Smoky Mountain Short Term Rental Expenses EXPLAINED: What You’ll Really Pay to Own One (Episode 4 of 10)

Avery Carl [00:00:03]:
Hey all, welcome to the short term show special episode series on the Smoky Mountains in Tennessee. We are doing a ten episode deep dive into buying short term rentals in the Smoky Mountains. So we’re going to talk about a lot of things in these episodes and we’ll probably be doing a quarterly update from here on out after we finish these ten. So make sure you hit that subscribe button so you get those delivered straight to your phone when they come out. We do have some supplemental materials for you in addition to the content on this podcast. So any information that you need on current property pricing you can find on our website@theshorttermshop.com and we also have, courtesy of our friends over at Air DNA, current air DNA data for this market on our website as well. So you can check that out on the shorttermshop.com. and if you guys are interested in buying a property in the Smoky mountains with a short term shop agent, you can email us at agents@theshorttermshop.com or if you just want to learn more about buying short term rentals in this market, you can join our Facebook group.

Avery Carl [00:01:07]:
We’ve created a 50,000 person community on Facebook all about investing in short term rentals. You can join that. It’s the same title as my book. It’s called short term rental, long term wealth. See you guys over there. Hey guys, welcome back to the short term show slash short term rental Smoky Mountains podcast. We have not come up with an exact name of it. It, as of the time of this recording today, we’re going to be talking about one part of the analysis.

Avery Carl [00:01:38]:
So we’ve technically got a two two part episodes of analysis. We have a data and numbers separate segment. So make sure you check that out. On this segment, we’re going to talk about expenses because a lot of people will say, how on earth do I know what my expenses are going to be? So we’re going to talk about that. But first I’m going to introduce my expert panel. First on the list is Derek Tellier. Derek, you want to introduce yourself?

Derek Tellier [00:02:04]:
Yeah, absolutely. Derek tell you, I’m an agent with the short term shop and the smokey’s been around since the very beginning. Got twelve, well, eleven active short term rentals in the Smokies, one more in the process of being remodeled as of this recording. So yeah, I dabble in the numbers a little bit. So I got a pretty good grasp on what these kind of things go for. And there’s a lot of variables. So glad to be here and looking forward to helping out.

Avery Carl [00:02:30]:
All right, next we have Ethan McCarty. Introduce yourself, Ethan.

Ethan McCarty [00:02:33]:
Yep. So I’m Ethan. I help the short term shop out on Facebook and doing different things like that. Currently have two cabins in the smokey, a studio in Pigeon Forge, and a two bedroom in Gatlinburg, and also got a duplex down in Gulf shores. But yeah, just like Derek said, happy to be here, happy to talk expenses.

Avery Carl [00:02:53]:
All right. And last but not least, we have Julie McCoy, who almost needs no introduction.

Julie McCoy [00:02:58]:
I don’t know. I think. I think we get an inflated sense of my, of my profile at this point in our little bubble. Um, yeah, I’m Julie McCoy. I am one of the agents in the smokies and in the Tennessee Smokies. I own seven short term rentals here. Anywhere from a studio cabin up to a pretty big four bedroom with a pool. I’ve got a couple of those.

Julie McCoy [00:03:22]:
And yeah, I’ve been around since 2017 in this market and happy to talk about my experience with expenses.

Avery Carl [00:03:33]:
Awesome. So the first thing that I want to highlight here, before we get into talking about different line items, is that there’s no way to know exactly what your expenses are going to be when you buy something. I like to tell people, I liken it kind of to what I expect my expenses to be when I’m buying a primary home, because even though it is an investment, you’re still paying all the utilities as if it were a primary home. So you definitely need to include a lot of extra things. I mean, that’s pretty elementary. There’s a lot of things you would include when you’re analyzing a short term rental that you would not when you’re analyzing a long term. So hopefully, we’re going to shed a little bit of light on what you can expect in this market, but we’re not going to be able to tell you exactly what it’s going to be, unfortunately. I wish we could, but unfortunately we can’t.

Avery Carl [00:04:21]:
So let’s start off with utilities. So that’s the first one that I want to hit. Not so much just what it costs to keep the lights on, but where you are going to run into a higher or lower utility bill than in other areas. So we’re recording this in the wintertime, and we just came off of an ice storm where the power went out in some places and we had a lot of people saying, oh, my h vac, my heater is not keeping up with the, with what the temperature is. So, you know, it was like 2010 degrees outside and they had the heater set to 70, and it was only keeping it to 60. And I saw a lot of people say, oh, my gosh, my cabin’s not energy efficient. It must be leaking air everywhere. What is the answer to that, guys? Why is that? Why? Let’s talk about that first.

Derek Tellier [00:05:15]:
Well, first of all, the climate here is not getting temperatures like that around here is extremely rare. So you’re right, a lot of these are log cabins. And even if they’re not log cabins, they’re not energy efficient like they would be up in the north through the northeast, because they don’t have to be that you don’t build to standards for arctic temperatures when a market rarely ever sees that. So when you see something like that, you know, that’s extremely rare. It’s going to be the issue. We run heat pumps here. We don’t run furnaces like they do up north. It’s just a different system that’s just not designed to handle those kinds of temperatures.

Derek Tellier [00:05:51]:
But you’re going to see them every once in a while. So when that happens, electric bill goes up. I mean, it’s the nature of it. It’s going to run all the time, and you have to be willing to understand and accept that. Factor it in a little bit. But it’s, again, it’s very rare. You don’t see that all the time. So you just gotta look at averages.

Avery Carl [00:06:08]:
Yeah. So every now and then when that happens, because in the south, we have heat pumps that are a combination unit with our air conditioners. It’s not a separate furnace. Being from the south, I didn’t even know what a furnace was until I was an adult.

Julie McCoy [00:06:21]:
I’m not.

Avery Carl [00:06:21]:
I’m sure I don’t know that I still know what a furnace is, but, um, they’re just not made to withstand, you know, long term cold temperatures because they don’t have to in most cases. So every now and then, you will see that in the smokies, maybe once every two years, you’ll have something like that and your electric bill will go up. Anything else that you guys want to hit in relation to electric bills and maybe how you would figure out what it’s going to cost for a property you’re planning to buy.

Julie McCoy [00:06:51]:
Well, there’s a few things I think are worth talking about. One is thinking about what is the demand on your power system that may be different from your personal home. Hot tubs are a very, very common in this area is a very desired amenity, and that is, by nature, going to draw more power than if you didn’t have one. Um, also indoor pools are becoming more and more popular. Those are, can be tremendous power draws, you know, certainly worth the expense in my opinion. But, but yeah, your power bill will definitely go up with amenities like that. And then I think the final aspect is just having awareness that people on vacation are not really going to be as conscientious, most likely as they might be in their personal home, about, you know, keeping temperatures moderate and things like that. So given the opportunity, they may crank the heat up or the cold down, um, more than you might want because it’s their vacation and they want to be comfortable more than they want to save you a buck.

Julie McCoy [00:07:55]:
So just keep that in mind and I think, you know, just kind of error on the high end when you’re thinking about power bills. And that will, you know, that will set you up better than estimating low.

Ethan McCarty [00:08:08]:
And to go off what Derek said of averages, you should just be able to call your electric company and get an average of the bill there or an idea of what it might run. So that’s an option. You could always ask the seller to give a three month average of what the bill has been. So if you’re looking to get a close to an idea of what you’re after, you could go that route.

Derek Tellier [00:08:33]:
Sometimes. Sometimes listings will provide that in the Smokies. It’s not super common, but we will see it on occasion. But also one thing that does make it easy. Not every area is like this, but there’s only basically one electric company in Sevier County. Sevier county electric service does pretty much everything. There may be some overlap with some other areas I know, like my daughter lives on the northwest side and she’s actually in a Knoxville utility district with a severe address. But for the most part, the cabins and the properties you’re going to be looking at are going to be with Sevier county electric service.

