All Forum Posts by: Yitzchok Carmen

Eighteen months ago, Sevier County TN suddenly decided they needed to "inspect" any short-term rentals in Sevier County for "safety", in exchange for a yearly fee of $300.  We have about a dozen properties that had to pay the $300 fee and wait for an inspection.  Here has been our experience, including the latest:

- The inspector requires you to be on site when he comes, and he has no-showed on three occasions.

- The inspections are all over the map.  One inspector might cite you for your barbeque grill, while the other one completely ignores it. But no matter what, they find issues that you have to correct, no way around it.  If your house is in really good shape, that's a problem, because they are going to dig as deep as they can to find things to cite you on. 

- They don't always inspect. Even though you pay the $300, there's no guarantee they will inspect at all.  At one property, we had paid for two years of inspections. Finally, the inspector shows up on a Friday a.m. and says "I'm shutting you down, because your smoke alarms aren't synced correctly."  We had guests arriving that day.  

- "Shut you down" is a favorite phrase of the inspectors.  They really like it. 

- Reinspection almost never occurs.  If you call to remind them, they often can't even locate your file.

Clearly, this was a nothing but a cash grab for the county cloaked under the guest of public welfare. Their stated reason for starting the inspection program was "guest safety". But guest safety wasn't important enough to them to actually staff this to inspect thousands of cabins and do so on any consistent basis. If you ask enough questions, the inspectors will sometimes even readily admit as much.  

Pretty easy with some deductive math.  Zoom in on a tighter radius on Airbnb.  Put December 2025 as your check-in.  That is a pretty good indicator of total available units.  Then revise the date for this weekend.  Subtract B from A at that should be your total booked 

The thing with seller financing is there is a very wide array of ways you can do it. 

Myself, my style is we generally set payments based on a 30yr amortization schedule. I got a friend who uses a 20yr amortization schedule. But you could also just set an amount. 

I most often do 3yr or 5yr terms with a final balloon payment. 

I don't ever try for 10, 20, 30yr terms, that just seems ridiculous to me. 

I approach it from start that my exits are market sale or finance out of it. Starting with multiple exist strategies is a must-do. 

And for me these are all but always value-add deals. 

I have known of some trying or doing some of these with properties that have no value-add to them, and just used it as a way of acquiring a property that didn't pencil out and there kind of hacking a way to get it, hoping and betting on appreciation saving them in the end.    This seems dumb to me.    But they keep there down low enough so if it all goes pear shaped they will just walk away and assume they will have profits from the rents or limited losses.     Again, seems dumb to me but hey people throw $ away on stupid options every day. 

There is a few key elements to it right. 

The property has a small enough existing mortgage vs FMV or is free & clear. Well, to get there generally means seller has owned it many years. If seller has owned it many years that generally means there is also work to be done. I find a very common theme in the properties and sellers that are a fit.

Now could you try this with some of those newer built fancy-pants places built for say $800k spent that nobody is willing to pay even $700k for today...... Pitching that you'll do it at $800k making them net-0 but to do it you need to be low down, 0% interest, 3-5yr term and $_____ monthly payment.....     I mean sure, and I bet it would work to land some.      But know going in your taking a gamble on where market price will be in those years to come.     And if it's not there, your walking away and a possibility that seller will try to sue to force performance. SO gotta make sure it's correctly entered and written. Not to mention loosing what you stuck into it. 

There is a huge ocean of opportunity out there with seller financing, HUGE. 

I do them literally all the time. I have like 4 right now, today going. There all over the place you just gotta dig for em.     And i still get asked the same #1 question about seller financing "yeah, but, is there really sellers out there willing to do seller financing" lol.     Ah yeah, it's not like I am taking the entire bulk of em all myself.     I am less then a flea in my volume vs what's out there..... I am a flea on the flea who's scratching the surface of the St Bernard that's the opportunities out there just waiting for someone with some know how to pitch it. 

I can honestly say; you'd be surprised.... 

You gotta picture the full context of things, from every side. 

For the average person, if they had the cash they'd stick it in the bank right. What's the interest rate they get? Maybe as high as 1%. I've seen many at fractions of a percent. 

