From Analysis to Action: Choosing a Market
Before continuing our short-term rental journey, we decided to take a step back from heartbreaking market-hopping and dedicate ourselves to education. As a family, we set a time every day to have a study session. We tried to limit it to just one hour, but often ended up discussing strategies and terminology for hours each day. We immersed ourselves in knowledge and read several leading books on the subject of purchasing short-term rentals and property investing. We scoured YouTube and the world of podcasts for anything related to STR and running a successful hosting company.
We realized quickly how foolish we were in Destin, and Orlando. We just rushed at something with cash and heart, but that was it. We quickly saw that we had a lot to learn. 🤓📖 And our newfound knowledge came with an array of new financial and real estate terminology.
Here are a few terms that quickly became a part of our everyday vocabulary:
- **CAP Rate (Capitalization Rate)**: A measure of a property's profitability, calculated by dividing its net operating income by its current market value.
- **ADR (Average Daily Rate)**: The average rental income earned per paid occupied room over a specific time period.
- **RevPAR (Revenue Per Available Room)**: A key performance metric calculated by multiplying the ADR by the occupancy rate.
- **ROI (Return on Investment)**: A measure of the profitability of an investment, often expressed as a percentage of the initial investment.
- **Occupancy Rate**: The percentage of time a rental property is occupied by guests during a specific period.
- **Property Appreciation**: The increase in a property's value over time due to factors like market demand and improvements.
We had to step back and reevaluate our goals, but this time we were starting to understand what exactly we were trying to achieve. It was easy to summarize that goal; we no longer want to work for "The Man." The research, and education reinforced a way to imagine a future within real estate. We talked, and talked, and talked, analyzed, and considered all of the circumstances that could go wrong. We ran earning calculations on 10 houses a day for weeks. However, there came a point when we realized we were stuck in something of another term we learned...
" Analysis paralysis: When you think so hard about a decision that you end up doing nothing at all. It's like being stuck in the mud, or trying to cross a bridge that's not there."
We were overwhelmed by data, market choices, and property options.🤯 But then, after looking at thousands upon thousands of homes, came moment of clarity! 🎯 We decided to stop overthinking and focus on what truly mattered: One market at a time. By this time we had rationalized purchases in Upstate New York, and Bar Harbor, Maine. We searched as far south as the Florida Keys, and we ventured as far west as the Texas Hill Country.
In addition to the newfound knowledge, there was something else we wanted to be a part of and our vast area of searching needed more focus. We knew we wanted to be familiar with the area. We knew we wanted to be within driving distance. We knew it had to meet the expectations of all the market factors we'd considered important. But we wanted something more. We wanted a HOME. We had to genuinely love the area we were going to invest in.
That final requirement narrowed our list very quickly. We were deciding between beach home, or mountain retreat. In the end, we chose Sevierville, Tennessee, as our target market—a place rich with potential for short-term rentals and a place that fit the category of love we insisted upon. It checked boxes in every single category we were looking for.
A short list of five market analysis categories we thought make Sevierville, Tennessee, an exceptional choice:
- **Tourist Appeal**: Sevierville, nestled in the Smoky Mountains, boasts year-round attractions, including Dollywood, hiking trails, and beautiful scenery.
- **Strong Demand**: The area experiences high demand for vacation rentals, with visitors seeking the comfort and charm of a home away from home.
- **Regulatory Environment**: The local government has a supportive stance on short-term rentals, making it easier for hosts to operate legally.
- **Positive Cash Flow**: Our analysis revealed the potential for positive cash flow, even after accounting for expenses.
- **Market Growth**: Sevierville is experiencing growth in tourism, ensuring a steady stream of potential guests.
That was it. A cabin in the mountains was in our future. Now we had to find it.
Stay tuned as we delve deeper into Sevierville, Tennessee, sharing insights, challenges, and our exciting first purchase in this market.
🏡🚀 #PeakOfJoyLodge #Jac-Rentals #ShortTermRentalJourney #RealEstateEducation #SeviervilleShortTermRentals
Jesse and Angie Ferguson
REFERENCES:
These books provided us with some of our most valuable insights, strategies, and wisdom of experienced hosts. Here are five must-read books that truly enlightened us:
1️⃣Rich Dad Poor Dad by Robert Kiyosaki
2️⃣ The Book on Rental Property Investing by Brandon Turner
3️⃣ The Millionaire Next Door by Thomas J. Stanley and William D. Danko
4️⃣ Rich Dad Advisors: ABC's of Buying a Rental Property by Robert Kiyosaki
5️⃣ Small Giants by Bo Burlingham