Have you ever wondered who owns these beautiful rental cabins in the Smoky Mountains? Most owners of cabins in the smoky mountains are people just like you. Are you considering buying a Smoky Mountain cabin or wondering where to start to purchase one? There are many questions when considering a buying a cabin in the smoky mountains whether you plan on making it your second family home or if you plan to make it a vacation rental. This series of articles should help you begin your search to find the perfect cabin for you. Let’s begin with the initial costs of owning a Smoky Mountain cabin.
First and foremost, the question of budget comes up. How much can you afford to spend on a cabin? There are many things involved when it comes to the expense of owning a second home or a vacation rental. You’ll be making a down payment, of course. Your monthly expenses will include your mortgage payment, property taxes, insurance and the regular monthly bills like electricity and such, just like on your personal residence. Also, you’ll have expenses such as caretaker fees if you don’t live close by and need someone to handle routine maintenance like painting/staining, gardening, keep the appliances in working order, and so on. Generally just keeping the cabin, interior and exterior, in tip-top shape. After all, it’s a big financial commitment so you’re going to want to keep it in the best shape possible, right? All of this aside, owning a cabin in the Smoky Mountains is a wonderful, enjoyable experience and will be for years to come. So, let’s get down to business…initial costs and set up.
Your mortgage…how much can you afford to spend? Do you have a down payment? What’s the interest rate?
One thing to consider when you’re buying a cabin is that lending institutions often charge a higher interest rate for mortgages on second homes, or cabins, than what you may see being charged for a primary residence. This tends to be especially true when the property being purchased will be on the vacation rental market so don’t be surprised if this happens when applying for your loan. It’s usually not much higher but you have to disclose to the bank you’re going to put the cabin on the vacation rental market. You also want to make sure your budget will support making the mortgage payment on your own should your cabin not generate enough monthly revenue, at least in the beginning, to cover the mortgage from the rental income. Don’t count on rental income to make the payment for you. Although in many circumstances the vacation rental fees the cabin generates may make your payment in full, you should still be prepared to make the payment on your own, especially in slow seasons, etc.
It may help to speak with your bank and get preapproved for you loan before you begin shopping for your cabin so that you have your budget set and know how much you can afford to spend. The price range of cabins in the Great Smoky Mountains can be wide when you consider other things like size of cabin, location, age and all other things that can affect the cost. Another factor that can affect price is how many the cabin can ‘sleep’, along with the natural features near the cabin. So, before you begin your search, be prepared with your budget. You don’t want to waste time looking at these big beautiful cabins only to find out it’s not in your price range.
Another thing to add to your budget once you’ve gotten your loan preapproval is the insurance for your cabin. Sometimes your regular insurance company won’t cover a second home or a vacation rental cabin. Check with your insurance agent to be sure but even if your regular insurance company won’t cover it, many in Tennessee will. If you’re considering a cabin near the Great Smoky Mountains National Park or in the Gatlinburg, Pigeon Forge, Townsend, or Sevierville area, there are many insurance companies in and around the area who are gladly cover vacation rental cabins.
Another thing to consider when purchasing insurance for a vacation rental cabin is having a higher liability coverage limits because it’s a vacation rental. Most rental management companies, should you decide to contract with one, will require a certain amount on the liability coverage. A suggested liability limit is one million dollars or more. This, of course, can make the yearly cost of insurance slightly higher but very well well worth the minimal additional cost should the need arise. You’ll want to insure the structure, of course as well as all the contents. Remember, your rental cabin will be fully furnished, and you’ll need those furnishings insured. Most of the time, when you purchase a vacation cabin rental which has already been on a rental program, the furnishings are sold along with the cabin. So, you are basically purchasing the cabin fully furnished. It’s up to you whether you change out the furnishings or leave things as you find them. Speak with your chosen insurance agent concerning the contents of the cabin.
Another initial cost will be changing the utilities into your name. Being that the cabin will be a rental, the deposits on utilities may or may not be higher than if it were a primary residence. You will have electricity, water and sewage (if applicable), cable or satellite TV, and telephone. You may pay a bit more for a deposit on electricity. Trash disposal can depend on whether you’re going to be in charge of it or if it’s included with the services of your vacation rental management company that you hire, should you decide to use one. If you’re going to go it on your own, you’ll have to sign with a trash pickup company or dispose of the trash yourself if you live in the area. There are many waste removal services in the area but one thing you must remember is — your outdoor trash container must be bear proof! No matter where you’re located in the Smoky Mountains there’s the probability of black bears raiding your outdoor trash container. Bear proof is best. A fed bear is a dead bear is a phrase you’ll hear often when in the Smoky Mountains area. Next is your option for television reception. Should you go cable or satellite? There are pros and cons to both and we’ll discuss them in detail in an upcoming article but for now, you’ll have to remember you’ll need to put either service in your name no matter which you choose.
Next up is property taxes. As in buying any home, a Smoky Mountains cabin will have property taxes. You’ll need to keep this in mind and choose whether to add the taxes to your mortgage in escrow or to pay them on your own. One difference in taxes for your personal residence and a second home or vacation cabin is that since your cabin will be a vacation rental, you’ll also have to pay taxes on your contents. It’s called a “tangible property tax”. It’s as if you are running a small business by renting the cabin and this will be required. You’ll receive a questionnaire and if unsure how to fill it out, you can receive help with it from the county/city tax office.
These are the bare bones expenses to consider when you first begin your journey of buying a cabin in the Smoky Mountains region. At first it may be a bit daunting but in the long run, owning a vacation rental cabin can be a very rewarding experience. Especially if you love the Smoky Mountains and visiting the Gatlinburg and Pigeon Forge area. There’s so much to see and do and the beauty of the Great Smoky Mountains surrounds the area with natural beauty that will never fade no matter what the season. When you own your own vacation rental cabin don’t forget that you’ll get to spend time there too. Whether you decide to try your hand at renting it on your own or you sign with a rental management company like Pioneer Vacation Rentals, you’ll be able to block out time for yourself and your family to enjoy that special cabin you’ve chosen for yourself.
We invite you to continue reading on in this series where you can learn about the choosing the type and size of cabin for your needs, choosing the area where you’d like to have a cabin of your own, what amenities and attractions you’d like near your cabin, special considerations on maintaining your cabin and keeping it in good condition, the pros and cons of renting the cabin on your own, and the pros and cons of using a rental management company. All of this information and more will be covered throughout this series and hopefully provide an insightful look into owning a Smoky Mountain rental cabin.
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