This article is intended to help Cabin Owners and Future Cabin Owners understand who the Average Cabin Owner is, what they realize during the first year of owning the Cabin, what the three main questions they end up asking and the answers to how they can wade through the distractions to become successful Cabin Owners.
Warning: This Article is not polite, sweet or sugar coated. It is a poignant look into the mirror of real life. If you get offended and stop reading you are only hurting yourself.
Avatar:
Name: Sheryl- usually the wife wants the cabin.
age: 45+
Occupation: Successful at what they do- most often Sales, Upper level management, Corporate, Government, or Business Owner.
Properties owned: often more than 2 but this is their first cabin
Married: again
Resides: elsewhere
Experience with rental properties: probably has had long term rentals in their portfolio but this is a new market to them.
Family: is important to them. usually have children and grandchildren but they are spread around. Probably has ailing parents.
Driving forces: they often overlooked their family and invested in their career; this eventually cost them their first spouse and a strong relationship with their children. They are strong and have rebuilt their life and are finally at the level of financial stability that they were working for. They want to reunite with their children and enjoy their Grandchildren, they now have the time and want to spend the money they have to enjoy life.
Usually, they have fond memories of visiting the Smokies and want to own a piece of tranquillity for themselves- HA HA!
What they are looking for:
/ an investment and relaxation
/ enjoy the relaxation
/ want to make money for retirement
/ want to have a place to retire when they finish working
/ they want their investment taken care of.
What they find:
/ High outgo and low income
/ problems, problems, problems.
/ No retirement money and no tranquility.
The questioning begins:
Oh my, what did I do?
here are a few of the common realizations that people see when they get to this point:
/ This Cabin does not make any money!
/ This Cabin is costing more than I anticipated.
/ This Cabin takes a huge amount of Maintenance.
/ I wanted to come up here for an vacation and all we do is work on the Cabin the whole time!
they start to realize that this is not what they thought it was.
They feel like they have been duped or lied to.
They wonder if they made a bad decision.
Most often, the problem is that the owner paid too much for the cabin.
There are three values for a cabin:
- Market Value
- Business Value
- Wow or Experience Value
Most often these values are added together to justify the price of a cabin when in reality each value should be counted and held separately, not collectively.
Oh my, what can I do?
If you overpaid for the cabin do not worry, there are several options.
/ sell the cabin at a loss- although, if the market is right you may be able to sell it to a “sucker” and let them loose
/ allow it to go into foreclosure
/ hold the cabin until it is actually cash flowing, then you can sell it from a position of power.
So how can you make it better? Your best choice is to get some professional help.
I recently heard a business expert tell a client that they needed to come back and get some more coaching. The client responded that they did not have the money to pay for the coaching. The expert said, “if you do not have the money to pay for the coaching then you REALLY NEED the coaching.”
If this is where you are, then you need help to make the decisions that will save you hundreds of thousands of dollars.
Let’s start with the basics:
Owners come to the “shock and awe” moment- the shock of, “I did not know what I was getting into.” and the awe of “how much does this crazy thing actually cost?”
It is usually fairly easy to guess when my Clients get to this stage, They begin the questioning and/or renegotiating of cleaning, maintenance and upkeep costs. Unfortunately, cutting these costs is the exact thing they should NOT do. Pay for reliable cleaning, maintenance and upkeep. Meaning- having a cheap cleaner or maintenance company and skimping on the upkeep is the surest way to increase guest complaints and reimbursements. This will decease the value of the cabin and is certain to invite more damage; you are literally tearing your investment down.
Oh my, what will I do?
Alright, this is where your choices make a big difference. John Wooden, the great basketball coach, is attributed with saying, “Remember, the choices you make will make you.” Most folks, when they reach this point, start looking for ways to get out of their mistake. After all, the first rule of holes is when you find yourself in one- stop digging. Maybe getting out from underneath your Cabin is the proper way to handle the situation, but maybe there are other ways that you can turn your situation around. Allow me to introduce you to “Suzy”.
Suzy bought her Cabin for a very good price when the market was low. She was also able to pay cash for most of it. (Let me tell you, that is the best way to have your Cabin pay you back!) Despite all of this, Suzy was unhappy with her Cabin. When I talked to her about her situation I asked her several questions that were hard for her to answer. To make a long story short, Suzy was unhappy because she felt that the Guests did not take care of her cabin the way she would. There was often minor damage done and it seemed like every week she was getting calls about how something needed to be fixed or replaced. It began to pile up and eventually the stress that it caused was more than she wanted to deal with. After getting deeper into the conversation she revealed that she was having health issues and her Mother-in-laws health had deteriorated to the point that Suzy was now caring for her every day.
