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How Investors Analyze Smoky Mountains Cabins Using AirDNA Revenue Data · Short Term Shopping

• 0:02
  Speaker A: Welcome to Short Term Shopping, where we explore homes for sale in the best vacation markets in America. Some homes we do like, some homes we don't like. Brought to you by the Short Term Shop. It's Short Term Shopping. All right, here we are to talk about the Smoke Mountains, East Tennessee, which, again, I must say how much I love it there. Used to live a lot closer to it than we do now, and it's something I think about all the time. I just love. I love Tennessee in general, to be honest. It's such a wonderful place of free. It's a lot of freedom.
• 0:47
  Speaker B: Yes.
• 0:48
  Speaker A: And the weather's great. You know, most cases you got. You got some, some highs and some lows, but no major extremes. And anyway, I got Reagan here from the East Tennessee Smoky Mountains. How are you?
• 1:01
  Speaker B: Hey, I'm good. I'm one of the agents out here in the Smokies, and I actually live in Townsend, Tennessee, which is honestly the best place in the world. So we, we love living out here. We live in the river. There's this river called the Little river that comes right out, out from the national park down straight through Townsend. And if we're not at home, the kids are usually swimming in the river. So we, we love it here, too.
• 1:26
  Speaker A: Wonderful, wonderful. And you've owned and operated overnight rentals for. For a decent amount of time.
• 1:32
  Speaker B: 2019 was when I bought the first one, and then I've been an agent here for almost four years, so.
• 1:39
  Speaker A: Okay, wonderful. Well, we just want to, you know, get a little update on what you're seeing in the market. We are in the fall of 25. Interest rates are obviously the big ticket item right now. They start. They're starting to go down a little bit. They've been very, you know, higher than they were for quite some time. They've been a little higher. And just the market in general, what are we seeing as far as buyers and sellers and such?
• 2:06
  Speaker B: Yeah, so in 2025 is. Interest rates kind of held around that 7% mark. Inventory just kept kind of climbing here in the market. So we just didn't have enough buyers to eat up all the houses that were coming onto the market. So we could see a steady stream of inventory building in the market. So kind of topped out right around 2200 list mid August, and which is just last month. But. But we are seeing a, a little bit of an improvement in the market. We are a little bit more favorable. Interest rates started about, I don't know, two and a half, three weeks ago. We. We started to see a little Bit of a blip down today. We just found out we had a 25 point basis cut from the Fed. So hopefully that will even help improve these interest rates further. But we can already see the inventory kind of coming down a little bit and under contracts going up a little bit. But we are still a bit in a sweet spot in the market where this inventory all still exists. So all of these listings have a ton of competition. So, you know, one seller may not be able, but not may not be willing to work with you to get to the number that you want to be for purchase price. But you might have five others just up the road with a very similar property that may.
• 3:26
  Speaker A: So.
• 3:26
  Speaker B: So we're kind of in a cool situation in the market that you might have to make multiple offers to try to get to the property that you want at the price point that you want. But sellers are coming down on price and also contributing to closing costs, which can just make the deal even sweeter for a buyer.
• 3:43
  Speaker A: So I just realized I'm wearing a beach hat, so I'm going to switch to something a little bit more Tennessee. There we go.
• 3:50
  Speaker B: Maybe get you like the Smokey the Bear. I don't know, like something.
• 3:54
  Speaker A: I don't know. Yeah, I'm pretty sure I have like a national park hat somewhere, but like a ranger hat.
• 3:59
  Speaker B: Like a ranger hat. My son has a ranger hat, so that's cool.
• 4:02
  Speaker A: My brother's actually a national park ranger.
• 4:05
  Speaker B: Fun.
• 4:05
  Speaker A: But I didn't have time to go digging so this was readily available anyway. So. Yeah, you know, there's a lot of folks out there, I think, that are still living in the past. And, you know, 21, 22 was an absolute. It was nuts, especially in your market. I mean, it was insane with the amount of buyers that were just coming out of the woodwork. And I think that maybe today and we're sliding into 26 here. I think a lot of people don't realize that that's gone. And I don't think it's even your markets. I think it's nationwide. This is going on where people don't realize that there's been a big shift from the way up here insanity down to. For the past year or two, things have been very slow in real estate sales. And now we may be starting to see a little bit of action going on. But are you seeing that? Are you seeing buyers that are kind of still like, you know, hesitant because they're living in the past?