Now add in situational factors. 

Say they've been trying to sell the property for $400k, and go nothing. Dropped too $375k, $350k, and most recently at $335k and they got a handful of showings and one low-ball offer at $225k....... 

Now you come along and say if you gotta pay for the straight-up purchase the most you can give is $250k. It needs work, the market isn't all that great, you got risk to think about, time to get things going, and the potential that it will take a year or 2 for things to get back into a good operating state to make $. 

BUUUUT.... Since they own it free & clear, and don't have an immediate need for that $ because they already got primary home n all that.... You can offer some options. 

If willing to do seller financed at the 3yrs to get to other side, and mitigate your $ out of pocket so you can focus your $ on reno, you could do 5/10% down and double the interest rate bank will give making it 2%, and you could go as high as $265k. 

Or, if there investment focused and willing to work together.... You could go as high as $290k but, that's 5% down, and 3yrs no interest so you can focus all $ toward reno and running the place best possible to get through the tough market. You'll make monthly payments on principle through it all. 

That's 1 quick "for instance" scenario off top of the head. 

Some people don't need the $ right now, they have pension or whatever. And it's more about getting rid of the headache property that's actually been costing them $ every month. Sometimes eliminating what's been an expense, that alone is $ in there pocket.     And they get-it that it's gonna cost you $ to do the various things, so changing how the buy is structured impacts the end $ you can pay for the place. 

At least this is how I approach them. 

The rare few say things like "but a mortgage would be ___" and I say sure, and if I had to get one and pay a bank that $ I can only afford to give you $____ for the purchase price. It's just the reality of the #'s. 

And I hold, it's not a negotiation, I'm as ready to walk away as i am to do a deal, it's a take it or leave it. There choice of which way we go. 

When they ask if I am negotiable on any of them I say "Sure, I'm happy to pay less" and I just leave it sit and sink in with a smile. And I mean it. 

Is 0% interest rare, yeah it's rare in my experience but it's not impossible or unheard of. All depends on all the right factors lining up. 

Well, I'd assume step 1 is you ask......

 I disagree with both of your opinions.

Using Heloq's and owner financing for the right investment can be great. You just have to purchase the correct investment. 

We just bought a house with owner financing.  Minimal downpayment and no interest. The investment will pay for itself in 5 years, and I could buy an almost unlimited amount of these deals if I could find them. 

We could have written a check for the property but why bother when we are getting 0% interest? We have it rented making more than the loan payment.

This is exactly why I hate HELOC's and advise to never NEVER us a heloc to acquire investment property. DSCR, seller financing, or get more capitol.

It's just horrible to risk all that have done. Sad. 

Quote from @Yitzchok Carmen:

Quote from @James Hamling:

Quote from @Yitzchok Carmen:

Quote from @Collin Hays:

Quote from @James Hamling:

Quote from @Collin Hays:

I just got off the phone with a self manager who paid $810K for his cabin in May of 2023 and is listing it soon for $650K.  His realtor advised him to get out now.

It's not a 1-off. Values are going to fall 50-60 percent from 2022 peak before we reach bottom.  I lived through this in 2008-2010.  I bought my first Smokies property in 2005, and by 2010, it was worth half what I paid.  The values will fall until they are a traditional multiple of annual rents - about 7X annual rents.

This time is NOT different.

As for agents, the most reliable agent in that region, Darlene Derosia, says that nothing is moving, regardless of the discount.  

 In my experience with my places 

2brs gross about 70-80k

3brs gross 70-90k 

4brs gross 90-105k

This is average over the last 5 years. They are nice places but nothing with that amenity that cant be purchased at Lowes. No views, no waterside. They are great locations though

If you think it will bottom out at 7x rents

2BR would sell for 490-560k

3BRs would sell for 490-630k

4Brs would sell for 630-735k

It seems like we are already seeing prices at pretty much these points, no? 

When I started buying in early 2019 you could get a 2BR is Sky Harbor that would gross about 50k for 250k which is 5x rents. 