Derek Tellier [00:09:03]:
My experience has always been that they are super helpful and super friendly. You can always call them up and yeah, they’ll usually give you a twelve month average. One thing I think that’s worth mentioning while we’re talking about electric that people don’t realize, and as agents we’re guilty of not reminding everybody, is severe. County electric does require a security deposit. When you start your electric service at your cabin as a short term rental, they do this to protect themselves because in the past, between natural disasters and the recession we had in zero, eight people stopped paying their bills. Electric service got hit, so now they hold a security deposit. It is held, I believe, in an interest bearing account and you do earn that interest, you get it back when you sell your property. If your property has not been a short term rental, that deposit is probably going to be about $1,000.

Derek Tellier [00:09:53]:
If it has been a short term rental, they are going to look at the average of the last twelve months and I think they double it. Julie may remember the actual number there, but be prepared when you go in and when youre underwriting, not just for your monthly bill but your expenses up front, just go ahead and factor in a grand that youre going to need for your electric security deposit. We forget to bring it up because were used to it and its always seems to be a big surprise to everybody. So hopefully a lot of people will see this and now theyll know.

Julie McCoy [00:10:20]:
Im so glad you said that because yes, I had completely forgotten about that and at this point I dont want to think about how much of my money the power company has in their possession. But yeah, I believe if its been a short term rental in the past they double the highest power bill from the last twelve months. Im pretty sure thats their metric. And there may be an option to not do the security deposit but it would involve a credit check which most people don’t want the hard pull on their credit and would rather put in the deposit. But if that’s something that concerns you, you can always ask them if there are other options instead of the deposit, but be prepared for that.

Derek Tellier [00:11:01]:
They won’t do the credit check for a, for a rental. They will do it for a primary.

Julie McCoy [00:11:05]:
Oh really?

Derek Tellier [00:11:05]:
Yeah.

Julie McCoy [00:11:06]:
Okay.

Derek Tellier [00:11:06]:
So if it’s your primary residence, you can get a credit check and they will waive the deposit? Yes. But otherwise it is, there is an option. I don’t want to ignore it because people will talk about it. You can get a bond. There are companies out there that sell bonds where the utility district will take a bond for it, which means less money upfront. But you have to renew the bond every year. So if you’re planning to hold the property, bonds can, I don’t, they vary in price, but if you’re going to hold the property for four or five years, you’re going to end up paying more, maybe less than that, maybe three years. You’re going to end up paying more than you would if you just paid the deposit.

Derek Tellier [00:11:39]:
It’s an option. It’s out there. Look into it, see which one is best for you. For the most part, if you factor it in, just pay the deposit, safer, easier and simple and you get it back.

Julie McCoy [00:11:50]:
This is the other thing to remember.

Avery Carl [00:11:52]:
At some point, yes, at some point, eventually, you may never. If you never sell. Well, never sell.

Derek Tellier [00:11:59]:
Never sell.

Julie McCoy [00:12:00]:
Yeah.

Avery Carl [00:12:01]:
I’ve always regretted selling everything that I’ve sold, which hasn’t been much. All right, let’s move on to a few other of the smaller, easier to figure out utilities and. And expenses before we get to some of the bigger ones. So what about gas in the smokies?

Julie McCoy [00:12:18]:
So there is very limited natural gas only in city limits, and in small areas within city limits will you find natural gas. What is far more common out here is propane. And so you’d have a propane tank that is located outside the property can be anywhere from, like, 100 gallons up to 250 gallons of, um. And they are usually leased through a local propane provider. There are many of these, um. Or you can buy the tank outright. And the difference is, if you are leasing a tank, then the only company that will fill that tank is the company you’re releasing it from. If you own your tank, then you can have any company that you desire fill your tank.

Julie McCoy [00:13:04]:
And, you know, if someone, you know, if you feel like you’re not getting great service, it’s really easy to switch. I don’t know that I recommend one over the other, necessarily. It’s up to, you know, your own tolerance, and it’s a decent idea to ask who you know, if a tank is leased for a property that you’re buying, who’s the provider at kind of. What’s the reputation? There’s a lot of companies. Some have good reputations, some do not. So it could be a useful thing to know to decide if you want to take over that lease or nothing.

Derek Tellier [00:13:35]:
And propane prices, if you’re not familiar with propane, varies throughout the season. So when you. When you’re figuring this out and you’re looking at average expenses, the smart thing to plan ahead for is plan to have your propane tank filled, like in August or September, because the winter is when it’s going to be used most of the time. There are exceptions. Most of the time that propane tank is being used for your fireplaces. That’s generally the only thing. There are some gas fireplace or gas stovetops. You will see those around here running on propane.

Derek Tellier [00:14:04]:
I actually own some properties that have h vac systems, heaters that are on propane. All I can say on that is it costs a lot more when you’re running your heat on propane. So factor it in. Yes, your electric bill is quite a bit lower, especially during this cold rush. We had, but my propane pill was higher than what my electric bill would have been. But if you happen to be buying a property that has propane H vac, be prepared that you may have to refill it during the winter and the prices will be higher. So, yeah, do the research on it. But most of the time, it’s just.

Derek Tellier [00:14:38]:
It’s just a fireplace. And, you know, you can always get away with gas. Do away with gas fireplaces, swap electric in there, and do away with the propane altogether. I mean, propane is one more thing. In a lot of cases, if you want to, you can eliminate it. Again, if it’s natural gas, you get that in the city of Gatlinburg, some areas of pigeon Forge and Sevierville, then you don’t have to worry about running out. You’re never going to have to run out. They keep it.

Derek Tellier [00:15:00]:
It just runs all the time. But again, it’s one more number, and again, not common. You won’t see it a lot. So.

Julie McCoy [00:15:08]:
Okay.

Avery Carl [00:15:09]:
And last of the utilities. Well, I guess we can get to Internet in a minute. I almost forgot. Internet. Water and sewer. So what is different about water and sewer payments in the smokies, or lack thereof, than in other markets?

Julie McCoy [00:15:23]:
You usually don’t have them. Most of our properties here are on private wells and septic systems. So we see shared wells quite a bit. But a lot of times the cabin will have its own independent well. That is its water source for all of the water in, you know, in that property. And then the sewer system is a septic system that, once again, is independent to that property. So the good side of that is there are no bills that are no recurring utility bills that are associated with these. The well pump will run off your electricity, so it gets factored into that.

Julie McCoy [00:16:03]:
And septic is a gravity fed system that has no power or other mechanical parts to it. So that is, to a large degree, is set it and forget it. The thing that you do have to factor in, though, is the occasional maintenance of these systems and occasional repairs. So, on your well, I would kind of consider it similar to like a h vac system or, you know, your water heater. Every ten years, 15 years, the well pump will eventually, you know, will eventually reach the end of its life and need to be replaced. And so just kind of budget for that as a capital expenditure, you know, probably 1000, $1,500 can depend on the depth of the well and some other factors. And there are some other parts of the well mechanism that may need occasional upkeep or replacement that are less expensive over time. So if you want to kind of budget what you would ordinarily pay for, maybe a water bill, $50 a month or something like that, put that in your underwriting just to cover, you know, those occasional costs when they come up.

Julie McCoy [00:17:12]:
And on the septic side, it’s a good idea to have your septic tank pumped every couple of years just to keep things, you know, moving through there cleanly. And, you know, any debris that gets in there that shouldn’t be, you know, shouldn’t be in there, anything inorganic will get taken out, and it’ll just help limit the potential for problems down the line. If used perfectly, a septic system should just kind of go indefinitely. But we do not live in a perfect world, and guests are not perfect, either. So that’s. That’s my take on it.

Derek Tellier [00:17:47]:
A couple of points I’ll add on the well and the septic one. I know, you know, a lot of our clients and a lot of people who are buying in this area are not used to wells and septics. So the first thing is really high level. A well is a big hole in the ground that they drill down until they find water and they drop a pump in it. It’s that simple. There is nothing complicated about a well. It is simply a hole in the ground. Because every place on this planet has water.

Derek Tellier [00:18:09]:
If you go down deep enough, we are in the mountains. Some of them are deeper than others. But bottom line is, that’s all it is. Septic. There’s a lot of different systems out there, but most of our systems are simply a septic tank with a drain field. And again, google it. You can learn all about them. One thing I’ll recommend is, you know, if you don’t know the history of the septic, if the.