• 5:06
  Speaker B: Not necessarily hesitant, but I think that they are definitely concentrating on running the numbers more you know, cash flow is definitely maybe a little bit slimmer as it than it was in the past. Whenever. Well, maybe not even in the hot, you know, the hot time, whenever things were selling for over ask and things like that, the real driving factor was that low interest rate. But then you still have to operate it and, and you know, make it cash flow at that point. So today, to me, it's no harder to cash flow to be honest, because you're just needing to run your numbers and offer at the price that makes sense with the current interest rates. And if interest rates improve in the future and you're able to refinance in the future, then you're just going to be even in a better.
• 5:50
  Speaker A: Do you think people are still in that same mindset where, you know, why should I bother because there's so many buyers out there?
• 5:56
  Speaker B: I don't think so, but I do think I'm. I'm experiencing buyers that are more willing to put the work in though, so to run the numbers and to, to vet the properties and at least now they have options. So back whenever everything was flying off the shelf in a week, you kind of had to. If you wanted to buy something, you had to know, go after the one that kind of fit what you wanted and that was what you got because there was really no other options. But now you're able to be a little bit more selective in it since there is so much inventory and, and so which I think is definitely a benefit to the buyer.
• 6:31
  Speaker A: Is it a numbers game? In other words, what I've been, what I've been doing, I haven't bought the Smokies in a while. I do look though. I have bought two beach houses this year in on 38. The hat I was wearing. But what I was. I just made a ton of offers. That's how I got. That's how I found deals. And so in other words, we narrowed it down to like five or six houses. We were interested. And we also did the same thing on a personal residence as well. A primary situation where, you know, there was so much available for sale, it was almost. It was hard to decide there was so much for sale. So I have two parts to that question. Number one, are you seeing it as a numbers game is like multiple. Find multiple properties and offer on a lot of them till you find the deal. But is that in turn maybe making the choice a little more difficult because there's options?
• 7:21
  Speaker B: Yes, I think it depends on the buyer and what their motivation is. So if, you know, I had a buyer that Came to me that had a million dollar budget. She had a million dollar budget. She wanted to buy the most properties she could buy for a million dollars. And we literally.
• 7:36
  Speaker A: Wait, which is how many?
• 7:38
  Speaker B: One. She wanted one property?
• 7:39
  Speaker A: Oh, most. Most. Like the biggest.
• 7:41
  Speaker B: Most property I got you. Yes. That she could get for a million dollars. So, you know, we combed through the MLS and we made ourselves a list of what we liked best to worst and just kind of started at the top and. And several of them were listed for more than a million dollars. And we just wanted to see how, you know, possibly motivated the seller may be. And I think it was the fourth offer that we ended up. All the other ones got rejected or we counted back and forth and just couldn't come to terms. But the fourth offer, she was able to pick up a six bedroom, brand new construction for under a million dollars. So which. Very nice property, 3,000 square feet, you know, wonderful. So it was a work, you know, getting into this thing. But you know, with all the offers and things like that. But it doesn't necessarily have to be that way either. But you know, you have to also know kind of what you want to go after. So you want a two bedroom that is in a particular, you know, budget range, then kind of the same thing. Kind of find the best fit for the money in that budget range.
• 8:46
  Speaker A: So in other words, find four or five that you're slightly interested in. But don't let yourself fall in love. Go out there and make a bunch of offers, whack up the sellers, do the best you can to get the best deal you can, and then fall in love.
• 9:00
  Speaker B: Yes. Okay, after inspection.
• 9:02
  Speaker A: Yes, after inspection.
• 9:05
  Speaker B: Don't fall in foreign inspection.
• 9:07
  Speaker A: Hey, you mentioned new construction. And again, this is a relatively new thing. We didn't really seek new construction in the smokies from about 2006. Seven. Right pre. You know, right around 08 until. Until Covid. Really. So what. Where are we at with new construction right now? Because there was a few years there where it was like all over the place, like, whoa, what is going on? And it was very common to have these new listings for sale. Where. Where do we stand in the new construction market? Like, is it still. Is there still a lot of it and is it attractive?
