Go Big with Gib Podcast
Go Big with Gib is a podcast for professionals, business owners and entrepreneurs to talk about their big wins.
Go Big with Gib Podcast
Ep 57. The Smoky Mountain Masterpiece with Gib Irons
Owning a vacation rental can be a profitable endeavor, especially in high-demand areas like the Great Smoky Mountains. This episode explores the acquisition process, financial returns, effective management strategies, and the importance of standout amenities.
• Overview of Smoky Mountain Masterpiece and its prime location
• Breakdown of investment costs and potential gross rents
• The essential role of property management in maximizing revenue
• Key amenities that draw guests and enhance their experience
• Understanding expenses to calculate potential net profit
• Discussion on the benefits of real estate masterminds for investors
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Welcome to the Go Big With Gibb podcast, where we talk to professionals, business owners and entrepreneurs about their big wins. Hey guys, and welcome to this episode of Go Big With Gibb. I'm Gibb Irons, your host of the podcast. It's great to have you here with us Today.
Speaker 1:I want to talk about my vacation rental in the great Smoky Mountain National Park. So I own a six-bedroom, five-and-a-half bath vacation rental called Smoky Mountain Masterpiece, and it is literally on the outskirts of the National Park. From the back porch you're overlooking the National Park. It is just a beautiful property with very beautiful views from the front of the house and the back of the house. Property with very beautiful views from the front of the house and the back of the house. And then it also happens to be located near Pigeon Forge in Gatlinburg, which are very well-known tourist areas. The Great Smoky Mountain National Park attracts like 16 million visitors per year. So even though you may know more about Yellowstone National Park or some of the other national parks in the country, the Great Smoky Mountain National Park actually has the most visitors of any national park.
Speaker 1:I talked in one of my reels recently about the return metrics for the property and how it's been one of my best cash flowing assets of all the real estate investments that I've done. I wanted to kind of go through the numbers with you briefly. So I purchased the property in December of 2021 for $1,850,000. I made a 20% down payment and the down payment was $370,000. Then I invested approximately $185,000 in the furnishings. This was a brand new build that I purchased, so it wasn't set up, there was no furniture inside of it and I had to totally furnish the place and decorate it with artwork. You know a normal vacation property. You might spend about 8% of the purchase price on furnishings. In this instance, I spent 10%. It may even been a little bit higher than that. It could have been more like 12 to 15%, but it's very nicely decorated. The theme is the mountains mountain vacation. So my total investment on the property was the $370,000 down payment and the $185,000 in furnishings. I mean that included my electronics, tv, everything On average the property over 2022, 2023, and 2024, it has averaged about $250,000 in gross rents.
Speaker 1:I have a full-time property manager, which I highly recommend If you're going to buy a vacation rental. It can be self-managed. You can have a full-service property manager, like I have, or you can have a hybrid where the property manager maybe helps you with marketing and things like that, but they don't assist you with dealing with the guest and the bookings. I personally, as an attorney, I wanted to have a full service property manager, which is what I have, and I pay that property manager 20% of the gross revenue. So in a year where we generate $250,000 in gross profit, the property manager takes 20%, which is about $50,000. On average, I spend about $20,000 on maintenance on the property every year. For example, the property has an elevator. The elevator has to be maintained. We've also got a fire pit which requires propane, and then there's just other general maintenance costs. When you're having that many guests, wealth and save money on taxes through recession resistant real estate investments that create passive income for you and your family. If you want to secure your financial future, go to investwithgibcom to schedule a 30-minute introductory meeting with me, gib Irons Again, that's investwithgibcom.
Speaker 1:Amenities are hugely important when you talk about vacation rental properties. In this particular property, the view is the main attraction and the location, but on top of that I have an indoor pool and I have one of the nicest home theaters that I have ever seen. We went all out on the theater. We bought six really plush black leather couches, we did stadium seating, we put this huge bar with a hard stone countertop in the back and we've got like a real popcorn machine. We've got several arcade style games and just pretty much anything that kids could want is there for them. The biggest draw of the theater room is we have a 10-foot projection screen and it's not one of those older projection screens where you lose color because of the size. It actually has amazing color.
Speaker 1:So, going back to the numbers, we average about $250,000 in gross rent pay, 20% of the property manager, which is $50,000, and then about $20,000 in maintenance. So the net payments to the owner generally are about $180,000 per year. Now, out of that $180,000, I've got to pay the principal and interest on the mortgage, the taxes, the insurance and the utilities. I have a loan on the property. As I said, I financed 80% loan to cost and it was at an interest rate of 2.5%. Back in December of 2021, interest rates were at an all-time low and I was able to get a fixed interest rate of 2.5%. So my monthly mortgage payment is approximately $6,000 per month, which is $72,000 per year. I pay for a commercial property insurance policy with commercial liability and that costs me approximately $10,000 per year. Property taxes are assessed at $8,000 per year and then the utilities, including electric water. All that kind of stuff averages out to be about $10,000 annually. So, all said and done, I make at least an $80,000 profit on the property each year. Now there have been years where it's been closer to $100,000, but for 2024, the actual net profit was closer to $80,000.
Speaker 1:So if you're looking for a really good cash flowing asset, I highly recommend that you check out short-term rental vacation properties as a resource. There is an excellent mastermind called Vodacy. It's spelled just like the word odyssey, but with a V at the beginning, and it's run by a guy named Sean Moore who is a vacation rental expert. And I joined the Vodacy program before I purchased Smoky Mountain Masterpiece and found it was a very reasonable cost to enter the mastermind. I'm sure it's increased since I came into the program, but it was very, very reasonable. There was a ton of training modules and then coaching and I highly recommend that if you're considering buying a vacation rental property, you should consider joining Vodacy and talking with Sean and his team, because they helped me underwrite the property, they helped me find a realtor. They put me in touch with different lenders and so they had a huge network all the way down to property insurance recommendations.
Speaker 1:I'm very happy with this property. I'd say it is by far the best cash flowing property that I've ever owned. With it being a larger property, I expect that it will appreciate significantly over time. So not only are the renters paying down the principal balance on the mortgage, I'm also getting an amazing cash on cash return and I expect a lot of appreciation due to the size of the property. So if you'd like to talk about real estate investing whether it be short-term rentals, whether it be multifamily or medical real estate reach out to me. I'd be happy to jump on a call with you. Thank you so much for joining us on this episode today, and I'll see you next time. Thank you for listening to this episode of Go Big with Gibb. If you haven't already, go, follow us on social media at GibbIrons. We'll see you next time.