Derek Tellier [00:18:29]:
If the seller has never had it pumped or has no idea when the last time it was pumped, just go ahead and plan to have it pumped. Depending on where it’s located, how easy it is to find how deep it is. We’ll decide how much it’s going to cost. Go ahead. When you’re thinking about that, talk to the septic company. You’re going to have, you know, pump it when you get started and ask them about having a riser put in. So when they first time they dig it up, it’s going to cost you more. They got to find it.

Derek Tellier [00:18:55]:
If they add a riser to the top of it, basically, they’re adding a little chimney, a little cap. That makes it easy for them to get to the next time. So in the future, when you have to have it pumped, you’re only going to pay for them to pump it. They come, they open the lid, they drain it, you’re good. Just know that. Think about it, factor it in. It’ll probably cost you a couple hundred bucks to get that done. And if nothing else, it’ll save you aggravation down the road.

Derek Tellier [00:19:19]:
You don’t have to worry about your yard getting dug up next time it has to be pumped. And of course, there are areas that we do have utility water and sewer in, in the smokies. Again, back to like, the gas in city limits. City of Pigeon Forge, city of Survival, city of Gatlinburg, all have city water and sewer in some areas. If one thing I definitely, again, they vary cost wise. One thing I will point out, the eastern side of Gatlinburg, there is a utility called Web Creek. If you are buying anything in the cobble knob area or out in that area, know that Webb Creek is one of the highest utility companies in Tennessee. So if you’re getting your water and your sewer from them, probably need to at least double, if not two and a half times, what you would probably think your utilities are going to be.

Derek Tellier [00:20:10]:
I believe the minimum water bill for Webb Creek is $120. That’s your baseline. I have a property out in that area, and it took me by surprise when I first got it. So if you’re on a Web creek again, just bump that number up a little bit. It’s definitely going to be higher than anywhere else.

Avery Carl [00:20:26]:
Oh, that’s a pro tip. I had no idea. Okay, next, let’s hit on the Internet briefly, and then we have some of the stuff that’s a little, like, meatier and harder to kind of understand for newbies. So Internet, there are places in the smokies, and it’s getting to be less places all the time, but there are places where you can’t get regular Internet. So let’s talk about first what the usual companies are that do provide, quote, regular Internet, and then what your alternatives are if you’ve got a great property that’s in a place that those places don’t service. So spectrum, I think, is the biggest one, right, for cable and Internet. Then there’s also at and t and xfinity.

Julie McCoy [00:21:11]:
Affinity. Spectrum are the two biggest cable providers, in my experience, and they kind of have their own territories. You don’t usually get a choice. It’s just who services where that property is.

Avery Carl [00:21:23]:
Yeah. So you would just when you go to close and you need to get your cable and Internet, or you should probably know what this is before you close to make sure you don’t have to go. An alternative route is find out who services it and, and call them to get your, your stuff connected. Let’s talk about the expense of having actual cable versus just Internet with streaming services. So we personally cut the cable cord and just have streaming services. BYO password. What about you guys? What do you seeing as the price difference? Because I think we’re paying like maybe $120 a month for just the really good Internet and not cable.

Derek Tellier [00:22:04]:
So, yeah, I’m the same. I have, I have cut the cord on all but one of my properties, one of my bigger ones I still have cable at, mainly because I wanted to remove all mention of cable in my listing and give it a buffer before I cut it so that somebody didn’t book it and find out that it had cable. I have cut it or never had it at all. My other ones. Cable is extremely expensive. It’ll triple your Internet, what your normal Internet bill would be typically, and the reality is most people, you’ll occasionally get people that want to watch the game on Saturday. As long as it’s disclosed in your listing, it’s not a big deal. I never get any real complaints about it.

Derek Tellier [00:22:42]:
And one, here’s a tip. If you’ve got xfinity or spectrum, usually when you get a new service, it’s $50 a month for twelve months. And after twelve months it goes up to like $90 a month. Wear them out to get them on chat, text them, tell them, hey, my bill went up. I know my promo expired. I’d like to. How do I get that bill back down? I promise if you keep doing that, you’re going to get your bill back down. I have never, more than a month or two, paid more than $50 for Internet in three years.

Derek Tellier [00:23:11]:
In this market with high speed, they’ll try to sell you on a higher speed, 800 megabytes for dollar, ten more a month. The typical is three to 400. It’s plenty fast enough for just about any cabin out here. So wear those guys out. Now. If you can’t get one of those, that’s a whole different scenario. And everything I have has cable so I can’t speak highly to it. Ethan may have one and I think Julie has some that she can speak a little bit more about.

Derek Tellier [00:23:38]:
Those alternative ones.

Ethan McCarty [00:23:40]:
I am blessed with spectrum. So take it away, Julie.

Julie McCoy [00:23:45]:
Yeah. I mean, I think the ideal is if, if you can get spectrum or xfinity just because it’s a hard line that, you know, generally you’re not going to deal with you know, weather interference or outages beyond what you may experience with power outages or something like that, which Avery, we should circle back around to power outages at some point. Um, so yeah, I mean that’s going to be the fastest and most reliable that you can get out here. However, there are certainly plenty of places that it does not reach yet. And my three largest, most expensive, highest revenue generating cabins, none of them are on xfinity or spectrum. So I’ve got two different Internet solutions there. It’s the same type of technology, they’re just two different companies and they utilize a broadband technology. And I am not an expert on how this works, but it’s essentially, it’s essentially a line of sight, kind of like a satellite except instead of a satellite in the sky in space orbiting the earth, it is, you know, it is a land line of sight, little satellite.

Julie McCoy [00:24:54]:
So I’ve got these little dishes that are like this big mounted on the side of the house and it looks at usually it’s piggybacking off of a nearby property that gets that service and so that is how that functions. I’ve had a very good experience so far with both companies on this. I don’t get complaints about my Internet speed and none of those properties have ever had a tv subscription of any type, even satellite tv. So everybody’s streaming everything. They are all four bedroom properties that are over 4000 sqft. So lots of devices and things like that. So generally speaking I haven’t, you know, haven’t had an issue and feel good about recommending those companies. The thing to know is because it is line of sight, then there needs to be a line of sight available.

Julie McCoy [00:25:49]:
So they are not going to be able to access all things as well. You may have to call around to a few different companies to find one that will serve as your particular property. So my newest one, I went to my original company and said hey I’m buying this property, do you service here? And they said no, not yet. We’re working on it. We’re, it’s a work in progress but we’re not there yet. So I reached out to somebody else and then we still had to jump through a couple of hoops. I had to get a little dish installed on my neighbor’s house who is also fortunately a client of mine to get the service over to me. So.

Julie McCoy [00:26:27]:
But made that happen and that’s been great. So that’s your best bet. If you can’t get you know, your typical cable Internet connection. Then the third option. Now, Starlink is getting established here. That may be a good option if you’ve got the correct view of the sky. If you’re covered by a bunch of trees or down in a valley, that’s probably not going to be the best option for you. But if you have a very wide open view of the skyd, could be a great solution.

Julie McCoy [00:27:03]:
I’ve got some clients who have Starlink and love it, and then the final thing would be satellite Internet. If you have no other option, then you can go with, like, a satellite provider, like dish or was it via sat? Hughesnet?

Avery Carl [00:27:19]:
Yeah, there’s. There’s a few of them. Slow, right?

Julie McCoy [00:27:25]:
I have never had a good experience with them. I’ve not tried recently, but that tends to be like, maybe email only. You’re not going to want to cut the cord on that. I don’t think it’ll support any sort of robust streaming. There’s usually data caps and so on, so that’s a less than ideal solution. But it does exist.

Derek Tellier [00:27:49]:
I was going to say, not to overly complicate. There is one other. There are some services out there that are strictly cell phone signal providers. There are some. Viper broadband is a popular one where they use multiple different providers. They just put a different sIM card where they’re literally using your 4G or 5G signal, just like your phone is. So if you’re out there and there’s no xfinity, there’s no spectrum, these aren’t options. You don’t have a clear line of sight.

Derek Tellier [00:28:13]:
If you can get a cell phone signal, you can probably get some type of service that will work off of that type of signal. Tends to be a little bit more expensive, but sometimes that’s the only option. And last but not least, here’s reality. Here in the smokies, there are cabins where you will not get Internet, period. There’s no options. No line of sight, no satellite dishes, no cable, no cell signal. Be aware, it can happen. Sometimes it’s because it’s in a little holler, dipped out in the middle of nowhere, and you just can’t get anything.

