Cabin Incomes for 2008
With cabin prices in the Smokies appearing to have bottomed by the end of 2008, that factor of the equation would indicate it is a good time to buy. But what about incomes? Have incomes fallen commensurate with prices? Is this really the time to consider an investment cabin purchase?
Business owners in Sevier Co. TN are typically very closed mouthed about their companies’ incomes. However, having been long established in this area and having established good working relationships with several nightly rental companies, I have been able to get rental income estimates for cabin rental incomes in the Smokies in 2008 which I believe to be accurate and reliable.
I have obtained information concerning average cabin incomes managed by six long established rental companies in the Smoky Mountains. These companies were chosen because I could get reliable info about or from them and because they are a good representative sample of management companies in the Smokies. I’ve indentified and defined these companies as follows:
Company “A”- This firm is an “in-house” manager handling only cabins in one of the highest quality developments in this area. Their gross incomes for 2008 are holding par with 2007 and they anticipate 0% loss from last year.
Companies “B & C”- These two management companies handle high quality cabins throughout the area, have strong marketing programs and maintain tight control over the quality and quantity of their inventory. They estimate that when the final figures are tallied, they will show a 0% to 3% reduction from 2007.
Company “D”- This company manages more mid-line cabins throughout the Smokies, has a strong marketing program and a good reputation. Their gross income is anticipated to be down about 10% from 2007.
Company “E”- I would define the bulk of their inventory as tending towards decent but more bargain oriented cabins and they estimate a decrease of 18% from 2007.
Company “F”- This firm has the largest inventory ranging from top quality to marginal quality. It is difficult to effectively market this number of cabins with as broad a range in quality and they appear to be 20+% down from 2007.
What this says to me is that in a difficult economic cycle, desirable cabins represented by a focused, quality oriented management company are performing well for their owners. This, coupled with a realistic downward price adjustment, creates a strong buy signal for an astute investor.