• 9:45
  Speaker B: So I don't think there's as much as there was kind of during the COVID time, just because there, you know, there were. There were two wildfires, the 2016 Gatlinburg fires. And then there was one I can't Remember in the 2020s on the Hatcher Mountain that burned several properties. So for a while there we were kind of just rebuilding on, you know, properties or on foundations that were burned. But there have been new developments started in the Spokies with new constructions. I, I don't know exactly how many they are still building a few, but I don't see as many. Used to, you could find like a, like a, like a property that was under construction you could go under contract on very easily on, on the mls, but there's not as many.
• 10:32
  Speaker A: Are they attractive? I mean, a general rule of thumb at least that I've always followed is you can have cash flow or you can have turnkey. That being said, I have bought new construction before, you know.
• 10:43
  Speaker B: Yeah, it's also builder quality and things like that too. So I think that is also the advantage of being like hooked in with the, with the Realtor here in the Smokies is like if it's just some Joe Blow that we don't know, he's coming from Minnesota or something and buying a lot and he's going to develop it himself and bring in his own builders. We've seen some people get into a bit of a situation being under contract on some of these, these new constructions and then they. Not quite, you know, they don't. They're not built to the quality that, that they should be and things like that, and there's delays and things like that. But so, so builder quality can definitely be a big piece of that new construction thing. But, but typically if it's one that's still building and you're going to go under contract on it, you're going to have to wait obviously, a little bit of time for it to be completed. So those are usually priced a little bit more favorably just to kind of, I guess incentivize buyers to go under contract before they're built to kind of, you know, help position them better. I guess like the developers that they already have a buyer for the property before it's even completed. But then now we've got some. That a bunch since we have so much inventory in Sevier County. People that have built new constructions that are just getting thrown in with the rest of the inventory. And some of those people, you know, the builders need to move them. They're just sitting on money tied up into these, these buildings that aren't, they're not renting or are not running well, probably to be making revenue for the short term rental perspective. So they can be ones that you can also get a deal on just because they, they don't they're not as emotionally involved in the property. They're not managing the property. They just built it. They want to sell it and get their cash out of it. And so we've seen a little bit of that too.
• 12:27
  Speaker A: Everything you're saying gets me excited as a buyer. I'm like, man, I need to go shopping. Come on. What is living there? Tell me about living there. Are you seeing changes there at all? Have you seen more people moving there to be vendors? Has that changed in the past post Covid years or. Not really.
• 12:46
  Speaker B: So I kind of. I live on the Townsend side, which is the far west side of the market.
• 12:52
  Speaker A: So.
• 12:52
  Speaker B: So we're kind of like a little blip off to the side. So I don't. So Maryville is the big town that's kind of right next to Townsend. So I do see a lot of. We've got a lot of growth just in the economy of the city in general. But it's. They complain everybody moving here from California, but so which my neighbors are from California, so that is true. But in Chicago. But I. I don't think it's a ton of people moving here, to be honest. To. To. To work here.
• 13:26
  Speaker A: I don't know. I don't think because there are an abundance of jobs, right? If you. If you move to your town to. To the East Tennessee Smoky Mountains and you are willing to work, you can get work, right? It's pretty easy.
• 13:39
  Speaker B: Trade crafts like electricians, plumbers, Anybody that wants to learn a blue collar trade and be a, you know, a very good professional in. In their job could do very well here. Builders can do build quality that could do well here. I joke that I think that there's like one group of like flooring guys and one group of sheetrock guys because I think that the. All of the builders, like they have to wait their turn to use like the good sheetrock guys. But yeah, I mean, I guess, yeah, definitely could.
• 14:12
  Speaker A: Major shortage of sheetrock in general.
• 14:16
  Speaker B: We have so much tongue and groove. So I think she rock is definitely a.
• 14:19
  Speaker A: That's true. I didn't think about that. Yeah.
• 14:21
  Speaker B: So we have so much tongue and groove that. So if I see a sheetrock house like I'm expecting the sheetrock job to be awful because there's just not that many people that do good sheetrock here. But I mean, obviously they do have some better people.