Derek Tellier [00:28:46]:
Not common sometimes in those we mentioned at and t at the beginning. If it’s got phone lines to it, you can sometimes get like a DSL type service that’ll be kind of slow. There is potential for that, but it is a rare occurrence that you will have a property that will have zero Internet.

Avery Carl [00:29:02]:
I owned one for a while and eventually one of them started servicing. So what are the names? Of those line of sight ones, Julie, so that people can, can check that out if that ends up being the way they have to go.

Julie McCoy [00:29:13]:
Yeah. Hollering is the most popular one. I think. I think they’ve got kind of the biggest reach. And then the other one that I’m familiar with is called Wi Fi squared. And they are awares Valley based company. So they’ve got a pretty broad reach in Wears valley and they’re working on expanding that. But yeah, if you’ve got a property in Wears Valley, I would definitely reach out to them.

Avery Carl [00:29:37]:
Awesome. So lots of good Internet information there. And now we’re going to get into some in the weeds. That’s what I’m going to call it. In the weeds. There’s a few things. First, let’s talk about cleaning and how to figure out what your cleaning fee is probably going to be. Are there any? Um.

Avery Carl [00:29:54]:
Well, yeah, well, I don’t want to get ahead of myself, so figuring out cleaning expenses.

Ethan McCarty [00:30:00]:
Yeah. So I can start with how I do it anyway. And, uh, you guys can tell me if you do it different. But, uh, the starting out, what I did was just, I knew where the cabin was that I was interested in. Just got on cat on Airbnb, looked at cabins very similar to mine, see what they were charging, assumed they had a little upcharge into that and got a general idea of what I might be spending on cleaning. The other thing that you can do is call a couple of cleaning companies and tell them the size of the bedroom, get a couple quotes, and you would know exactly what you, what you’re going to spend there. I already said it, but remember, you get charged one thing and you can charge another thing. So you could make a little bit off of your cleaning.

Ethan McCarty [00:30:39]:
So that’s how I do it on my end.

Julie McCoy [00:30:44]:
Yeah, I agree with that enemy method. What, you know, what surrounding cabins are charging. You want to keep your fee in line with that. You’re not be too high or too low. In my opinion, though, you can play with that in a number of different ways, but that should give you a good idea of what the baseline should be. And there can be a pretty broad spectrum of what you get charged based on the company. A big impact is, you know, part of it’s going to be about how big is the property, how many square feet, but another thing is going to be how many beds are there because they’re changing linens on all of those beds every turn. And so if you’ve got a, you know, if you’ve got a 1500 square foot cabin, but you really pack them in.

Julie McCoy [00:31:27]:
There’s, you know, ten, you know, can sleep ten people. There’s, I don’t know, a bunch of bunks or something. Um, you know, and there’s six or eight beds in that place. They’re going to charge you more because that’s more laundry that they take. They’ll take it off site, have to launder it off site. That’s more time that they’re investing in your property. So it’s not just a function of number of bedrooms and square footage. It’s also going to matter how many people you’re sleeping.

Julie McCoy [00:31:53]:
And, you know, any extra spaces, anything extra that you may be asking them to do. It is very typical that that hot tub care is included in this cleaning fee. So the cleaners will generally will drain the hot tub, you know, clean it and refill it every turn. That is an ordinance here in Sevier county. So that is supposed to happen every turn. And your cleaners will typically handle that as part of the base cleaning fee.

Ethan McCarty [00:32:22]:
Yeah. And you’ll want to keep in mind, if you’re going to allow pets, you’ll be charged a little more. You’ll be able to charge a little more as well. But just keep that in the back of your mind.

Derek Tellier [00:32:33]:
Yeah. So all those things are going to factor in. Every cleaner is going to be a little bit different. It’s also in what the cleaner provides. Most of the cleaners in the area are, it’s pretty standard that they’re going to supply your basic soaps and, you know, paper towels and toilet paper. But you may have a pretty nice property and they may be providing the cheapest Costco toilet paper and paper towels they can get. And you may say, no, I want something better. So you may have toilet paper.

Julie McCoy [00:32:58]:
Costco toilet paper is awesome.

Derek Tellier [00:33:00]:
It is generic. No offense to Costco, sorry, Costco folks out there, but bottom line is what they provide. And some cleaners will provide linens. So this is another thing. Do you want to provide your own linens? Some cleaning companies won’t allow you to provide your own linens because they don’t want to have to keep up with your linens. They just have a service that they use. So these are things that you want to talk to your cleaners about. What do they provide if they’re going to provide linens? One, either a, it’s going to be more expensive or they may charge you a linen fee.

Derek Tellier [00:33:30]:
You may pay a yearly at the beginning when you get startup, you may pay them $800 depending on the size of the property, $500. And that is for them to have enough linens to take care of your property. And while a linen fee may sound expensive when you’re getting in there, think about it. Let’s say you’ve got even a three bedroom cabin, you know, so you’ve got three beds in it. It’s nice. And keep it nice and simple. You need to buy no fewer than about eight sets of sheets for that cabin because you need one set on, on there. You need one set for the turn.

Derek Tellier [00:33:59]:
And you always need a spare or two. Preferably have one set of spare sheets for each size of the bed physically in the cabin, someplace that guests can get to if you direct them to it, because if something happens, you might not be able to send you. Kids are on vacation. Kids get sick. You guys all have kids. Well, Julie doesn’t have kids, but anyway, we all have. We’ve all been around kids who get sick. And when you get sick, guess what happens? The sheets tend to get nasty.

Derek Tellier [00:34:23]:
People want to be able to replace those sheets and not have to wait to wash them. So you want to have extras. All these things are going to factor in to what your cleaning is going to be. There’s just so many variables. Enemy method is by far the best to give you a ballpark, though.

Avery Carl [00:34:36]:
And if you guys don’t know what the enemy method is, check out our YouTube channel, slash the short term shop. And there’s a video showing you how to do it. Uh, something that’s kind of, you’ve already kind of touched on it wrapped up into cleaning fees. Sometimes it’s part of it, sometimes it’s separate, is the cost of restocking items. Uh, how do you guys figure out in the smokies, what, what your restocking costs are going to be? And typically, I would say there’s. It’s pretty standard in the smokies to just provide, like, a starter kit to kind of get started of, you know, a few laundry pods, a few dish pods, a few, like, two rolls of toilet paper maybe. So you’re not necessarily stocking it huge every time. But anyway, go ahead.

Avery Carl [00:35:23]:
How would you guys figure that out?

Julie McCoy [00:35:25]:
I don’t really consider that expense because it tends to be so minimal. And depending on your cleaner, it’s like, some of them may provide those things that rolled into their cleaning fee, and then some of them may want you to provide, like, I’ve got one set of cleaners. Um, and, you know, I buy the laundry pods in bulk. I have them shipped to their house and they just let me know when they’re running low. Um, you know, and same for, you know, I buy the Costco toilet paper because it’s nicer than the single Plyde stuff that is going to go in by default, usually. So stuff like that, they’ll just let me know. It’s like, hey, we need more of XYZ. I order it and ship it, and the cost is not significant enough for me to really budget for.

Julie McCoy [00:36:10]:
And then I’ve got another set of cleaners that I don’t provide much at all on that front. And so it’s, you know, again, it’s not something I really considered.

Derek Tellier [00:36:21]:
Yeah, I’m the same. I don’t factor it in as a separate line item when I’m trying to underwrite a property, I try to just look at a general percentage to give me an idea. And overall, of all my expenses. So I don’t really consider that it is. It’s going to be minimal. I mean, obviously, depending on the size of the property, it might be a couple thousand dollars a year, and even that might be high. So I just don’t look at it. I don’t think that much about it.

Derek Tellier [00:36:48]:
And again, my cleaner supplies most of it. And if they don’t supply, and I am, then I’m probably paying a little bit less on the cleaning than if they were to supply it, so they can kind of offset. So if you’re using that enemy method, if you’re figuring that out, if you’re looking at the average, you’re probably going to be able to roll that in. I mean, you’re almost getting, you’re almost nickel and diming a little bit too much. If you start trying to factor that in, you’ll overanalyze yourself out of buying anything if you get that deep.

