A first rental cabin is a different purchase from a first rental house. The income comes by the night, the costs are higher, and the rules change at every city limit. None of it is hard once you know what to check.
What drives a cabin’s income
- Sleeping capacity. Larger cabins earn more per night, within what the permit and the septic allow.
- Amenities. Hot tubs, game rooms, theater rooms and pools raise rates and fill off-season dates.
- View and privacy. Guests pay for both.
- Drive time. Distance to the Parkway, Dollywood or a park entrance shows up in bookings.
- Road access. A steep gravel road costs you winter guests and reviews.
Costs that first-time buyers miss
- Property tax at the commercial assessment ratio. See Sevier County property tax on rental cabins.
- A short-term rental insurance policy
- Management, typically a share of gross rent, or your own time if you self-manage
- Cleaning, supplies, hot tub service and pest control
- Staining and deck upkeep on a log cabin
- The annual permit and fire inspection
- Furniture and replacements. Most cabins sell furnished, but not all of it will be worth keeping
How the financing works
A DSCR loan approves the cabin on its income. We divide the monthly rent by the full monthly payment and look for 1.0 or better. Your tax returns and your job are not part of it, which is why this loan suits self-employed buyers and anyone who already holds several mortgages.
- Up to 85% of the purchase price with strong credit, so a down payment from 15%
- At a 600 credit score the limit is 70%
- Income from 12 months of the cabin’s history, or AirDNA projections counted at about 70 to 80%
- About 30 days to close
You will also need cash reserves. We look for roughly six months of liquidity in your bank statements.
The order to do things in
- Get pre-qualified so you know your budget and leverage.
- Pick the area and the size of cabin that fits it.
- For each candidate, confirm it can rent, and get the rental history.
- Work out the real payment: loan, commercial-rate tax, insurance and fees.
- Send us the address. We will run the ratio before you offer.
- Go under contract, order the appraisal and close.
Should you buy through an LLC?
Many investors do, for liability reasons. We lend to individuals and to LLCs. Talk to your attorney and accountant about which is right for you.
Start with the investment property loans overview, or tell us about the cabin you are looking at.