• 14:32
  Speaker A: I actually read somewhere recently about a major sheetrock shortage. Like, you know, people to do not. Not shortage of sheetrock, but people to do the job.
• 14:41
  Speaker B: AI is not going to put up sheetrock. So that might be. That might be a where we need to go.
• 14:47
  Speaker A: It's an opening and I will. But I will say of all this, I'm pretty. I find myself pretty good around a house. Sheetrock is hard. It is so hard to lie.
• 14:56
  Speaker B: I puttied many a hole and I don't ever want to put it, man.
• 15:00
  Speaker A: The tape and the getting the lines perfect. It's. I was looking at a house earlier that had rounded sheetrock on the corner of. It was really large rounding though. And I was like, man, I don't want to be that guy that looks hard. So hard. Yeah. Anyway, you have an interesting perspective on analyzing deals. I'd like to talk about that and like what am I doing to look for a deal in the Smokies today?
• 15:25
  Speaker B: So obviously running your numbers is key. So that when you run your numbers, I like to think in terms of things that are absolutes that you can know first. So when I run in my numbers, I start with all of the information I can put a number two and be fairly confident about. So obviously the purchase price, how much taxes am I going to pay on it? What I think, you know, use some good generalizations for utilities and expenses and things like that. And I come up with a number that it's kind of like my break even number. So all of these things that I. All my knowns and come into my knowns and I come up with my break even number. And then the one piece that is your unknown is how much money is this property going to make?
• 16:08
  Speaker A: So.
• 16:09
  Speaker B: So revenue in short term rentals is so dependent on the management of these properties. So it's a range of what we think a property can produce. There's lots of different ways to estimate revenue. The enemy method, we've got platforms that data scrape. So price labs, air air DNA. I think what was the air dictator aerobic or whatever. So there's lots of different ones that you can kind of use to kind of, I don't know, come up with because you have to come up with some sort of idea. Obviously you may be given rental history from a property, but really that's just giving you a. An indicator of how well it was managed in the past, like how good of a manager it was. So. So I like to just look at the market from a high level. And this is. This is kind of Smokies specific because I get like in some markets you have to be like across a certain road or in a certain neighborhood. So Smokies is Sevierville, Pigeon Forge, Gatlinburg, It's a pretty wide area and a majority of the area is short term rental friendly. So as long as we're kind of staying within that 20 minute driving distance to one of the major, major attractions destinations, we're usually pretty good here in the market. As far as positioning the property, I'm going to. Can I share my screen?
• 17:26
  Speaker A: Absolutely. Okay.
• 17:28
  Speaker B: All right. So this is just kind of how I like to use air DNA to give me some high level kind of ranges of what I can expect a property to prod. So in air DNA I'm looking at just like the market in general. So the whole Gatlinburg, Pigeon Forge market, you can, you can drill down into these submarkets if you like, but it really doesn't make much of a difference in the numbers. So I'm just looking at the whole, the market as a whole. So I want to go ahead from the get go and, and just kind of schlep off all of the kind of bad comps, bad data that I don't want to bring in. So that's properties that haven't been listed very long, properties with really bad review properties that have that, you know, available days to rent are very low. Like those are just not going to pull in good data for me. I want properties that are enlisted for a whole year, preferably things that have higher than 4.7 star ratings, to make sure that they're at least decent performers. So that's, I'm going to go ahead from the get go and filter that on here. So up here in listings. So I'm going to leave this here. So let's say we're going to analyze a two bedroom in the Smokies. So we're going to change the, the bedroom count to two bedrooms. Then I don't care about the bathrooms. I want the entire place. And then I just leave the real estate type to, to whatever.
• 18:56
  Speaker A: And why do you do that? Because there's only one real estate type in the Smokies.
• 19:00
  Speaker B: Pretty much.
• 19:01
  Speaker A: Yeah.
• 19:01
  Speaker B: Yeah. I mean like apartments, if I'm doing the entire place, then I mean it's, I don't really know how they, I mean how they actually bucket this stuff anyway. So.
• 19:13
  Speaker A: Yeah. Seems a little redundant.