Avery Carl [00:37:13]:
All right, now, these are the two big ones that kind of overlap each other. They are two separate line items, but they can overlap in some places, and they are maintenance and capex. So let’s talk capex first, because there’s a lot of formulas out there and rules of thumb for calculating capex. And I’ve found that most of them are specific to long term rentals. Julie’s actually really good at explaining this. So I’ll let you start with capex. Julie.

Julie McCoy [00:37:46]:
Yeah. And I think what I was exposed to when I was first learning about real estate investing is a lot of these formulas that go into long term rentals, which are perfectly great, but don’t necessarily translate to short term rentals. And so what I would see, a lot of is a percentage based allocation for capex and or expenses. It can be anywhere from five to 10% of your monthly revenue. You know, just allocate that towards a capital, you know, a capital expense account. So that’s great if you’re, you know, if you’re renting a property for $800 a month, or whatever it is, and you’re taking 5% of that, putting in a capex account, awesome. Totally get it. If you are renting a short term rental and is making $4,000 a month, then all of a sudden that 5% becomes a much larger number, and you will very quickly learn that’s more than you need, most likely for capital expense.

Julie McCoy [00:38:44]:
So unless you want to build up your account really quickly, in which case you still want to underwrite it a different way, I recommend doing something like probably one to 2% for your capex allocation. Because when you actually do the math and figure out the dollar amount, you’re still in that same dollar range. And if it were a long term rental with a lower monthly revenue. So just keep that in mind when you’re working with percentages in particular. Do the math and does it make sense? So, okay, 5% of, you know, $4,000. I don’t even know what that is, but I don’t even know. I wish I knew. But, yeah, when you think about that, like, all right, what are my likely capex expenses going to be over a ten year span, et cetera, the way you’re going to plot that out.

Julie McCoy [00:39:35]:
Just keep that in mind, make sure the numbers are realistic. Because otherwise, like Derek alluded to before, you can decide that a property doesn’t work, but it’s because you’ve got way too much allocated towards something like your capex or your maintenance expense.

Ethan McCarty [00:39:53]:
I think it’s 200 a month. But I may be wrong.

Julie McCoy [00:39:57]:
That’s what I came up with in my head, but I wasn’t confident enough.

Ethan McCarty [00:40:01]:
To say it, so I got the benefit of being Julie’s client. So that’s my method. But I do just want to note that you may think differently buying a new cabin versus an older cabin on your capex expenses and what you might have to set aside for that.

Derek Tellier [00:40:20]:
Well, and I’ll throw in the other side of this, the percentage basis is all well and good when you’re. When you’re planning for a longer term. Right? But let’s say you bought the cabin and the h vac in it is 15 years old, and you’re allocating 1% a couple hundred bucks a month for your capex. And twelve months in, you’ve got a couple thousand dollars and your h vac system just went out and that’s $7,500. Well, guess what? Your capex budget didn’t mean anything. So the most important thing I say is when you’re buying that property, your inspection is going to tell you how old things are, or at least approximate age. Capex, to me is an actual number. It’s not a broad percentage.

Derek Tellier [00:40:58]:
The percentage is nice for making sure you have money. You want to make sure you have reserve funds. But when you buy that cabin, identify how old these systems are. If you’re running with an original 15 plus year old h vac and water heater, your capex is going to be significantly higher in the first couple of years than if you’re buying a brand new construction where your capex is going to be minimal. So you’ve got to factor all this stuff in when you’re doing that. Just, you know, just plan to front load. In some cases, you might come in and buy that property and replace the h vac right out of the gate. It’s 20 years old.

Derek Tellier [00:41:28]:
Yes, it’s functioning fine. But you’re about to put this, you know, four bedroom, beautiful cabin up on the market, and you do not want your h vac going out. And I promise you, when your h vac goes out, it’s going to be at 10:00 on Saturday night in the middle of winter. It is not going to be on Tuesday morning at 08:00 a.m. in the summertime, it is not going to happen. Or in the spring when you don’t even need it. That’s not when it’s going to go out. And so know what your systems look like when you buy and just plan for it on that aspect of it.

Derek Tellier [00:41:54]:
And then once you get established, yes, absolutely. Have some reserves put aside. A lot of that comes down to, I like to say, man, whatever makes you sleep well at night. If you need to put 5% aside because you sleep well at night knowing you’ve got that money put aside there, then great. If you put zero aside because you’ve got reserves in other places, lines of credit, whatever. And you’re like, if it breaks, I’ll fix it, I’m good. And you sleep well at night, whatever works for you. Just recognize that it’s not as simple as a percentage based.

Derek Tellier [00:42:21]:
You got to really know what your property has got in it.

Julie McCoy [00:42:26]:
Yeah, for sure. I think those are all excellent points and need to be considered and I had some other point that I wanted to make, and now it’s escaped me, so I apologize.

Derek Tellier [00:42:37]:
Well, we mentioned maintenance, too. With the overlap there, I’ll say I kind of treat maintenance. Obviously, it’s usually going to be a little bit more money than your, than your supplies aspect of it, but I kind of treat maintenance the same way as I do supplies. I mean, maintenance is replacing your h vac filters. It’s, you know, it’s, you know, if you might, you might have a water filtration system or salt that you need to add to your water system or something along those lines. In the end, it’s really not a big deal. You’re going to have little things. You know, guests are going to rip towel bars off of walls.

Derek Tellier [00:43:05]:
You’re going to have to send handyman out to fix stuff. Again, I just make sure that I have a comfortable reserve that I can handle that kind of stuff. I don’t put an actual percentage on it. The analytical folks are going to want to put something out there, put another one or 2% on something like that. Just know that it’s going to be a lot more wear and tear than a long term rental. Whereas long term rentals, you’re only sending somebody in when something major breaks because the tenant is usually responsible for everything else. On a short term rental, if it’s little things like the towel bar falling off the wall or like a doorknob being loose, you’re going to have to replace that. So you’re going to have to send a handyman out.

Derek Tellier [00:43:40]:
And it’s not a bad idea to maybe, especially during peak season, maybe once a month or every two months, just have a handyman or somebody you know and trust go out there and say, do a, you know, we got a turn today or we got a day off, you know, put it on the schedule. Go out there and spend a few hours and just walk through the property and look at all the stuff, you know, make a list of the things that are typically loose and break and just, just go through and do a quick maintenance on them. If you do that, you’ll actually be better off than waiting until it breaks.

Avery Carl [00:44:11]:
Totally agree with that. So while we’re on the subject of maintenance, so what are some things that might be kind of specific to the smokies or certain types of properties in the smokies that may require maintenance regularly that people didn’t necessarily think of? So for me, I’ll start, my example that I’m going to use is staining of a cabin a lot of people don’t realize that that is something that has to be done every five to ten years. Whether it depends on what kind of stain you get. If you’re getting a translucent stain where you can still kind of see the wood grain underneath, then typically that’s about every five years. It’s every ten years if you’re getting an opaque stain, which is more like cabin colored paint. And I know for our, we haven’t gotten some of our bigger ones stained, but for our smaller ones, like one bedrooms with a loft, it was pretty close to 5000 to get that cabin stained. So keep that in mind. We’re seeing a lot more.

Avery Carl [00:45:08]:
A lot of builders move more towards hardy board in some cases, so you don’t really have to mess with that. But if you are buying a wood sided cabin, that is a cost you’re going to have to think about.

Julie McCoy [00:45:22]:
Yeah. And another aspect of that is the sun exposure that it gets. So if one side of the cabin gets blasted by the sun, it’s going to need to get restained more often than the. The covered deck or, you know, the side that is mostly in shade. So that’s a big factor as well. And as far as cost goes, accessibility to all sides of the cabin is going to be a big factor. So if you’re hanging out over a cliff and, uh, you know, and getting guys out to, you know, one side of it or another, it’s going to be a big deal. That’s going to cost more money than if you can just set up ladders on all four sides and.

Julie McCoy [00:45:57]:
And get her done.

