Buying an Airbnb Vacation Rental in the Smoky Mountains

Log homes and cabins certainly have a timeless attraction to them, and they are usually a safe housing style to invest in, seeing as they're often sought after in the vacation rental market. If you are looking for a sure-fire strategy to generate a lucrative income through property investment, let us show you the way to “The Smokies” where you can boost your investment portfolio and achieve your financial goals that much quicker.

Vacation Rental Market Share Boom: The facts and stats!

The market share of vacation rentals is growing at a breathtaking rate. According to Statista, compared to global revenue levels, the highest proportion of revenue will come from the United States in 2021, and the vacation rental market is poised to shoot up to a whopping US$16,626 million. Currently, user penetration is 16.6% and is expected to hit 18.2% by 2026. By 2026, 62.9 million users are expected in the Vacation Rentals segment alone. Market revenues are forecast to grow at a CAGR of 4.13% over the next five years (CAGR 2021-2026), resulting in a projected market volume of US$20,359 million by 2026.

A Stroll through the Smoky Mountains

It's this misty, tranquil landscape that inspires wanderlust for the Smoky Mountains, fondly known as the Smokies. A rare jewel with magnificent views, hemmed in by giant peaks, and filled with rocky, boulder-strewn creeks where rivers flow in a zen-like manner, the Smokies offer an escapade for anyone.

Atop this hilly terrain, you can easily access city amenities while still enjoying the charm of the mountains. Throughout the year, this quaint town hosts festivals and events to keep tourists flocking to this rural countryside. Among the greatest attractions is its natural surroundings which feature four distinct and mild seasons for the enjoyment of all residents and visitors alike.

Get Acquainted with the Terrain

The Great Smoky Mountains are located in Eastern Tennessee. The state line goes right down the middle of the national park. It is one of the most popular parks in the southeastern United States. In fact, the national park is the cash cow for the surrounding cities, as it draws in millions of tourists all year through.

So, whether you are considering a permanent move, or looking for an investment or a second home there are numerous reasons why the Great Smoky Mountain area is a great choice to consider. Heaven on earth awaits in Sevier County, tucked away in the throne of nature, so let’s have a look at how you can own a slice of heaven for yourself!

Benefits of Buying an Airbnb in the Smoky Mountains

Any property investor can consider some essential factors when buying vacation rental property, such as extensive information on the average cap rate, or yearly rate of return, and the market potential. Based on the top 25 markets, Gatlinburg, which is nestled in the smoky mountains steal top spot in the country to own rental property, according to a 2021 report from Vacasa.

(Source - Zillow)

1. Lower Cost Investment

It is often less expensive to buy a property in the mountains than in the city. This will allow you to maximize your investment and stretch your budget. Another option may be to buy a larger house or lot with plenty of space. You could even invest in some added amenities which could draw in more crowds to your Airbnb.

2. Property value appreciation is high

Zillow says home values rose a whopping 21.5 percent over the past year (February 2020 to February 2021) in Gatlinburg. When you invest in a property, especially in the Smokies, you can be rest assured that your decision will yield a return on investment in the future. You may ask “How come?“ The answer is simple, since mountain property is prime rental property, so its value will only appreciate with time.

3. Guaranteed Rental Income!

According to AirDNA, the estimated rental income for Gatlinburg is approximately $55,439. Of course, that dollar figure is general, and a lot depends on the size, location, and amenities of any rental property. But here’s the gist: Gatlinburg rentals make money for their owners. According to data scraped from Airbnb, new hosts in the US, who welcomed their first guests in the first six months of 2021 and have only one listing, have collectively made millions of dollars hosting on their platform. Smoky Mountains ranked among the top 10 most profitable Airbnb areas for new hosts (with only one listing in the US) for the first half of 2021, earning $3.9 million so far.

4. Year-round visitors

Travellers flock to Gatlinburg year-round. Gatlinburg, located at the entrance to America's most visited national park, the Great Smoky Mountains National Park, is much more than a seasonal destination. The Great Smoky Mountains National Park is a popular vacation hotspot for visitors from all over the country, receiving as many as 12 million visitors in 2020. Besides wildlife, hiking, and scenic views, it offers historical sites and more. The town hosts several popular events throughout the year that are fun for residents and visitors. A few of these events include the Gatlinburg Farmer's Market, Harvest Festival, Oktoberfest, Gatlinburg Craftsmen's Fair, and New Year's Eve Ball Drop and Fireworks Show.

5. Airbnb regulations on short-term rentals are minimal

Airbnb laws in The Smoky Mountains are relatively lenient compared to other cities with more stringent laws. It’s one of the most Airbnb friendly cities with far fewer compilations. However, some regulations that you should comply with are as follows:

• Obtain a business license

• Tax includes 9.5% sales tax (7% goes to Tennessee and 2.5% is directed to Sevier County).

• Obtain the “Tourist Residency Permit” - Vacation rental owners in Gatlinburg have to complete a one-page document that shows the size of the property and how many bedrooms it has.

The plus point is that investors don’t need to submit detailed documents like floor plans or notify neighbours about their intention to use the property as an Airbnb rental.

