Making STR Simple

Since the Covid-19 epidemic, The Smoky Mountains have absolutely exploded, quickly becoming one of the most sought after destinations in the U.S. for vacations. Annually the area welcomes more than 14 million visitors. And because of the steady tourism, investors have gained peaked interest in owning a STR (Short Term Rental) property in areas like Pigeon Forge, Gatlinburg, Sevierville, and Wears Valley.

If you are just getting started, we have compiled a list of key terms and concepts that will prepare you to invest in a prosperous rental.

Short-Term Rental

A short term rental property is rented to guests for short stays, ranging from a quick weekend getaway, to a two week family vacation. The areas that surround The Great Smoky Mountains obtain over 10,000 active rental properties, which makes for a very competitive market. Typical listings are booked through platforms like Airbnb and Vrbo. And unlike a traditional long term rental, STR income often fluctuates based on factors like: season, tourism, pricing, and guest demand.

Location Matters

One of the biggest factors impacting STR rates, income, and success is the location. Visitors widely prefer close proximity to popular attractions like Dollywood, Great Smoky Mountains National Park, The Island, and Downtown Gatlinburg. Other increased booking factors are mountain views, easy road access, privacy, and properties that are near restaurants and entertainment.

Occupancy & Booking

If you are looking for consistent income, occupancy rates are a major factor. When occupancy is high during peak and slower seasons this creates not only stability but brings in more bookings due to high demand year round. Understanding the local booking trends and seasonal demand is essential when you are looking at potential STR revenue.

Listings

The first impression that guests get is your online listing. Therefore high-quality photography, compelling description, popular amenities, accurate representation, and shining guest reviews all improve visibility on booking platforms. Well-optimized and professional marketed listings show to perform significantly better than those with poor photos or incomplete information.

Amenities

Today’s guests… well they are boujee. They are expecting more than just a place to sleep. They are looking for an elevated stay that can keep them occupied even when they are not exploring Gatlinburg or The Smokies. Popular amenities in the Smokies include hot tubs, game/theater rooms, fire pits, outside collaboration areas, indoor/outdoor pools, Electric Vehicle Chargers, high functioning kitchens, pet-friendly accommodations, and fast Wifi. The right amenities will help your rental stand out in a competitive market.

Cash Flow & Expenses

The income left over after paying mortgage, utilities, cleaning fees, maintenance, taxes, insurance, and management costs is your cash flow. Before you close the deal on a STR property it is crucial that you understand both the expected revenue and continuous expenses to determine if the property is a smart investment for your long-term financial goals. In order to create a passive income through STR you must understand the logistics five, ten, and fifteen years after you close.

Property Management

Many STR property owners, especially ones investing out-of-state prefer to hire a professional property management company. They will handle quick guest communication, cleaning coordination, maintenance, pricing, and the elevated marketing. In such a competitive market it is important to have a short turnaround time when it comes to cleaning and maintenance between bookings, often cabins only have three to four hours in between bookings from different guests. Though some investors choose to self manage to save money on costs which is also doable and not a bad idea. It all depends on the time and availability that you have as an investor and what is best for your property.

Bonus Depreciation

Tax strategies are an extremely beneficial move for investors when used properly. Bonus Depreciation is a great example of this. Depending on your situation and current tax laws, certain qualifying property improvements and assets may be eligible to be deducted more quickly rather than over many years. Because tax rules frequently change, it's important to work with a CPA who understands real estate investing before making financial decisions.

Opportunity Zones

Some areas qualify as Opportunity Zones which are areas created to encourage long-term investment. Investors who meet specific IRS requirements may receive tax benefits by investing in these areas. While not every property in the Smokies falls within an Opportunity Zone, it's worth exploring with your real estate professional and tax advisor.

Return on Investment (ROI)

ROI measures how effectively your investment is performing. While revenue is important, investors should also consider occupancy, operating expenses, appreciation, financing costs, and long-term equity growth when evaluating a property's overall performance.

Final Thoughts

Buying a short-term rental in the Smoky Mountains can be an exciting investment opportunity, but success comes from more than purchasing a cabin. Understanding the before mentioned key concepts can help you make more informed decisions. With the right research, financial planning, and local market knowledge, you'll be better prepared to build a successful STR investment in one of the country's most visited vacation destinations.