Derek Tellier [00:45:59]:
And other, other things that come to mind. Lawn care. A lot of our cabins, there’s not any lawn care involved at all because they’re in the woods and ideally, depending on the circumstances, again, if you’re hanging off the cliff, you probably don’t have any grass areas, so you may not have any lawn care at all. Or it might be something that you need to send somebody out once a month to dweedie a specific area. But now, one thing that’s become a bigger trend in the smokies, and I think is a good one, is that if you do have some outdoor space that you can set up a fire pit or an outdoor seating area. These are things, these are amenities that were not super common to smokies that are becoming a little bit more common and not common enough. Meaning that if you have that, you’re maybe going to be able to draw somebody who likes to sit outside and hang out outside, not just on the deck and when you do that, you’re probably going to have a bigger lawn. So that’s something you may not think about because we don’t see that often.

Derek Tellier [00:46:54]:
But all of a sudden you’re buying something that has half an acre and it’s actually kind of open and has grass, you’re going to need to factor in, you know, hundred, couple hundred bucks a month for lawn care. Again, that’s something you’ll have to look at individually on the property and just factor for it. I would say absolute bare minimum. If you’re sending somebody out there to weedy, you know, once a month, you’re going to spend $60 to $65 at least on something like that. If you’ve got a half an acre and it’s grass and needs to be cut, you’re going to spend a couple hundred bucks a month on lawn care. So factor that in and landscaping on top of that. Again, you do. Low maintenance is what we strive for.

Derek Tellier [00:47:30]:
So we don’t necessarily have big, elaborate landscaping out in front of our cabins. But if you’re trying to separate yourself and you will find cabins that have really nice landscaping and something we see all the time is a cabin that was designed with nice landscaping out front and nobody maintained it. So now it looks like a jungle and it looks awful. So if you want to do something, curb appeal goes a long way. When people are booking your property, they’re looking at photos. So if you’ve got really nice curb appeal, you’re going to draw people in, but you’re going to need to maintain that. So your landscaping expenses might be higher. So look at the landscaping, look at the grass, and just kind of identify, is this an expense that I need to worry about or not?

Julie McCoy [00:48:06]:
Well, another thing to think about is landscaping is seasonal here, because starting in about October ish, the grass will stop growing, things will calm down and they won’t need as much maintenance. Then in the spring, it’s going to start picking up. In the summer, you know, you might need to get stuff we eat at mowed every week. My house is on just about an acre and it’s all grass. And so, yeah, in the summer, man, he has to come out every week and mow, but it just kind of slopes off. And then we decide that, oh, at this, you know, this weekend looks like it’s pretty much stopped. So we call it until next spring. So keep that in mind, too, just because, you know, your, your costs are going to vary with the seasons for that, but generally it is pretty low.

Julie McCoy [00:48:59]:
I mean, the numbers, Derek, gave are pretty solid.

Ethan McCarty [00:49:02]:
I’d like to, for all the folks in spherical pigeon forge, Gatlinburg, be aware of burn times that you can and can’t burn. I’m supportive of the outdoor thing, but I be smart about it. A couple things that. Back to the staining. You also could have woodpecker damage from them. Boring in trying to get after the bees, so you might have to get that repaired. We already mentioned hot tubs. You’re going to have that as an expense.

Ethan McCarty [00:49:27]:
Something’s going to happen. You’re going to send hot tubs, etc. Out there at some point in time or whatever company you prefer. I don’t know if you’re going to talk about pool specifically, Avery. If you got a pool, you’ve got extra maintenance. So those are just some of the things, uh, that I had wrote down. And another thing that I’ve only bought old cabins. So I think about this.

Ethan McCarty [00:49:45]:
Made more a lot of wood, a lot of decks. And that wood, over time, needs one stained and two replaced as it, uh, rots and stuff. So you got to keep that in mind.

Avery Carl [00:49:57]:
Yeah, yeah. Let’s talk about pools. I’ve found on average, the pool maintenance cost to be like roughly 150 a month. What do you say to that, Julie?

Julie McCoy [00:50:08]:
Mine’s been a little higher. I have my. Now, there are a couple of different ways that pool maintenance companies will handle things. I have my guy go out every turn instead of on a schedule because I don’t want to deal with like, oh, yeah, the pool guys coming on Tuesday at 10:00 a.m. hope you’re up. So, yeah, I prefer to do that. So depending on how busy it is, how many turns I have in a month, then the cost can go up. But basically, if you’ve got an indoor pool, or if you have a pool in general, then you’re going to.

Julie McCoy [00:50:41]:
You’re going to have someone coming out regularly to make sure that the chemicals are balanced, the water level is good, things like that. And this is somebody who is going to be different from your cleaner. Your cleaner will often do the hot tub, but they will not do your pool. You don’t want them to. You want someone who is experienced with the types of chemicals that are needed to keep, you know, the pool levels correct and, and have a conversation with your pool person and with your cleaner to understand who is doing what. Because there could be things like who’s responsible for making sure the tile at the water line stays clean. Is that your pool treat your pool person or is that your cleaner? You know who’s responsible for making sure the furniture is neat in the pool room, etc. Etcetera.

Julie McCoy [00:51:30]:
So make sure that everyone understands the roles and expectations there just so that you don’t wind up with a situation where everyone thinks everyone else is doing it.

Avery Carl [00:51:39]:
How about hot tubs? So every property in the smokies has a hot tub. And if it doesn’t, it needs to just to be on par with everyone else. So how much money would you guys say you’re spending a year because it won’t be a month on hot tub maintenance?

Derek Tellier [00:51:54]:
I don’t, I don’t really necessarily feel like I have a specific hot tub maintenance budget. The cleaner, again, that’s built into your cleaning fee, that they’re, like you mentioned, they’re draining and cleaning it. A lot of times they’ll take care of the filters. You’ll have some, you know, either bromine or some type of chemical that they’re adding each time. It’s pretty minimal. You may again cut back to your supplies. It kind of falls in. I would fall that into my supplies if I’m having to buy those chemicals and the cleaner does it.

Derek Tellier [00:52:20]:
You know, there’s. Yes, they’ll break down. They don’t break. I mean, the biggest thing with hot tubs is, is your time, because you’re going to have, you know, one out of 15 or 20 guests is not going to understand how to use it, and you’re going to spend some time on it. And that’s not maintenance, but it’s maintenance on your brain sometimes to have to deal with that. So I don’t factor in any special maintenance time or cost for the hot tub. The hot tub is what it is. And I do own a couple of properties that do not have hot tubs.

Derek Tellier [00:52:47]:
And what I’ll say to that is they definitely don’t make as much money as a property that does have a hot tub. And I try to, I make them pet friendly. I do other things to try to compensate for it, but they’re also properties that I paid less money for. So if I’m making a little bit less money, it’s, it’s okay. So it’s not, it’s not 100% got to have one, but it is about a 95% to 98% that you need to have one.

Ethan McCarty [00:53:10]:
I’m the same. The only thing I’ll mention is the hot tub. If it has a. Not a hard lid and has a soft lid that will have to be replaced after some point in time.

Julie McCoy [00:53:21]:
Oh, I was going to say I have lost a couple of hot tub lids recently to bears. Bears like to eat them, apparently. You know, apparently there is some. The formaldehyde that they use in a lot of these hot tub lids, supposedly it smells like an anthill to bears and they like to eat ants. So that’s the word on the street right now. I don’t know if that’s accurate or not, but I have had. I have had bears absolutely annihilate a couple of hot tub lids.

Derek Tellier [00:53:52]:
I have had the same. I have had a couple of lids get destroyed by bears. I have a couple of cabins that are frequented by bears at certain times of the year, and I’ve seen it happen. If we want to change one thing, we’ll hit on maintenance that we highlighted a little bit earlier. H vac. You’re going to need to replace your h vac filter at least every couple of months. Every two, three months. A lot of times you’re cleaner.

Derek Tellier [00:54:15]:
This is a good conversation to talk to the cleaners about is, you know, do they replace that for you? Will they supply the filter? What kind of filter are they supplying? I’ve struggled because I buy some decent filters for my systems and my cleaners have a tendency to just replace them with what they have and I have to get onto them. I’m like, no, use the filters that I actually bought because they’re using the cheapest, crappiest thing you can. And what I’m all, to me, I want a good air filter. That’s really important to me. Factor that in. That may be an extra expense. You have a good air filter. Altar is going to cost you $15 to $20 on average.