6. Own “your own vacation”

You can purchase your log cabin, put it on a rental program, and allow it to help pay for itself. Eventually, you may well move in permanently, or seasonally. It certainly is a long term investment and your property could also serve as your retirement plan.

Investing in a vacation home means you get to own a little piece of a destination that you (and other travellers) love. So its a win-win for everyone involved!

7. Expand your Portfolio

It is an excellent option to expand your Airbnb portfolio or even to invest in your first rental property to start operating a successful business. If you own a home in the city or near the sea, adding a property in the mountains will certainly diversify your income and profile.

8. Tax Benefits

Procuring a property in the mountains is one way to gain tax benefits, making it another reason to invest, since certain properties, such as cabins/condos in mountain terrain qualify for specific tax breaks and deductions. The average owner should be able to expect a pre-tax return in the 7% to 8% range - with some luxury cabins generating more for owners.

What Are The Best Neighborhoods In The Smoky Mountains?

There are several towns located near the Great Smoky Mountains and they are all within reasonable driving distance of the national park. The Great Smoky Mountains area is a great place to invest in vacation rentals. Currently, the region has a favourable economic climate that continually provides reasonable prices for rental properties. Near Gatlinburg, Pigeon Forge, and Sevierville in Sevier County, offers a wide selection of properties with excellent rental income and guaranteed to convert into positive cash flow properties. So, let's take a quick glance at what these cities have to offer - so you can put your thinking cap on!

1. Gatlinburg

Gatlinburg, Tennessee's most famous mountain town, offers convenient access to the Great Smoky Mountains National Park via Route 441. Gatlinburg is a town of contradictions in many ways. The town hosts millions of visitors a year, despite having fewer than 4,000 permanent residents. There are many attractions, shops, and restaurants in Gatlinburg's bustling downtown area, despite the surrounding natural scenery and mountain views. In this area, you’ll find all kinds of shops where people make art and continue traditional crafts. This town is also home to a ton of amazing restaurants, including Tennessee’s first pancake house, The Pancake Pantry!

Gatlinburg is known for its unique combination of quaint charm and vacation fun. Few attractions include Anakeesta, Ripley's Aquarium of the Smokies, and the Ober Gatlinburg.

Housing Market

Median listing home price - $599K, trending up 59.7% year-over-year

Median listing home price per square foot - $337

Median home sold price - $610K

Average Daily Rate: $265

Median Occupancy Rate: 82%

Median Revenue: $5,088

2. Pigeon Forge

Pigeon Forge's motto is "The Center of Fun in the Smokies" and it certainly lives up to its name! A seemingly endless number of museums, dinner theatres, go-kart tracks, souvenir shops, and restaurants line The Parkway, the main highway that runs from the centre of Pigeon Forge to the airport. In Pigeon Forge, Dollywood is definitely the most popular destination. The biggest ticketed attraction in the state of Tennessee, Dolly Parton's theme park, is co-owned by the country star! Because of all the fun attractions and excitement, Pigeon Forge is a top destination for families visiting the Smoky Mountain area.

Housing Market

Median listing home price - $585K, trending up 50.2% year-over-year

Median listing home price per square foot - $344

The median home sold price - $487.5K

Average Daily Rate: $250

Occupancy Rate: 77%

Median Revenue: $4,557

3. Sevierville

As the hometown of the Smokies, Sevierville has more of a residential feel than Gatlinburg and Pigeon Forge. The Great Smoky Mountains are considered part of Sevierville’s backyard. A vacation rental in this area is well-positioned to reach its occupancy goals, with 12.1 million visitors flocking to the national park each year. Moreover, Sevierville has also been recognized by evolve as one of the top tier locations for property investments in 2022. Visitor attractions in Sevierville include the Sevier County Courthouse, which contains an impressive clock tower and a statue of Dolly Parton. Sevierville offers tourists a true mountain town experience. Sevierville's most popular attractions include Smoky Mountain Deer Farm & Exotic Petting Zoo, Tennessee Shine Company, Forbidden Caverns, and Legacy Mountain Ziplines. Not to mention the Apple Barn, which is a popular attraction in the Smoky Mountains.

Housing Market

Median listing home price - $517.3K, trending up 47.8% year-over-year

Medan listing home price per square foot - $300

Median home sold price - $478K

Average Daily Rate: $334

Occupancy Rate: 45%

Median Revenue: $5,559

The cities mentioned above are the top tier locations in the Smoky Mountains. They offer incredible mountain scenery, snow, and plenty of mountain-based recreation activities. Each city competes to attract outdoor enthusiasts year-round and each has its unique selling points. You can choose entirely where to start your adventurous journey in the mountains, according to what tugs at your heartstrings, but of course depending on where the cash flows from since after all this is a business venture!

Getting the Most Out of Your Investment in the Smoky Mountains

1. Time Your Purchase

When it comes to investment properties, timing can be everything. When the market is booming and there are more visitors, owners can command top dollar during peak season and the month or two leading up to it. So, if you’re looking for a deal or the lowest prices, your best bet is most likely to shop around in the off-season. According to cabins usa gatlinburg, “though Gatlinburg and the Smoky Mountains are truly a year-round destination, the off-season in Gatlinburg is during January, February, and March. However, these months still see lots of visitors, this "off-season" is simply less busy than other times of the year”.

