Log Cabins In The Smoky Mountains

Log Cabins for sale in the smoky mountainsHow many times have you come to the Smoky Mountains, rented a log cabin for you and maybe your family, to only go back home and discuss why you should think about possibly buying one. Maybe you have never been to the area but have heard quite a bit from different investors or financial outlets about how The Smoky Mountains has become one of the top places to invest in real estate. Specifically short-term log cabin rentals. Regardless of how familiar or unfamiliar you are with the area, the real estate market for log cabins has changed drastically over the last 24 months. The last 12 months have been bordering on insanity. 

The Log Cabin Market

We have been in a seller's market for almost two years now, but the last 12 months have been the most aggressive market we have seen in the better part of a decade. What is a "Seller's Market" you ask? Well, it basically means that sellers, for the most part, have control over the market and over most terms in contract negotiations. When you add historically low inventory levels to the mix, you have a seller's market on steroids. 

The norm for this type of market is that many properties, that are in good condition and are priced within reason, will receive offers within 4-48 hours of hitting the market. In many cases these properties will receive multiple offers and ultimately the property will go under contract very close to, or above, the asking price. 

This fact makes it VERY important that as a potential buyer, you are working with a REALTOR that specializes in the log cabin market.  It is not the same as selling residential real estate. In many cases, you will be faced with having to potentially place offers on properties sight unseen. This is a very hard task for many people. I understand the difficulty completely. Again, this makes it very important to be working with a REALTOR that will educate you as much as possible. To give you as much factual data as possible. Even when that means that the data and facts may disqualify more properties than it actually qualifies.  How do you find a REALTOR that will act in your best interests? You do lots of research and see what other clients are saying about them. We'll get into this a little more later on in the article.

Different Pieces To The Log Cabin Puzzle

Firstly, everyone is typically looking for the same thing. A great deal on a log cabin that will not only pay for itself but make them some money. The hard reality is that this is not the norm. The norm is that the cabin will generate enough income to help you offset or supplement your mortgage and bills. There will be some months that you do very well and will net some money and there will be other months that are not as well where you will have to cover a percentage of your mortgage and bills. There are a few factors that play into this equation and how successful your cabin is or is not.

1) How much of a down payment you put down ultimately affects how low your mortgage will be. The more you put down the lower your payment. Obviously if you pay cash then there is no payment. Then it just becomes a matter of ROI over time. Down payments will vary greatly from one person to the next and from one loan program to the next. Speaking with a mortgage professional will help you understand what type of down payment will work best for you. 

2) The property management company that you choose to partner with can greatly influence how successful your cabin is. There are hundreds of property management companies ranging from small mom-and-pop shops to very large corporate brands that manage thousands of cabins. They will vary greatly in the service they provide as well as how aggressively they can market and rent your cabin. It is not uncommon for a cabin to perform differently from one management company to the next. For instance, if the cabin is placed with a smaller management company that is not very aggressive in their marketing and advertising then the cabin can make average, to below average income. For the sake of this example let's say $25,000 a year. Now place that very cabin with a larger more aggressive management company and you can potentially make closer to $40,000 or even $50,000. That is not uncommon at all. Of course this is an extreme example but the point is that they can vary greatly. It is also worth noting that the figures I mentioned above are gross annual incomes. For the longest time, the standard in our area for a management company was a 60/40 split. Over the last few years that has started to change.  There have been several companies that have come into the area that have started to offer more competitive rates to cabin owners. With that, several existing companies have changed their infrastructure to allow for a more competitive rates to offer to cabin owners as well. While there still are many companies that charge 40%, there are several that now charge 35%, 30%, 25%, and some that will start you at 20% and then bump you into their normal structure of 25% or 30% after an agreed upon time frame.

An alternative to using a property management company is to self-manage using VRBO. This is a great alternative that can be quite equitable. It is not for everyone but if your schedule permits, it can be easy to do. I can answer any questions that you may have about self-managing.

There are other alternatives as well that can be the best of both worlds. A company called iTrip.net for example is a full blown management company that manages your VRBO page for you. They take care of everything and their split for doing so is 75/25. That is 75% to you the owner. There is also a company called Evolve. They work closely with owners and only charge a 10% booking fee. You can read up on the services they offer on their website.  These 2 options are growing in popularity at a fast rate.

 

3) The location of your cabin and the amenities that it offers can have a huge effect on how well your cabin does on the rental program. Most renters are going to want to be in close proximity to all of the action. This typically means a drive of 25 minutes or less. And that is stretching it. Another thing to consider when talking about location is access. Most people are coming from other areas that are not similar to ours. Typically they are used to flat, non-curvy roads. If the roads leading up to your cabin are steep, narrow, and off the side of a mountain then you can almost guarantee that it will be difficult to establish repeat rental business.

Is It Expensive To Own A Log Cabin?

A cabin, just like your home, will require preventative maintenance. Keyword is “preventative”. Cabins need to be stained every 3-5 years depending on exposure and weather.  This can vary greatly in cost depending on the size of the cabin and how it is positioned on the land that it sits on. A small cabin (1,000 sqft) can cost between $1,500 - $3,000 or more. Cabins that are large will start to get into the 5-7k range and then they just go up from there. These jobs usually include all exterior wood walls, decks, handrails, etc.

Other costs are the typical expenses like utilities and other monthly services.

  • Water (if not on well)
  • Sewer (if not on septic)
  • Cable/Phone/Internet
  • Electric
  • HOA (if there is one)
  • Alarm (optional)
  • Pest Control
  • Propane or Natural Gas
  • Mortgage
  • Insurance
  • Lawn Care (if needed) 

These are just a few of the most important aspects to consider when looking for the right investment cabin. I also want to repeat that while it is possible to find a cabin that cannot only pay for itself but generate income, it is not the norm. I certainly do not want to sell a pipe dream to someone and have them find out that they were misled. I am all about full disclosure and transparency.

Log Cabin REALTOR

Is there such a thing? Technically, no. Are there agents like myself that have dug into every facet of this niche so deeply that we could be considered experts? Yes. So how do you find an agent that knows the ins and outs of the log cabin market? Research. Look online at what others are saying. Talk to other owners that own cabins. Ask agents how many transactions they have performed this year and of those, how many were cabins. A great question is to ask how many clients have come back and bought a second or even third cabin from them. 

Cabins is what we do. We do it well. But don't take my word for it. See what my clients say

 

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