Derek Tellier [00:54:49]:
So if you’re replacing that three, four times a year, that’s a small number, but know that needs to be done and have a plan in place. And you can get a lot of h vac companies that will do yearly, sometimes twice a year service. Definitely recommend it. Have somebody go out there two times a year. They’ll make sure the filter is clean if the cleaners not doing it, but they’ll do a quick tune up on the system. Your H vac system will last a lot longer if you’re paying that money to send somebody out there. It may feel like that money you’re just throwing away, but in the long term peace of mind and safety of it, it’s worth it. And a lot of those services, if you’re paying that monthly fee for them to go out and do it, then they’ll give you a discount or even a wave of service.

Derek Tellier [00:55:25]:
Call if you do have something going on and you’re going to at some point. So I would definitely look into h vac maintenance programs.

Avery Carl [00:55:34]:
Awesome. And before we go, are there any other things you think we need to hit as far as hidden expenses of this market that people will probably end up having to pay that they don’t? Just don’t think about. You don’t think about. Before you buy a property in the.

Ethan McCarty [00:55:47]:
Smokies, I wanted to mention pest control. I don’t think we mentioned it today.

Avery Carl [00:55:51]:
You’re going to have a good one. Yes.

Ethan McCarty [00:55:52]:
Monthly pest control expense. I think there’s a couple companies that do it, but it’s not too bad. You can call and get a quote for what the property would be. The second thing is maybe Derek mentioned landscaping, but tree control, if you got trees close to your cabin, you got trees blocking a view, something you may want to keep in the back of your mind. And then we didn’t hit on too much, but the property may have an HOA fee and you would just want to see what that includes to cover for your specific property.

Julie McCoy [00:56:23]:
Yeah, that’s a good point. With hoas around here, it’s usually pretty limited. There’s a lot of hoas where, you know where they’re planned unit developments. So you can almost think of them like freestanding condos or townhomes. And the HoA controls all the common area. And in that case, most of the time they are handling the lawn maintenance. You can ask your agent for details on that. And so in that case, it would offset that cost a lot of times.

Julie McCoy [00:56:54]:
There’s a community pool. There may be a private road system that they’re maintaining. That’s what we see most commonly in hoas here. There’s a couple of them that include other things, may include some utility costs, but that’s less common. And then a note on tree control. If you are in an hOa, before you cut any trees down, please make sure that you are not going to get in trouble with Hoa for that because there are hoas that either they own the trees and you don’t have any right to cut them, though they’ll usually allow you to trim back branches. They’re not in contact with your house. Check with the hOa.

Julie McCoy [00:57:31]:
But even if you own a lot where your house is on an acre or something like that, but you’re still in an hoa, there are plenty of times there are restrictions on the size of tree you can cut down. You can’t just clear cut your lot to get your amazing view they often will not allow you to cut anything that is more than six inches in diameter or something like that. So just be aware of that before you actually cut anything down and potentially incur fine.

Derek Tellier [00:57:59]:
A couple of other things I’ll mention. We mentioned linens earlier, but towels are the same. They fall into the same category. You know, some people include, you know, linens and towels, or they’ll say linens, and they mean sheets and towels combined. You will be surprised if you’re supplying your own stuff, especially on a slightly bigger cabin, how much money you will spend on linens and towels in a year. That is something that will catch people off guard. You might spend, you know, 1000, $502,000 to get your cabin started, and you might spend another five to $1,000 a year. And Julie’s shaking her head.

Derek Tellier [00:58:30]:
I got bigger numbers. My daughter, who handles all that for me, would probably be able to give you a better quote on that stuff, but it is very, very expensive to get those set up. Pest control again, good highlight. There’s different companies out there. Some will do monthly service, some will do quarterly service. Trust your pest control guy. There’s specific types of pest control. Hopefully they’re talking about it.

Derek Tellier [00:58:52]:
Some people will talk about bedbug control. I know Luke recently did an episode on his podcast talking about that specifically. So there’s plenty of resources out there if you want to dig in deeper on that. And, um, I had something else, and it’s escaped me.

Julie McCoy [00:59:07]:
Well, I’m going to say on the pest control thing, do not skimp this expense. It is the woods. There are lots of pests, and if your guests see one inside, they are going to throw fit. So, you know, you really want to do that. That is not something that I would consider an optional expense. It is not very expensive, and it will save you a lot of headaches and potential property damage down the line. And I want to talk a little bit about carpenter bees because that’s something that is pretty unique to this market. So we have carpenter bees.

Julie McCoy [00:59:40]:
They are these big, fuzzy, bumblebee looking insects that like to. They breed in the spring and early summer, and so they’ll kind of swarm a little bit. They do not sting. They’re not dangerous, but they will bore into wood and lay their eggs in these little tunnels that they will bore into wood. And it can be trees, but they really love soft woods, like your fascia, like your window trim, you know, even the siding on the cabins. So you will often see, you know, these little holes that are maybe like half an inch in diameter. Um, in these elements of the cabin, it’s very normal. It’s not really destructive.

Julie McCoy [01:00:26]:
It’s more of a cosmetic thing. But what will happen is woodpeckers are also prevalent in the area and they love to eat carpenter bee larvae. And so they will come and they will peck out these big gouges into the wood trim or wherever the carpenter bees have gone ahead of them. And that, you know, it’s still primarily cosmetic, but it starts to look pretty ugly. And if it gets out of hand, then, you know, then it can potentially damage the cabin by creating, you know, allowing moisture in and things like that that you don’t want. And it’s just ugly. So what you can do to get ahead of that is every spring your pest control company will generally offer carpenter bee service, and it is an extra charge. They will come and spray, you know, they will treat the cabin to discourage the carpenter bees from boring into it in the first place.

Julie McCoy [01:01:20]:
It is not going to be like 100% foolproof. You’ll never see one again, but it will definitely cut back on their activity and the potential for damage down the line. So I do recommend that.

Derek Tellier [01:01:31]:
One other thing I’ll mention, we mentioned hoas, taxes and insurance. We didn’t really highlight those. There’s different schools of thoughts about how you, when we think about expenses, I think those of us on this call, we don’t think about taxes and insurance as a standard expense like this stuff because we factored into more mortgage payments, especially if we’re buying a conventional loan, taxes and your insurance are going to be escrowed. They’re going to be in your mortgage payment. So if you’re working with a mortgage lender, conventional loan, it’s probably built in. But you do need to be conscious of the fact that there’s taxes and insurance. And one thing that can catch you off guard and your lender may not help you with the smokies are pretty safe, taxes are pretty low. But if youre a new construction, your title company, your lender is probably going to escrow your taxes based on what they currently are, and then maybe they do a projection, but we dont really know what the taxes are going to be next year.

Derek Tellier [01:02:20]:
So all of a sudden your mortgage payment may go up when the taxes get reassessed the following year. The one thing thats really nice about the smokies, as compared to several other markets and I own in Texas, and it was a nightmare, even though I knew my taxes were going to go up, but my mortgage payment went up by $2,000 this year because it was, because they had not factored in what taxes were going to be, even though I knew the formula and I knew what my taxes were going to be, but they still didn’t factor in and I didn’t think about it. And because I had a deficit, I’m having to pay to make sure I have enough for next year, but also paid back the smokies very low taxes by comparison. We have literally had lenders argue with our title companies that say, well, that’s monthly, right? And they’re like, no, that’s yearly. Taxes are cheap here. But recognize taxes and insurance are an expense and insurance is very variable. We could probably do an entire episode on insurance alone, but definitely know that these are expenses that you’re going to have to pay whether they’re in your mortgage payment or not.

Avery Carl [01:03:23]:
Yeah, I always forget about taxes and insurance because I do have them in my, in my mortgage payment. So taxes in this area are super, super low, like Derek said. And insurance just kind of depends on the type of property. It depends on different, like if you have a pool or not, what type of you, you definitely want to get short term rental specific insurance from a company like proper or someone similar. Proper is going to be the most expensive, but they do have good coverage. And you also want to get a commercial umbrella policy, which is pretty cheap, like $100 a month maybe. But that’s the extent of what I can really speak on, not being an attorney, but make sure that you have both of those things.