Do you think we may see that again? Esp bc costs of cleaning etc have risen since then

What your saying here is for your "plane Jane" nothing special, no special amenities, views, furnishings etc your average was/is: 

Rented 365 days per year……

2brs - $1,442.31 week / $206.04 per day

3brs - $1,538.46 week / $220 per day

4brs - $1,875.00 week / $267.86 per day

The average occupancy rate for short-term rentals in Gatlinburg is 65% according to Airbtics.

Which makes for 33.8 weeks or 237 days, equaling: 

2brs - $2,218.93 week / $316.46 per day

3brs - $2,366.86 week / $337.55 per day

4brs - $2,884.62 week / $411.39 per day

Now the problem with all this is 2024's average occupancy rate was 61%. And we are now seeing it lower at 57%: 

And when we look at everything together it all makes sense, seeing just how much inventory has been added in even just the last year alone: 

So it's no surprise that when I do a search of current offerings I see amazing properties with fantastic views, amenity loaded, properties offering a heck of a lot more than a roof over the head..... Priced BELOW your stated numbers.... 

This isn't shocking. It's a natural action of the supply demand curve in action. 

Or the "competition that isn't really competition" as you put it, effecting the market because reality is competition IS competition. 

And more hands competing for the same dollars, drives DOWN prices and UP quality of offerings. 

This is economics 101. 

So the whole notion of using yester-markets average revenues to justify a today price is no kosher. 

You can't even use in-the-now revenues per say because all indicators is the market is a falling knife. 

You have to project forward to the market stabilization point. 

As the market declines competitors will UP there offerings and LOWER prices. This becomes a cyclical happening as it drives other competitors to do the same to match and exceed those setting the market at the time. In terms of pricing we call this a "Race To The Bottom". 

Somewhere in this operators start exiting, removing inventory and competition. 

The question to it all is VELOCITY. Which factor gains what velocity. 

Most often the exit is an action of the few and rare, while most select denial and only exit after a long painful bleed-out. So generally the race to the bottom gains the velocity of power and the removal of inventory trails. 

Once enough inventory is removed, stabilization comes into the scene. 

And since many live in denial and inventory only get's removed through going bust, there is often a rubber-band effect to stabilization. 

It's the few who often survive this roller coaster. And a common trait is they were NOT living in denial at any point, they were usually those most hyper aware, and they choose intentionally to ride it all out and through. They don't make it via chance but instead via preparation. 

And the many who got bleed dry and out in the end..... They sing the song of "I knew it, if I only held on another _____ months" but no, that's a lie to make self feel better. Because if all the inventory held on the decline would have kept running. It was removal of inventory that made the recovery. 

Who are these folks who live in denial and get bleed dry, loosing it all? Most often the vast majority is the self-managed, the non-professional. There means are more limited as is there comprehension of markets, economics, and access to capitol. 

Who knows, maybe everything will be a-ok, I'm no expert on the Smokies. But I am an expert on market economics and analysis as it relates to real estate, and this is looking like a loaded gun in the earliest phases of correction. 

Boom - Bust cycle. Very normal standard stuff really. 

 You are correct generally with your view of things. And I may be wrong. However again, there is more nuance in it than just what you are posting as an outsider. And I am def not in denial, I have been working on my places for the last year to get more bookings. What you call a "Professional manager" is also not so black and white like you think. You can feel free to PM me if you really care that much and I would be more than happy to discuss. I don't want to hijack this thread any longer with this

Look I am not sure what your on about with the whole "Professional manager" thing. 

The only distinction I make is between Professional and NON-Professional. 

There 100% is Management Companies who are BOTH professional and NON-professional. Just as there is self managed that are both professional and NON-professional. 

Generally speaking most management companies are professional, and most self-managed are non-professional. And there listings most often reflect this. 

For example this listing by "Greg" which despite doing it for many years, it kind of screams non-professional. 

The photos are.... well there kuk. It does not visually inspire, or tell much of a story. The details leave more to wonder than it explains. It feels lack luster and novice to say the least. 

As does this one that yells "hey, I'm 4 walls and a roof, you could sleep here"..... 

Vs this one here that "POW" knocks it out of the park! They are selling it Selling It SELLING IT.    In the headline, in the photos, in the details there painting a picture of an EXPERIENCE and selling it well.     There reviews speak volumes. They obviously are systematically doing this and are Professionals. 

