5 Tips For Buying A Vacation Rental In Tennessee
Owning a vacation rental in Tennessee is a golden opportunity for both new and veteran investors to grow their portfolios.
Home prices in Tennessee continue to rise, with national market fundamentals favored to remain strong into 2023 and beyond. And that’s having a positive impact on rental markets.
The vacation rental industry continues to grow by leaps and bounds, despite the impact of pandemic limitations and travel restrictions, with vacation rental rates increasing by almost 6%.
Is it profitable to own a vacation rental?
Tennessee attracts visitors from across the country and around the world. With a rich history, stunning sights, and great family-friendly destinations, Tennessee’s tourism industry is booming—it’s the number two revenue-generating industry in the state.
And that can make buying a vacation property in Tennessee a potentially lucrative complement to your portfolio.
In addition to equity appreciation—the income earned from renting on the Airbnb platform alone averages just over $900 per month—short-term rentals through sites like Booking.com or Vrbo can increase your occupancy rate and boost revenue.
But it’s not just vacation tourism bringing travelers to the state.
Business-friendly Tennessee ranks fifth among all states for doing business in the country, meaning people are coming for work-related activities. And they all need a place to stay, too.
What’s your loan scenario?
What makes a good vacation rental?
One of the biggest factors that make up a good vacation rental is its location.
Vacation rentals in popular tourist and business destinations, like Pigeon Forge, Gatlinburg, Nashville, Chatanooga, and Memphis, can bring a steady stream of short-term rental revenue to your investment portfolio.
We’ll go more into this below, but you’ll also want to look at the tourism market in the area and what guests are looking for. Put yourself in the guest’s shoes and think about what you would want.
Top 5 tips for buying a vacation rental in Tennessee
Now that you’ve chosen the location for your property, let’s look at five other tips for making sure your rental succeeds.
Understand your budget and set clear financial goals
Before buying a vacation rental home in Tennessee, it’s crucial that you have a firm grasp on your financial situation and set clear financial goals.
Traditional lenders may hesitate to approve a second mortgage if you haven’t yet paid off your first mortgage. Private money lenders, however, like Marquee Funding Group, don’t use the same one-size-fits-all evaluation method when considering deals.
We evaluate each loan scenario independently and thrive working with complex or unique deals traditional lenders can’t—or won’t—approve.
Choose a desirable location for your rental properties
Where you choose to buy rental properties is arguably the most important aspect of buying a rental home in Tennessee.
A local real estate agent can be a great advantage when buying vacation homes and can often help you buy in up-and-coming neighborhoods before prices jump.
Understanding the demographics of a neighborhood is also beneficial when considering where to buy. Areas within a short drive of major attractions like Dollywood, Ripley’s Aquarium of the Smoky’s, and Music City USA, with high occupancy rates, can make it seem as if your rental property “rents itself,” requiring little direct effort on your part.
Understand Tennessee weather
When looking at potential rental properties in Tennessee, it’s important to remember that the Volunteer State can experience some pretty extreme weather.
Chilling winter winds, powerful storms, tornadoes, and even flooding can happen, and vacation property owners in Tennessee will benefit from considerating weather trends before purchasing an investment property.
Adequate insurance coverage and maintaining a nest egg for unexpected expenses can help keep your portfolio in the black.
Decide what type of vacation rental you want to purchase
Detached homes can require more upkeep and maintenance or have heftier associated expenses compared to condos, flats, or townhomes.
This can make a condo or townhouse a good choice if you’re looking for a vacation property with less hassle. While homeowner association fees can be an extra expense, paying less for individual repairs can be appealing.
For example, if a single-family house needs a new roof, you’ll have to handle the cost alone. However, when the roof needs replacing on a condo or townhome, the price is typically equally distributed among all property owners.
Pro Tip: Regardless of property type, property managers can be a great way to allocate the day-to-day operations of vacation properties without sacrificing time in your calendar.
Partner with the right people to navigate the process with ease
If you’re buying a rental property in Tennessee, the people working with you can make the process easier—or more challenging.
Choosing the best people to help you navigate each part of the process is important to your success.
Real estate agents who understand the subtle differences between Nashville and Memphis local markets are an asset, but partnering with a New York commercial real estate agent to buy a vacation home in Sevierville could mean facing unnecessary hurdles. The same is true when it comes to financing.
Traditional banks typically consider financing vacation properties riskier than primary residence mortgages, often with stricter borrowing requirements.
Buying a vacation rental property with a conventional lender typically carries higher interest rates than your first mortgage—because of the presumed increased risk.
And since the mortgage isn’t for your primary residence, many traditional lenders think there’s a greater chance of defaulting.
Buy a vacation rental property with a hard money loan
Hard money lenders, like Marquee Funding Group, are more interested in the likelihood of your deal’s success and more willing to work with a borrower that traditional lenders turn away from.
Private money lenders have a much quicker approval process than banks, credit unions, and other conventional lenders as well.
At Marquee Funding Group, we are personally involved in every deal we make. Our team of real estate experts is ready to share their real-world insight on all parts of the investment property process.
We’ll help you evaluate your options so you can be confident you’re making the best choice for your financial and portfolio goals.
How to buy a rental in Tennessee with Marquee Funding Group
At Marquee Funding Group, we treat our borrowers the way we want to be treated. That means same-day approvals and fast closing—often within seven days.
We offer loan amounts between $50,000 to $20 million and deal-specific loan-to-value of up to 70% on single- and multi-family residences and more.
Our expert team carefully and quickly evaluates each loan scenario to determine its potential for success—we don’t start the process thinking about failure. We want you to succeed, and we want to help make it happen.
If you’re considering a vacation home in Tennessee, contact our lending experts, or submit your loan scenario today.