• 19:16
  Speaker B: Yes. So then I'm going to come over here to performance. So I'm bringing in all of the performance price tiers that they have here. I am going to bring in both professionally managed and, and self managers. And this right here is host count. That's just how many properties the host has. I Just leave that all. So this is where I start drilling down into the good data. So days available I want to look at properties that have been been available for most of the year. So I'm, I'm checking 181 to 270 and then 271 to 365. Really probably the 271 to 365 is really what you should be looking at. But just to kind of give you make sure you're bringing in, I guess a good comp set. I'm going to leave it just to
• 19:57
  Speaker A: get enough houses basically.
• 19:59
  Speaker B: Yes. And then here's where I'm going to toggle on that star rating. So I'm going to set it at a 4.7. Anything that's below 4.7 on Airbnb is not showing up in the algorithm and is not going to be booking well anyway. So that's where I leave my review, my review star rating. And then for my review count I'm going to just set it here to over 10. So I leave it a little bit lower here because sometimes on air DNA I've noticed. So you can obviously you get reviews from VRBO and Airbnb. Sometimes those numbers can kind of, I don't know, they don't mesh well together. Like they don't add them up for some reason. So I, I leave the review count a little bit lower there and then I hit apply. So right now this is telling me that a average two bedroom cabin in the Smokies, using that those parameters is going to do 54,000k per year. But what I really like to do is I'll come down here into revenue, the revenue section and it gives you a bunch of graphs and other things here. But the very bottom, it's going to tell you here what a property is going to be producing a percentile wise. So the properties performing in like the 50th percentile are exactly average. So out of 100, if I have 100 property compser the property at number 50, this is what it would be performing at. So exactly average. So I take this graph because they don't give you, they give you it bimonthly and it would be nice if they would total it up for you, but they don't. But this is trailing twelve months. So it's really nice because it can kind of give you a real time. You know, like people will say like what did something do in 2024? What did something do in 2023? But maybe I want to know exactly what it did over the past 12 months that are, you know, the most recent to me. So this is to me better data if you're trying to find out real time what a property could possibly produce. But then I'll export this. So this is what it spit out for me. So this is telling me by month over the past 12 months what these properties produced in revenue. So then I can see a 50th percentile property is going to do the. It's around 51,000, but say a 75th percentile property, it did about 69,000. So if I'm looking at properties I can, I can fairly confidently, you know, assess that a two bedroom should probably, you know, an average two bedroom can probably produce between 50 and $70,000. So somewhere in there, so obviously something that's performing on like the 75th percentile range is going to be a little bit nicer. Maybe something that has granite countertops, updated bathrooms, things like that. So you can kind of gauge by your subject property what you're looking at, kind of where it will fit into these percentiles. So fits, you know, needs a full on rehab. It might be over here at the 25th percentile. So maybe only making $35,000 per year. But you know, with some certain upgrades or things like that like it can maybe give you an idea of what a property's potential could possibly be. So that's kind of how I like to like look at ranges and estimate revenue from a high level.
• 23:16
  Speaker A: You got, you basically got four fives and sixes. I like that. That's a nice little rule of thumb there. Go back to the, the spreadsheet. So you got four fives and sixes and a couple of threes, right? Well mostly five six sevens. Actually I'm looking at 75th because I figure that you know a decent, a decent owner operator that's been through the short term shop maybe had some coaching, should probably be in that range right there in the green box. And I like that we got five sixes and sevens is really what we're looking at here. Now these are not in order, right. They're the months are out of order for some reason.
• 23:49
  Speaker B: Oh, it did. That's interesting. Yeah, it did them by. It did them. I don't know what it did.
• 23:56
  Speaker A: I don't know.
• 23:57
  Speaker B: But yeah, yeah, it didn't.
• 24:00
  Speaker A: In other words, maybe a March and April or a 6 and a June and July or a 7 and an August is a 5 or something. That's an interesting concept there. You could really drive yourself nuts looking at these numbers. All day.
• 24:13
  Speaker B: But then you kind of have. So like this is market as a whole. So like if we're thinking from a two bedroom range then I like to use it as kind of, of like a baseline. So kind of, you know, when I'm looking at purchase price numbers and then I'm, I'm knowing that an average two bedroom is going to do this amount of money, you know, per year in revenue, it helps me kind of automatically rule out ones that I think are way too overpriced, that will never, you know, their purchase price will never. Cash flow with what I think the revenue will be will also help me, you know, quickly gauge what I think would be a good cash flower if it's, you know, priced right. And then I think it can, can do that revenue and you know, helps you kind of make quick decisions there. And then you can get, you know, drill down using the enemy method or things like that to kind of get, if you want to get you know, really into like the numbers of the, the surrounding properties.
