This has been a painful season for many of us following the devastating wildfires. We have had many people calling us at our office asking for advice on rebuilding, what to do and what the options are for people who have lost their cabins, their homes, and for some people their businesses.
We’ve also had questions from people looking to move or invest in our tourism industry here about the impact the wildfires had on the tourism industry, particularly overnight rental consequences. We tell them what I want to share with you today: Our expectation is that rental revenue will not drop off after this first initial shock and first initial cancellation of rentals. When the spring flush of green covers the burnt ground, renters will return. They have a love for the Great Smoky Mountains, Gatlinburg and Pigeon Forge. We have no doubt they will be back in droves. Rental companies estimate that 10 to 20 percent of total rental cabin inventory was lost in the wildfires. That will also cause the cabins that remain to experience more bookings. As with homes, not all of the rental cabins and chalets lost to wildfires will be rebuilt.
Should rental cabin owners use their insurance settlement to buy another cabin, or should they concentrate on rebuilding a cabin that they lost in the wildfires?
Many of my clients have lost their investment cabins. Just as with homeowners, they too have decisions to make. Each one of these cabin owners will need to work through their options carefully. One of the first things you will want to know if you are thinking about rebuilding a cabin is if it is affordable for you. What is the cost for rebuilding a cabin that was lost compared to what you can purchase currently? New construction cost is still running higher than the market pricing of existing cabins. The decision very well might depend on the type of insurance and the amount of the insurance settlement offer.
The good news is that loans rates are still very low, even for investors who have multiple properties. Also, something that might be new that was not available when you purchased your previous rental cabin is that lenders will now consider 50 percent of the rental revenue in qualifying you for the loan. With that factor, you might now qualify for more cabin than when you made your last purchase.
Of course, efforts are already underway to ramp up construction. I believe we are going to have a new season of construction like we haven’t seen since before the market crash several years ago. However, there will be those who choose not to build back or are unable to do so. They will be looking to purchase other cabins and homes, so if you have been thinking about selling, this may be the time to take a serious look at the idea.
Also, keep in mind there are codes and regulations that have been passed in the last few years that will affect any new construction and you can double those requirements when it comes to rental cabins. The State Fire Marshal’s office has become very involved in Sevier County investment cabins and has a lot to say about the grasses, sprinkler systems, and many other aspects of cabin design that will affect you. Rebuilding a cabin that burned will most likely require some new design and additional safety features to meet those codes and regulations.
Whatever your decision, we are here to help you through the process. If you are looking for a new home, we can take you to see what’s on the market. If you are looking for a place to rent, we can put you in contact with people who can help you find a place to live. And if you want to build back, feel free to contact us also for a list of cabin builders that we consider highly.