Derek Tellier [01:04:06]:
Umbrella policies are closer to a couple hundred bucks a year. They’re really cheap. I mean, depending on the size. Yeah, they’re very, very, very cheap. So definitely. And there are, we talk about property owns all the companies. A good insurance agent, we’ve got a couple of local ones, you know, that we use that do understand it. Just understand that you want to make sure you know what your coverage is.

Derek Tellier [01:04:26]:
The most important thing. Making sure you have loss of use coverage or loss of rent coverage. They call it different things. So that if your cabin is not available, there’s a policy in place that will help to reimburse you for what your potential income could have been. Again, these are very variable. Talk to your insurance agents about it, but know that you want to make sure that you have a policy that will cover you for that aspect of it and just, you know, cover you for what you’re going to need. So talk to somebody that knows what they’re talking about and understands and make sure that you can understand what’s going to happen if my cabin burns down? I mean, I hate to bring that up, but, I mean, it’s a reality that it can happen, whether it’s because of an idiot guest or natural disaster. Nobody thinks about how good their insurance is until they actually need it, unfortunately.

Derek Tellier [01:05:08]:
So have those conversations. They’re tough conversations. They’re not stuff you want to think about, but know what it is. You may pay a little bit more for insurance, but it may be worth it when you need it again. How well do you sleep at night?

Julie McCoy [01:05:20]:
I nearly lost two cabins in a fire this, this spring, and I would now they survived. So I did not have to go through the claims process or anything like that. So I was very grateful for that. But, yeah, my insurance was foremost in mind, and I would, you know, had they burned down and I hadn’t been adequately covered, like, no amount of premium money would have been too much to avoid that sort of scenario. So. So pay it upfront if for nothing else, just so you can sleep at night. Because when and if something like that happens, you don’t want to be worrying about if you’re going to lose everything because the policy is not sufficient.

Avery Carl [01:06:00]:
Yes. That is. We had the fire get really close to one of ours, too. And I was like, well, good thing we have insurance. And then I started thinking, I was like, actually, that property is worth double what it. What we have the insurance on. And hopefully this doesn’t burn down because that will really suck. So definitely make sure that as your property appreciates you update your insurance coverage because that’s very important.

Avery Carl [01:06:26]:
Anything else that we are missing?

Julie McCoy [01:06:28]:
Go ahead. Well, just one more thought on that topic. Not to make this the insurance episode, but also cost of build has gone up significantly since, you know, since a lot of a spot. And so make sure that you’re in touch with your insurance agent about what’s the coverage. So if it does burn down, if there’s a total loss somehow, then what am I covered to rebuild? Because I know there have been folks who, they’ve owned their property for quite a while and didn’t occur to them to update those things. I know I’ve been guilty of that. The fire this spring really kind of opened my eyes to a lot of these things that I wasn’t thinking about. So you could end up in a situation where it’s, you know, your insurance actually won’t cover the current cost of a rebuild.

Julie McCoy [01:07:15]:
So talk to. Talk to your insurance agent about that. Like, set a reminder for yourself every year. You know, just go through it again and, you know, hey, are there limits that we can raise? Are, you know, are these numbers still appropriate? And the insurance company isn’t going to raise it to infinity. They’re not going to cover it to, you know, $1,000 a square foot or whatever, you know, get something that’s reasonable or as close to, you know, as close to what you think you’re going to need as you possibly can.

Derek Tellier [01:07:43]:
Yeah, I’ll just, I’ll just harp on that really quick. Set it on. You have, this is where having an insurance broker is, is nice because they’re going to be looking out for you. So just put on the calendar once a year, send an email, have a conversation. If you’ve got a good relationship with your insurance person, then they’ll, they’ll walk you through that. So. And I know we wanted to circle back on a power outages in, in the smokies. We kind of circled back to where we started because power outages do happen.

Derek Tellier [01:08:11]:
I know Julie will have some more to add to this, but severe county electric has a pretty decent website and a pretty decent app where you can actually set up. So if your power goes out and it’s reported, you will actually get a text message or an email telling you that it’s out. So that’s something that can help. Just prepare for it. It’s going to happen. We’re in the smokies, we’re in the woods. Power goes out. It’s not like happen all the time, but it will happen, especially in storms.

Derek Tellier [01:08:34]:
So I know Julie wanted to bring up. I’m sure she has some good points on that.

Julie McCoy [01:08:39]:
Yeah, I mean, it was just about that. It does happen. Most of the power lines in the county are above ground. We have tons and tons of trees. We also have storms with strong winds that blow through. Or if we get a really heavy snow, which doesn’t happen very often, but once every year or two will come down and bring trees down, and that will always result in power outages. The, you know, and it could be just like a one off where, you know, just a few places lose power. It could, you know, if there’s a major storm, then it could have a pretty big impact across the county.

Julie McCoy [01:09:13]:
The power company is really excellent about getting things back up and running very quickly. And, you know, when we have a major event, then they’ll call in resources from surrounding counties, even surrounding states to get things back up and running quickly. So I think they do an excellent job of that. Usually if there’s a power outage at one of my properties, it’s back up in an hour or two unless there’s a bigger event and resources to get spread thin and then it can be longer. But being familiar with the SES website and knowing how to use those tools I think is really helpful in just communicating with your guests. If the power goes out, you know, the first thing I do is go to the website and, you know, check to see, like, does it show that power outage there or do I need to report it? Almost always it will show it that they already are aware of the power outage. And so I’ll say, like, hey, here’s the website, you know, so you can check this yourself if you want to. But I wouldn’t, you know, let, you know right now.

Julie McCoy [01:10:19]:
They’re aware of the power outage. They’re working on it, and usually they get it back up and running really quickly. So here’s a way for you to monitor it. And the communication really, really helps. Most of the time, guests are very satisfied with that.

Avery Carl [01:10:32]:
All right, I think we have covered a lot of ground here. Before we sign off, is there anything else that you guys can think of that might be a hidden expense or something that people don’t realize is going to cost them money when they buy a short term rental in the smokies?

Julie McCoy [01:10:49]:
Robert.

Derek Tellier [01:10:50]:
Pots and pans. Dishes, little stuff. I mean, you know, we didn’t, we didn’t talk about it. We kind of covered it. But these, which wear and tear. I know some people that replace their pots and pans every year. You may not have to buy stainless steel, buy good quality stuff. You won’t have to do it as often.

Derek Tellier [01:11:04]:
But again, depends on the quality you’re trying to, you know, establish for you, for your rental. If you want a nice place and you don’t want, you know, grandma staying at your place is going to complain because the, you know, the Teflon coated pans are all scratched up and they can’t cook their Thanksgiving dinner. You know, just make sure you got good stuff.

Avery Carl [01:11:20]:
Absolutely.

Ethan McCarty [01:11:23]:
I’d just like to know quickly, we talked a lot about expenses and how easily it is to get held up thinking about all these expenses or overanalyze or, I don’t know, whatever you do, you know, in the time that we have been here talking, and probably half the time, you can call and do research and find out and get a very, very good average, a very good estimated calculation of what each expense would be or percentage should be and use it and go with it. Don’t let, don’t let the expenses hold you up from buying something that is, in the long run, really going to be a cash flow machine or whatever. So just don’t overanalyze all that.

Julie McCoy [01:12:03]:
Yeah, I think it’s really easy to get tied up in, like, you know, well, how many, how many paper towels am I going to buy this month? Supply line items, things like that. And most of the time, a lot of things we talked about, especially the expenses that matter, unless you are really unlucky, it’s not all going to hit at once. And so, yeah, you want to be cognizant of what worst case scenario is, but also recognize that that is in fact the worst case scenario. You know, and generally speaking, things are going to run along and be pretty average and don’t, you know, don’t get yourself too worked up over a lot of these little things and feel like you have to have every penny accounted for because as Avery said in the beginning, it’s not possible to know the exact amounts of all of these expenses. It’s also not possible to know the exact amount that the property is going to make every month. And so we work in ranges and, you know, operate in your comfort zone, but just recognize that there’s a lot of variables. And so we work with the best info we have.

Avery Carl [01:13:13]:
All right, well, on that note, we will sign off, guys, if you are interested in buying with the short term shop in the smoky mountains, because we are agents, head over to theshorttermshop.com to get connected with an agent, and we are happy to help you. We will sign off for now, and we’ll see you on the next episode.