• 25:06
  Speaker A: Yeah. And so basically, I mean I've always felt like this, a two bedroom, here's your number, you know and I think these numbers are pretty close. Like six seventy grand on a pretty good two bedroom is, you know, for somebody that's working hard, that's achievable. It's real number.
• 25:21
  Speaker B: Well, we kept like, you know, I would hear people say all the time, you know, they would, they shoot out these ranges like a property should do between X and X. And I, and I'm a numbers person, I'm a data person. So I was like, I want something to prove that to me that I can prove that easily and repeatable. And, and this is kind of where I, I came for that.
• 25:41
  Speaker A: What's the, what's the 90%, what's that total, the sum?
• 25:46
  Speaker B: So 88,000.
• 25:47
  Speaker A: See that's a little steep if you ask me. I mean it can be done.
• 25:50
  Speaker B: But. Yeah, but, but I mean think about it. If we're talking about a two bedroom in Chalet Village with a view of Mount LeConte, like I have a three bedroom that does, you know, $120,000 a year in there. So like.
• 26:02
  Speaker A: Yeah, but you're not everybody, I get that.
• 26:04
  Speaker B: But, but I also have a fantastic view in a nice house. So like this is. So you have to look if you're looking at a property that you're assessing that's got a pool and a view and a, you know, it's got all the bells and whistles, pickleball court, whatever Then you know that 88,000 is probably a more, you know, you don't want it. You don't want to run your numbers thinking that that property is only going to do $50,000 a year, you know.
• 26:27
  Speaker A: Yeah, absolutely. Okay. So it's kind of what we're saying. I think what you're saying is, is equal parts, like what is, what does the data tell me versus how nice is this house versus purchase price? Simple as that. Sort of, you know. Okay, cool. And then of course, going to the enemy method is more difficult, but it's also great. Peace of mind is what that is. Yes, it's time consuming. It's a pain in the ass. Most people want the easy button. And the enemy method is not that, especially now that cleaning fees are hidden and things like that. So you do need to spend some time on it. But again, for me, that's part of the fun. That's, that's a lot, you know, it's fun. So have fun with it. Shop for a property, enjoy the process, enjoy the obsession. But there's a fine line between that and analysis paralysis.
• 27:25
  Speaker B: I think that, yeah. And like looking at things a little high level for those folks that get stuck in analysis paralysis I think can be helpful because it can. Because at some point nothing works. And you know, I think if you get too granular and you get to like in the weeds with it and then you. Or everything works. I don't know. So at some point you kind of get, I don't know where you lose focus of what exactly you're looking for. And, and, and the revenue piece is nothing is guaranteed. So you know, you have to make the best, you know, do the best job at gauging what you think it can produce and how you can manage it and you know, commit to, to making it a performer. So that's a big piece of it.
• 28:04
  Speaker A: Love it. I do want to mention it's all about the guests. Guests are number one all the time. We talk about all these numbers and spreadsheets and money, money, money, money, money. But the whole point of the whole thing is vacations. Happy vacations for hardworking folks. And honestly, my experience, if that's important to you, you will do well. These folks have to be happy and good vibes in the universe. I'm not trying to be all granola bar here or anything, but to me that's a big part of it. They need to be shown a good time for their families. And that vibe will stay in that house. That vibe is there from those families and it'll pass on to the next family, and then eventually your reviews build to the point where you're peak price per night, you know? Well, Reagan, you're wonderful. How do we find you?
• 28:53
  Speaker B: So you can find me at Reagan? The ShortTermshop.com. that's my email. I'm one of the agents here in the Smoky Mountains, so find me there on the website.
• 29:05
  Speaker A: Wonderful. Well, thank you so much. The shorttermshop.com and the smoky Mountain podcast. We'll see you next time.
• 29:12
  Speaker B: All right, Bye.
• 29:13
  Speaker A: Bye now.