Many people wonder who owns the beautiful rental cabins in the Smoky Mountains. The cabin owners are mostly people just like you. Are you considering buying a rental cabin in the Great Smoky Mountains of Tennessee? Are wondering just how to go about purchasing one? What happens next? Who takes care of it once you’ve purchased it? How do you go about renting it out? There are many questions to be answered when considering a buying a cabin for rent in the Smoky Mountains. This series of articles should help you to begin your search for 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 rental cabin. You’ll be making a down payment, of course. Your monthly expenses will include your mortgage payment, property taxes, and insurance. Also you’ll have lesser expenses such as caretaker fees if you yourself don’t live close by and upkeep as would a regular homeowner. Painting, gardening, and maintenance chores, etc. And let’s not forget the regular monthly utilities. It will also be your duty to keep the appliances in working order and the interior and exterior of the cabin in tip-top shape. After all, who would want to rent a cabin that isn’t in the best shape? All of these aside, owning a cabin in the Smoky Mountains is a wonderful, enjoyable experience and will be for family and friends for years to come. So, let’s get down to business…initial costs and set up.
So, your mortgage…how much can you afford to spend? Do you have a down payment? What is the interest rate?
One thing to consider when you’re buying any rental is that loan institutions often have a higher interest rate on mortgages on homes or cabins which will be put on the rental market so don’t be surprised if this happens when you apply for your loan. It’s usually not much higher but you must disclose to the bank you are going to be putting the cabin on the rental market for vacation rentals. You also want to make sure your budget will support making the mortgage payment on your own. Don’t count on rental income to make the payment for you. Though in many circumstances the vacation rental fees the cabin generates may make your payment in full, you must be prepared to make the payment 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 have determined just 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 affects 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. That way you won’t be wasting time looking at cabins that are beautiful but out of your price range.
Another thing to add to your budget once you have worked out how much you can spend on your mortgage is the insurance for the cabin. Sometimes your regular insurance company won’t sign on a rental cabin. Especially if you’re from out of state. Check with them to be sure but even if you’re regular insurance company won’t sign on the dotted line, many in Tennessee will. If you are considering a cabin near the Great Smoky Mountain National Park or in the Gatlinburg, Pigeon Forge, Townsend, or Sevierville area, there are many insurance companies in and around the Great Smoky Mountains National Park area who are experienced in insuring vacation rental cabins.
One thing to consider when purchasing insurance for a vacation rental cabin is having a higher liability clause due to the rentals. Most rental companies, should you decide to sign a contract with one, require a certain amount on the liability clause. A suggested liability limit is one million dollars. This, of course, can make the yearly cost of insurance slightly higher but it is well worth the cost should the need arise. You’ll want to insure the structure, of course but also the contents. Remember, you’re 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. What you decide in this situation should have an impact on how much you insure the furnishings for. Speak with your chosen insurance agent concerning the contents of the cabin. Most insurance agents in the Smoky Mountain area are very willing to work with someone from out of state who is purchasing a cabin and will be eager to talk with you.
Another initial cost will be changing the utilities into your name. Being that the cabin will be a rental, the deposits on certain utilities may or may not be higher than if it were a primary residence. You will have electricity, water and sewage if applicable, trash disposal, cable or satellite TV, and telephone. Electricity is a given. You may pay a bit more for a deposit on electricity. For instance, in Sevier County, the deposit is typically one thousand dollars. For water and sewage, it will depend on if your cabin is on city water, a water district system, or a well. As for sewage, whether you have city service or a septic tank will be a factor. If a septic tank, of course there is no monthly cost or fee to change into your name but there will be costs in the future to be sure it is keep in perfect working order. Trash disposal can depend on whether you are going to be in charge of it or does it come included with the services of your rental management company that you have hired to care for and rent out your property should you decide to sign with one. If you are going to go it on your own, you will have to sign with a trash pickup company or dispose of the trash yourself if you are living in the area. There are many waste removal services in the area but one thing you have to remember is — your outdoor trash container must be bear proof! No matter where you are located in the Smoky Mountain area there is the possibility 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 Mountain area. Next is your option for television reception. Should you go cable or satellite? There are pros and cons to both and we will discuss them in detail in an upcoming article but for now, you will have to remember you will 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 Mountain 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 than a regular home in which you would reside permanently is that since your cabin will be a vacation rental, you will also have to pay taxes on your contents. It is as if you are running a business by renting the cabin and this will be required. You will receive a questionnaire and if unsure how to fill it out, you can receive help with it from the tax office.
These are the bare bones expenses when you first begin your journey of buying a vacation cabin in the Great Smoky Mountain 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 the Gatlinburg and Pigeon Forge area. There is 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 will get to spend time there too. Whether you decide to try your hand at renting it out on your own or you sign a contract with a rental management company like Pioneer Rental Management, you will be able to block out time for yourself and your family to enjoy that special cabin you have chosen for yourself.
Be sure to continue to read on in this series where you can learn about the choosing the type and size of cabin for your needs, choosing what area you’d like to own a cabin in, what amenities and attractions you’d like near your cabin, special considerations on keeping your cabin up to code, the pros and cons of renting the cabin on your own, and the pros and cons of signing with a rental management company. All of this information and more will be covered and hopefully give you an insightful look into owning a Smoky Mountain rental cabin.