2. Invest in the Right Location

As a vacation rental buyer, it should come as no surprise that you should prioritize location. Take your investment strategy into consideration. Is there a national park nearby? What about skiing? Are there rivers nearby? Think strategically as the best place for your property investment depends on what sort of market you’re looking for -whether it’s a ski area, woods, lake, or river. The selection of your location plays a pivotal role and is key in deciding your income rotation. Your median income and occupancy rate will increase as you get closer to tourist attractions. Even if the property acquisition value is high, you still stand a chance to recover the cost in the long run. (since the closer you are to the city and its attractions, the higher the rental traction will be)

3. Invest in Amenities to Allure Your Audience

When you think of investing in a mountain vacation rental, think beyond a stereotypical rustic, one-room log building. The right mountain accommodations can turn a vacation rental into a space for a family reunion, a deluxe retreat, or a great place for remote-working.

As part of the infrastructure of any mountain-based vacation rental accommodations, a traditional kitchen, large windows, a large deck, comfortable beds, and plenty of storage for recreational items such as snowmobiles, skis, bicycles, etc; should be included.

Here are some more cabin rental amenities to consider that may help you maximize your property’s potential:

• High-speed internet: For vacationers such as digital nomads who look for a cosy house where they can work remotely, a strong internet connection is essential.

• Hot tub: Any chilly mountain vacation is better with a hot tub. Up to 20% more revenue can be earned by a vacation rental in the mountains which includes hot tubs. Especially if you are catering to couples on their honeymoon for a private getaway.

• Pet-friendliness: Pets are a big part of many guests' vacations, so renting a cabin would not be the same without their furry companions. A pet-friendly property can generate a 10–20% increase in rental income.

• A fireplace or fire pit could be nice to have especially for chilly nights to cosy up! Along with some blankets and cushions to add to the atmosphere.

• Add in recreational gaming tables such as foosball, ping pong, or Pool table, Dart Boards, or include a few family-friendly game options such as Monopoly, Dominoes, Jenga or simple card games.

Things to Ponder Before You Plunder on to Procure!

When deciding if it’s the right investment for you and if it will help diversify your investment portfolio, consider the following:

• Does this investment meet your short-term and long-term goals? What are the risks involved?

• Do substantial research and find out everything you need to know about Pricing, Competition, the tourist audience, HOA rules, Taxes, and City rules and regulations. Being thorough will help you gauge the overall picture.

• With respect to the mountainous terrain, there are a few things that you must dig deep into in order to find out what the terrain is like. For example, the Internet, television, and cell network coverage, Septic systems and permits, Water access, well permits, previous ownership of wells, water quality, etc.

• Make sure you have builder permits - that authorize you to be able to do home improvements, which can give you a free hand when it comes to remodeling and renovating.

• Utilities - since mountain life can be quite remote and sometimes in the middle of nowhere, you will need to have access to electricity, water, etc. You may want to go green by investing in solar panels. (Food for thought!)

• Are you ready to be dedicated to running an Airbnb? Do you want a property management company to run the business or do you want to hire a co-host on board to help manage the property?

• Contemplate your costs. If you are able to create a concise yet coherent business plan, you will see how much money you will need to start up, as well as how much your ROI will be.

• Having a plan helps you also understand what other services you require. For instance - Service providers such as snow ploughing services, Cleaning crew, Laundry service, Maintenance teams, Garbage disposal services, Hot tub and pool cleaning services etc. These all come with a cost - which is why we cannot reiterate enough the importance of planning ahead.

• A security system is also an essential must-have, since most often than not, this is an investment property, and you won't be living there. You can prevent bad Airbnb guests and unpleasant experiences by implementing the appropriate technology hacks in your Airbnb.

• Airbnb provides Host liability insurance, which is a part of AirCover, which provides Hosts with $1 million in coverage in the rare event a guest gets hurt or their belongings are damaged or stolen while they’re staying at your place. AirCover also provides Host damage protection, which provides hosts with $1 million in coverage in the rare event your place or belongings are damaged by bad guests during an Airbnb stay.

Before We Bid Adieu, A Few Words of Wisdom

Vacation rentals in the Smoky Mountains have been gaining some momentum for years now, and it doesn’t seem to be slowing down any time soon. In light of the reasons that make this mountain haven one of the best places to own a vacation rental property and the impressive market statistics, it's no wonder so many people are looking to invest in the Smoky Mountains in 2022!

At Hostaway we help you manage your property by offering you the most comprehensive, easy to use, state-of-the-art Property management systems (PMS). Manage inquiries, recurring guests, distribution channels, owners and staff all in one place. From triggers, automations, workflows to marketing tools, analytics and reports, the PMS scales as your business grows, so you don't need to change. Call us for a demo and we’ll walk you through the entire process.

The vacation rental industry continues to grow with each passing month, much less year. Your Airbnb property could reach the moon and the stars if you adopt the proper attitude and follow the right guidelines! Hopefully this information will serve as a guide to help you - to take that leap of faith and “Go to the Smokies!”