Short Term Rental in the Smokies

[Raja Gupta]

Hi Everyone, 

First, I want to say thank you to this community! I haven't been an active contributor (mainly because I didn't know anything - ha!), but I have learned so much since I joined the community a few years ago. I have read, soaked up knowledge and made some great contacts. 

We recently closed/completed a cabin build in Pigeon Forge with the help Julie McCoy, and I wanted to share our experience in case it is helpful to someone else. 

Investment Info:

Single-family residence build & hold investment in Pigeon Forge/Sevierville.

Build Budget: $583,500

Actual Build Cost: $632,700 (includes furnishings)

Cash invested: $106,500

We built this cabin (The Bear and Buck!) because as we were looking to invest, we were just not able to find a cabin that would perform the way we wanted it to, at the price point that we thought made it a good investment. Although we came in over budget by a substantial amount, we added in a lot extras that should classify this cabin as a "high end" rental in the market and help us keep our occupancy and DAR high. 

The cabin is a 4 Bed, 4 bath, 2 Half Bath cabin, with a pool, theater room and gaming area. 

What made you interested in investing in this type of deal?

We have some experience designing, building, and decorating homes, and wanted to take these skills and apply them to an investment of our own. It seemed like a good way to add value using our skills. 

How did you find this deal and how did you negotiate it?

I worked with Julie McCoy (I'll tag her if she responds to this post - won't let me tag her now for some reason) to find the lot and get the build started. She's awesome! 

How did you finance this deal?

Regular mortgage, second home loan.

How did you add value to the deal?

As mentioned earlier, we felt that our experience in knowing the build process, as well as our experience in decorating homes was crucial to making this deal work and brining value and uniqueness to our property.

What was the outcome?

The build process was challenging at times, but we had a great builder who helped us manage through everything. This was our first "remote" build (we are not local), and during COVID, there were a bunch of things that popped up that were unexpected. We worked through everything and couldn't be happier!

Lessons learned? Challenges?

Everything is going to take longer and cost more than you think. Don't be afraid to spend more if you can see a path to additional revenue and profit. 

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes - Julie McCoy was our agent. 

Financial Details to Date: 

Here is the good stuff - the financial details: 

- Land cost: $26K
- Build Costs: $537K
- Furnishings: $40K (includes substantial savings we due to our design experience - normally, this would be closer to $60K)
- Loan costs (interest payments during construction, closing costs, insurance, etc): $25,500
- Travel Costs (going to check on the build, meeting with builders, scouting lots,etc): $5K

Progress to date:

We are using a management company (Cabins USA) to operate the cabin. This is our first cabin, and we are on the hunt to build another, and we are focusing on growing our portfolio right now and leaving the management to someone else. So far we have been happy and they were really helpful in getting the cabin setup appropriately. The cabin came on to the rental market on Feb 3 (12 days ago), and so far we are booked  for 87 nights through June (59% occupancy so far). Our occupancy numbers by month so far are: 

- Feb: 81%; DAR (Net) $294/ Gross $367 (excludes cleaning fees, insurance, taxes, etc)
- March: 94%; DAR (Net) $357/ Gross $445
- April: 57%; DAR (Net) $316/ Gross $395
- May: 35%; DAR (Net) $366/ Gross $458
- Jun: 63%; DAR (Net) $421/ Gross $526 

We don't have any pics of the cabin up on the rental site yet, so find it amazing that we have such high occupancy rates in Feb and March already. We fully expect occupancy rates and DAR to increase as we move into summer and spring and we finally get pics of the cabin up on the rental site. 

We took some pics of the cabin as we were finishing up the decorating before the first renters, so if you are interested, feel free to take a look! 

The Bear and Buck - Prelim Photos

If anyone has any questions, I'm happy to help in any way that I can!