldn't write off Cobbly Nob as an area to invest. Nor would I completely write off a cabin producing $115k for $800k. Just by the net alone you refer to that would be a cap rate of 8.375% which isn't too shabby.

As far as self managing versus using a management company is concerned: It isn't as difficult to self mange as it may seem. Sure, it has its challenges and frustrations at times, but the total time allotted to self managing is quite minimal with systems put in place and like you mention good cleaning and maintenance. Being local and having dealt in the industry for such a long time I have a pretty good grasp on the reliability of various contractors and support services to make a productive cabin rental. That being said, sometimes a management company is the best option for certain properties. For instance, some extremely high luxury properties are often better off with a top notch management company because they are able to produce a substantially higher rental income than self managing. A prime example is our 1 bedroom cabin with an indoor pool that we have with a management company. It grossed $91,897 in 2018. Had I self managed the property I feel like we wouldn't have been able to come near as high with the gross rental income and the net with a management company would also be higher. That isn't the norm, but there are specific few circumstances where a management company can be the best option. Although admittedly there are very, very few companies I would recommend and trust managing a cabin.

I love talking about the Smokies all day long too, so feel free to fire away any questions you can come up with!