I looked Suzy in the eye and said, “Ma’am, you have too much on you.” Suzy literally started crying, right there in public. She apologized and asked me to continue. “Suppose I hit a nerve, huh?” She smiled and nodded at me through her tears. “Suzy, it is not that the Cabin is giving you problems. The problem is that you have too many problems to handle right now.” She agreed and started crying again.
Suzy is a very strong woman. DO NOT think that I am even suggesting that she is not highly competent. We continued to talk and after about ten more minutes of prying, we came to an agreement that we would manage her property and not contact her unless it was an absolute emergency. We set up some guidelines for spending money on repairs and I made sure that the cleaners, maintenance and management knew that she wanted us to run her Cabin “blind.” Every problem was to come through me and I would be the only one to present to her. For over a year we ran the Cabin that way. Suzy and her husband even came to stay in the Cabin a couple of times and they said that they had not enjoyed their cabin that much in years. Did everything go smoothly? No. Did major issues come up? Yes. Did I have to bother them with problems? Yes, but only a few times. Did it cost Suzy more? In money, yes. In time, aggravation, headache, heartache, lost sleep and the like, No. She is a happy Cabin Owner again.
You MUST realize that I am not advocating allowing someone else to make financial decisions for you, that would be irresponsible.
There are other things that you can do to make owning a Cabin less stressful. Let us start with the basics:
/ Pay a decent price for it. This means do not pay too high of a price, know what the three values are and use them to make your decision.
/ Have money set aside for the startup. It generally takes abut a year and a half to get a Cabin renting the way it should, you will need money to float (float is a term that comes from a sink or swim analogy, when learning to swim we often need something to help us float so that we do not sink) the Cabin along for that time.
/ Have money set aside for emergencies. Yes, this is in addition to startup money. If a hot tub freezes up in the winter or the water heater dies or a tree falls on the Cabin, you need a reserve to pull from.
/ Having a reliable team to help you. Whether you live next door to your Cabin or not you will need a team to help you.
/ Have a system. Build a system that you and your team know how to use.
/ Use the system. This should be a foregone conclusion… but it is not. So, use your system.
/ Find a place to get help. Learning how to ask the right person the right question at the right time will make your life better.
Now that we have established some of the basic courses of action that are available to the majority of Cabin Owners, I would like to go back to where this crisis started and answer some of the original questions. Let us take a look at the introduction and questions:
Introduction (from beginning of the article):
Usually, they have fond memories of visiting the Smokies and want to own a piece of tranquillity for themselves- HA HA!
What they are looking for:
/ an investment and relaxation
/ enjoy the relaxation
/ want to make money for retirement
/ want to have a place to retire when they finish working
/ they want their investment taken care of.
What they find:
/ High outgo and low income
/ problems, problems, problems.
/ No retirement money and no tranquility.
The questions:
(from above) here are a few of the common realizations that people see when they get to this point:
/ This Cabin does not make any money!
/ This Cabin is costing more than I anticipated.
/ This Cabin takes a huge amount of Maintenance.
/ I wanted to come up here for an vacation and all we do is work on the Cabin the whole time!
Answers:
/ This Cabin does not make any money!
Cabins really can make money, just not in the way you are thinking. Owning an investment property is usually about long term appreciation and tax shelter. When used correctly, a Cabin can be a solid investment.
/ This Cabin is costing more than I anticipated.
Below is an explanation of what common labor cost are. After seeing how much Labor costs, I hope you will better understand and appreciate what the Cabin Management and Maintenance companies have to pay for. They are not trying to nickel and dime you to death. They are trying to comply with Local, State and Federal guidelines.
/ This Cabin takes a huge amount of Maintenance.
Yes, it does. It will be abused and treated like a Commercial Property so do not expect it to cost like a Residential house.
/ I wanted to come up here for an vacation and all we do is work on the Cabin the whole time!
You do not always have to work on the Cabin when you come on vacation. However, it will save you a great deal of money. How does the old saying go, “Time or Money- that is all it takes, Time or Money.”
Here is an insight into current (2019) Labor Costs:
In the book the Cabin Owner’s Manual I presented an idea, People see Cabins as a way to enjoy a modern experience in a perceived rustic setting. What this means is that most of the time folks are looking for a place to relax. This may mean having the kids be occupied with something so you can read a book or play on social media. It may mean that you turn your phone off and look at the mountains. It may even be that you just want to be isolated for a while with a special someone. Whatever the reason, it comes down to hiding from life for a while and the mountains are a great place to do that. However, as an Owner of a rental, it is your responsibility to provide a place where others can enjoy what you own. That puts you squarely in the service industry just like a Motel, Casino or Cruise Ship, you now own something that other people are going to use for vacation or holiday. That means that it will be used hard. Used hard because they do not usually live there and therefore do not know all the nuances of your Cabin or even how to use amenities like the hot tub or the game system and even things as simple as the television remote (I have had more service calls about the television remote that you can imagine-no joke!)
