Once upon a time, many years ago, Smoky Mountain vacation rental cabins and chalets could actually generate enough rental income to pay for themselves. In fact, several of our clients purchased or had built multiple cabins over a period of years because they not only paid for themselves, but they also created a handsome after-tax return. Then came the real estate bubble and prices headed out of sight and in many cases went far beyond any reasonable valuation level. At the height of the insanity, 480 square foot Gatlinburg area studio cabins sold for well over $200,000 and of course this simply wasn’t sustainable. There are only 365 nights in a year and as a cabin owner, one can only reasonably expect to rent your property for around 200 nights a year at best (although I have personally seen rentals that generated as many as 278 nights in a single year).
After the rental management fee which is typically 40% of gross rentals, cabin owners still must pay for the utilities, taxes, and maintenance which will likely take another 10% (or even a little more depending upon the property) of gross rentals. This means that the typical Gatlinburg area vacation home will net to the owner about half of the total gross rental generated. When local real estate values skyrocketed in the bubble years, prices got way ahead of rentals and owners had no real chance of generating sufficient rentals to cover their expenses, much less provide any sort of return.
Due to the very difficult economic climate, Gatlinburg area real estate once again provides an excellent investment opportunity. Now that prices have come back to a more realistic level and interest rates remain low, buyers can find great bargains. Currently, it is occasionally possible to purchase a vacation rental property for only about half of what they sold for at the height of the real estate bubble years. Frequently these homes are available due to foreclosure and they are no longer furnished. Still, if you are buying at a level only roughly half of what the peak prices were, you can afford to invest in some furniture and appliances and still be WAY ahead of the game. To view foreclosure and short sale properties currently listed by all of the members of our Great Smoky Mountain Association of Realtors MLS, please click here. To get professional advice regarding how to find the very best investment properties in our area, please contact us!