And look at this one, nailing it! This looks like it may be one of those big companies but come one, that listing grabs you and says THIS IS THE ONE! They are selling me the experience so much here! 

Those who know me know I am the travel diva, I am, the wife is Mrs Top-Shelf but I am the Gordon Ramsey of travel. When I just want 4 walls and a roof I go to the Hilton. I'm old, I've earned it, I'm not some 30-something whipper-snapper anymore so I'm done with super-8's. But when I want an EXPERIENCE I got STR. I want and expect an experience, I want to feel it, live it, I want to be setup for success.

And your listing get's all of 4 seconds to convince me that your that vehicle to my expected experience. 

Professionals get this. 

My book in experience is regimented and seamless especially if have any issue along the way. 

When I arrive it's as if you expected me. I find a guide of tips and things to do. No not a stack of brochures from the local biz association but something of yours, specific to this property and this local. Love it. 

Again, professionals get this and deliver. 

It's no 1 metric that makes a professional or non-professional, it has nothing to do with LLC or c-corp, it has to do with being a professional hospitality operation or some schmoe offering a place to stay.

What your saying here is for your "plane Jane" nothing special, no special amenities, views, furnishings etc your average was/is: 

Rented 365 days per year……

2brs - $1,442.31 week / $206.04 per day

3brs - $1,538.46 week / $220 per day

4brs - $1,875.00 week / $267.86 per day

The average occupancy rate for short-term rentals in Gatlinburg is 65% according to Airbtics.

Which makes for 33.8 weeks or 237 days, equaling: 

2brs - $2,218.93 week / $316.46 per day

3brs - $2,366.86 week / $337.55 per day

4brs - $2,884.62 week / $411.39 per day

Now the problem with all this is 2024's average occupancy rate was 61%. And we are now seeing it lower at 57%: 

And when we look at everything together it all makes sense, seeing just how much inventory has been added in even just the last year alone: 

So it's no surprise that when I do a search of current offerings I see amazing properties with fantastic views, amenity loaded, properties offering a heck of a lot more than a roof over the head..... Priced BELOW your stated numbers.... 

This isn't shocking. It's a natural action of the supply demand curve in action. 

Or the "competition that isn't really competition" as you put it, effecting the market because reality is competition IS competition. 

And more hands competing for the same dollars, drives DOWN prices and UP quality of offerings. 

This is economics 101. 

So the whole notion of using yester-markets average revenues to justify a today price is no kosher. 

You can't even use in-the-now revenues per say because all indicators is the market is a falling knife. 

You have to project forward to the market stabilization point. 

As the market declines competitors will UP there offerings and LOWER prices. This becomes a cyclical happening as it drives other competitors to do the same to match and exceed those setting the market at the time. In terms of pricing we call this a "Race To The Bottom". 

Somewhere in this operators start exiting, removing inventory and competition. 

The question to it all is VELOCITY. Which factor gains what velocity. 

Most often the exit is an action of the few and rare, while most select denial and only exit after a long painful bleed-out. So generally the race to the bottom gains the velocity of power and the removal of inventory trails. 

Once enough inventory is removed, stabilization comes into the scene. 

And since many live in denial and inventory only get's removed through going bust, there is often a rubber-band effect to stabilization. 

It's the few who often survive this roller coaster. And a common trait is they were NOT living in denial at any point, they were usually those most hyper aware, and they choose intentionally to ride it all out and through. They don't make it via chance but instead via preparation. 

And the many who got bleed dry and out in the end..... They sing the song of "I knew it, if I only held on another _____ months" but no, that's a lie to make self feel better. Because if all the inventory held on the decline would have kept running. It was removal of inventory that made the recovery. 

Who are these folks who live in denial and get bleed dry, loosing it all? Most often the vast majority is the self-managed, the non-professional. There means are more limited as is there comprehension of markets, economics, and access to capitol. 

Who knows, maybe everything will be a-ok, I'm no expert on the Smokies. But I am an expert on market economics and analysis as it relates to real estate, and this is looking like a loaded gun in the earliest phases of correction. 

Boom - Bust cycle. Very normal standard stuff really.