Criteria I Use On Financial Estimates For Investment Cabins
When presenting information to a potential cabin buyer, I provide estimated income / expense statements as well as estimated averaged annual return on investment estimates. With an increased interest in investment cabin purchases due to the advent of short sales and foreclosure sales the following is the cover attachment I send with my estimates. It explains the criteria I use for those financial figures I have to estimate.
“With the apparent bottoming of cabin sales at the end of 2008, short sales have become a factor (though a small factor) in the Smokies. Since the beginning of 2009, I have been analyzing short sales / foreclosure sales as they appear on the market. While on paper the prices are very attractive, when these properties are analyzed for their investment potential, one thing becomes painfully clear; most of them were bad investment decisions when they were purchased and remain poor options even at their reduced prices. That having been said, I have found several choices that are extremely attractive options.
In preparing the Cash Flow and Averaged Annual Return on Investment estimates for these properties I have attempted to be conservative as far as any necessary economic assumptions. The income estimates for the next 7 years were obtained from the best management company for each property assuming that rental rates and occupancy would maintain the 2007 / 2008 levels which are relatively lower than the previous 5 years. This obviously assumes no rapid or dramatic recovery of general economy and each management company feels confident in their estimates.
With regard to the estimated average annual appreciation rates, 3% to 5% is a conservative estimate for these rates over the last 30 to 40 years in Sevier County according to appraisers I have consulted. Frequently, after a significant downturn in a real estate market, appreciation rates exceed their traditional averages for a time. While that could well be the case in these circumstances, I have not taken that possibility into account in my calculations.
For the vast majority of buyers I deal with, purchasing a cabin in the Smokies is a major economic and emotional decision. For my part, I am providing you with conservatively realistic scenarios so that should you decide to make such a purchase, at least in part based upon information provided by me, that your actual experience will be satisfactory and could reasonably exceed my estimates. “
That’s how I do business. If you are curious about owning a cabin in the Smokies for investment and personal use go back to www.willquinn.com and contact me.