Well, somebody has to fix the problems for the Guests and if you think someone is going to brave Friday evening traffic and drive all the way to your Cabin to change inputs on the TV remote for free, you are crazy. You see, Thanks be to our great Governmental tax code and insurance regulations, paying for employee time, usually referred to as “Man Hours,” is ridiculously expensive. If you pay payroll then you will understand what is involved and probably have a good idea of how much a man hour costs. If you do not, then here is a little insight into why everything costs SO much:
When I started working on Cabins for myself, I had already received my Bachelors degree and had among other jobs, been a Secondary Ed (High School) teacher so I felt that I had the mental capacity to add running a business to my knowledge of Maintenance and Landscaping. Was I in for a surprise! When it came time to pay our taxes and I realized that I knew nothing about running a business. So, I found a Business Coach, Tony Bass, to teach me how to run a business. I payed thousands of dollars for Tony to go sit in a room for a whole weekend and do math with me. No joke, We did THOUSANDS of calculations to find out what it cost me to run my business. I left that meeting with a new respect for successful Business Owners, a healthy dose of humility and MY NUMBERS. What I found out was that country wide most of the time whatever an employee gets paid, be it $10 an hour or $40 per hour, the company MUST charge at least 3 and maybe as much a 4 times that rate to the Client. Yes, You read that correctly. If an employee makes $10 for an hour of work then a Company has to charge at least $30 for that work, and That does not include the cost of equipment, AND THEN travel time has to be accounted for. To clarify, if an employee sits in traffic for 30 minutes getting to the Cabin and it takes them an entire 6 minutes to trouble shoot and fix the problem with the TV remote then get back in the truck for the now 45 minute drive back to the office. Here are the ACTUAL costs to the company broken down using the Multiple Overhead Recovery System:
Man hours of work- .1 hour or 1/10th of an hour
Man hours travel time- 1.25 hours
Truck cost 1.35 hours
Those numbers do not seem to intimidating so lets break them down.
Man hours of work- .1 hr times $10 per hour= $1.00
Man hours of travel time- 1.25 hr times $10 per hour = $12.50
Truck costs- 1.35 hrs (truck time must be charged for sitting time as well) times $10 per hr= $13.50
So $1 + $12.5 + $13.5= $27
But, when you add in labor burden and markups (business costs for doing business) and add a 10% profit that number jumps to $54.00!
Yes, it literally costs the company over $49 to send 1 person being paid $10 per hour to work for 6 minutes. So they charge you roughly $54 and make about $5.
Keep in mind, this is for one employee! Some Maintenance companies have a wise policy of requiring 2 employees to be present to enter a Cabin- for safety and ethical reasons.
Put the shoe on the other foot, How would you like to buy a truck and keep it maintained then hire a person to drive that truck and train them on how to maintain a $400,000 Cabin and only pay them $10 per hour and hope that they do their work well so you can keep your business running, only to profit a measly $5 for 1.35 hrs of work. That works out to be about $3.80 per hour!
Want to hear more? Take a guess what the numbers look like if you have to pay the Employee $15 per hr- The total comes to $70 and some change!
Now for the fun part; You, the Cabin Owner are not even happy with the work of the $15 per hour employee because your want someone that is motivated to excellence working inside of your investment property, So lets get a real professional and see what you would pay for them. At $25 per hour you are paying almost $103. So let’s get realistic. If a Management company is charging you to do work- and the work is actually being completed in a timely manner, expect to pay for it.
They say, “Knowledge Is Power.”
If that is true, then you may want to consider paying for some knowledge because it takes years of experience to know the ins and outs of this industry. Contact me today.
John D. Suttles, Owner of Cardinal Custom Lawn Property Maintenance
Marty Loveday and Associates Realtors, 130 Maryville Hwy. Seymour, TN- John@martyloveday.com Cell: 865-724-8402 Office: 865-573-9444
If you are reading this article you may be interested in help with Operation, Management or Maintenance of your properties. For more information download the free 10 page book, The Top Ten Drawbacks to Cabin Ownership and How to Deal With Them, from WWW.TheCabinOwnersManual.com or purchase the Manual for the current low price of only $10!
About the Author:
John operates Cardinal Custom Lawn Property Maintenance, www.CardinalCustomLawn.com, which maintains Mountain properties inside and out. He serves as a Realtor with Marty Loveday and Associates, www.MartyLoveday.com/John-Suttles/ where he uses his knowledge to assist those in the Cabin Industry (He is constantly looking for qualified listings to take to market) and he authored, The Smoky Mtn. Cabin Owner’s Manual, www.TheCabinOwnersManual.com where he offers his experience in Cabin rentals, maintenance and market to those who want to be successful in the Cabin Industry.
John is a recognized and highly respected author, educator, and businessman with a reputation for helping individuals and organizations create helpful and sustainable results.