Investing in real estate in any capacity is a gamble that can be very rewarding or an absolute nightmare. Especially if you are an absentee homeowner. A large majority of people that are investing in log cabins in Gatlinburg, Pigeon Forge, and surrounding areas do not live here locally. There are a number of things that you need to consider before purchasing, and then things you will need to address and stay on top of after. This will be a 2 part series where I discuss the items to address before purchasing your log cabin and then in part 2 I will discuss "How to maximize bookings on your investment log cabin". Having said that, the investment cabin market is doing well and showing an upward trend. You can read about why I think that investing in log cabins in Gatlinburg may be the best investment you make in 2013.
As I said above, most owners of these investment cabins do not live here locally and will need to rely on a 3rd party to manage the rental cabin. There are a few options here.
1) Professional Property Management Company - There are a plethora of different property management companies in the area that will manage your investment cabin for you. Some are better than others. Typically you can expect to have to pay your property management company a split, a %, of all your rental income before expenses. The most common split is 60/40. 60% to you and 40% to the management firm. There are others that offer a 70/30 split and some that will have different tiers you can select from. The services will vary of course from tier to tier. Again, there are some great property management companies and some that are not so great. If you plan on enlisting the services of a property management company then you should begin investigating and interviewing them BEFORE you purchase. Check out their website. How user friendly is it? It should be easy to navigate and even easier to book a reservation. The individual property pages should be descriptive, clean, and have great pictures. Remember this company is supposed to be showcasing your investment. Perform multiple searches online using Google (currently holds over 65% of all internet searches). What companies are ranking on the first page for a number of different terms? A few companies that have great marketing campaigns are Cabins USA, Cabins For You, American Mountain Rentals, Cabins USA Gatlinburg, Cabin Fever Vacations, and a smaller, very selective and successful company called About The Smokies.
Once you have a small list of potential companies then it is a good idea to call and interview them. Make a list of questions to ask them before hand. You want to find out how they handle their booking rotation. Some handle by booking volume, others just go in a specific order. Nevertheless, it is important to know how they are going to handle assigning bookings. Some of the better companies are going to interview you as well. They will have certain criteria that your cabin will have to meet in order to qualify for their rental program. This is a strong indicator of a company that has identified what units are renting well and what it is that they feel will be successful.
2) Handling Your Bookings Yourself - Even if you do not live here locally this is still an option. Many absentee cabin owners make this option work and work well. Make no mistake though, it is some work and requires your dedication. The main resource for handling your own bookings is VRBO (Vacation Rentals By Owner). This is a great company that allows you full control of your bookings and showcasing your Investment Log Cabin. The fee for using VRBO starts at $399 and goes up to $1,299 a year. Your property page is YOURS. You maintain it. Change the photos, text, rates, etc. (**If you need professional photos of your unit then call our friend Stacy Champagne with Pixdipity Photography.) It even has an interactive booking calendar so any potential renter can see what days are available and what the rates are for those days. The booking calendar software is state of the art, very easy to use, and provided by Homeaway Connect. Of course if you go this route you will have to establish contact with, and enlist the services of a cleaning company. The unit must be cleaned after every rental. If there is a hot-tub it is supposed to be drained and refilled after each rental. You will have to find a service or maintenance company that will handle any/all issues that happen at all hours. Should the toilet not flush or the hot water heater go out, you need to be able to have someone ready to respond immediately. I know that this all sounds very intimidating but it saves you from giving the property management company 40% of your gross bookings. Many owners are willing to endure some of the hurdles to save that money.
3) What Is Your ROI? - When you purchase an investment cabin in Gatlinburg you are
probably definitely wanting the cabin's bookings to pay for itself. That is the whole point of the investment right!? Well do you know what it will take to make the cabin successful? You will need to look at what the current market is dictating for rental prices on similar cabins. Those phone calls you made to property management companies should have provided you with what size cabins are renting best. Using that info and basing it on a 10 month year will help you in determining what you should be looking to pay, what kind of down payment you will need, and what vacancy rate will have you making mortgage payments. These two formulas for ROI will be different of course if you manage the cabin yourself versus hiring a property management company.
These are the 3 main items to think about before buying. There are other items to address and a Gatlinburg Real Estate Specialist like my self should discuss those with you during the process of looking for the right unit. If you are thinking about, or have already decided to buy a log cabin in Gatlinburg, Pigeon Forge, or Sevierville contact me to begin your search or answer any questions.