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Property Shield

Data Security Firm is Changing the Face of Fraud Protection by Carole VanSickle Ellis Property Shield is, by any definition, “new to the scene” of data security. In fact, the company launched in February of last year. However, said the company’s co-founder and CEO Alex Fahsel, the data security firm hit the ground running by tackling emerging issues around fraud, data security, cyber security, and even artificial intelligence. “As much as we love all this technology, it can be used for all sorts of nefarious things,” Fahsel said. “Property Shield specializes in using this technology for good and to stay ahead of scammers and fraud. Cybersecurity has historically been a ‘cat-and-mouse’ game where the good actors have always been a few steps behind. We started Property Shield to give those good actors the opportunity to stay ahead.” “We are basically the data police,” explained Luke Lind, co-founder and CTO of the company. “Our system is constantly monitoring the web for potential fraudulent listings, and whenever it finds one, we immediately notify whichever client owns the data.” At the same time as the notification is going out, Property Shield tackles the process of having the fraudulent listing removed from consumer access as soon as possible. “The combination of these two workflows helps reduce illegal activity at the physical property level,” Lind continued. “Because our system is able to identify and remove fraud listings within hours, we can effectively cut down on the threat they pose to the property.” That threat is growing exponentially larger every day as cyber criminals, already frighteningly internet savvy, add psychological manipulation to their roster of skills. According to the Boston Division of the Federal Bureau of Investigation (FBI), rental scams increased 64% between 2020 and 2021. Cumulative losses exceeded $350 million in 2021 alone. “The actual losses are most likely much higher,” the bureau added, “because many people are hesitant to report they were scammed.” “These are very sophisticated crime syndicates that push these scams and frauds,” Fahsel said. He explained that large syndicates of cyber criminals based in countries with low or no regulation on this behavior may run hundreds of variations on dozens of distinctly “stamped” scams, from romance scams to employment scams to rental fraud. When one strategy begins to work particularly well, the lessons from that strategy may then be applied across the board. There is a great deal of intense analytics involved. “Cyber criminals look closely for certain criteria to indicate if a certain geographical region or market is ripe for real estate scams,” Fahsel said. “When they home in on a market, they will check net domestic migration patterns, for example, to determine where a large volume of people is moving. Then, they tailor the scam to fit the mindset of the people moving into or out of those areas.” Because an individual moving into a new area may not have a clear idea about the nature of the rental landscape, they are particularly prone to falling for what Fahsel calls “too-good-to-be-true” offers. “Scammers compile data about properties, rental prices, images, and listings, then hire virtual assistants or even college students looking for part-time jobs to put together these offers and facilitate the exchange of security deposits, rent, or other funds,” he explained. This makes the entire process even muddier for law enforcement because there are often innocent parties involved in the middle of the process between the victim and the cybercriminal. “The ‘employees’ get scammed too, because they frequently never get paid,” Fahsel noted. The “salaries” for these positions are also often too good to be true; the Federal Trade Commission estimates in 2022, job seekers lost $68 million in labor, lost income, and fraudulent fees associated with fake jobs. Cutting Off Fraud at the Source Because most real estate scams are carried out by large syndicates running multiple scams and multiple variations on these scams in multiple locations around the country, identifying trends early and acting preemptively to identify and eliminate fraud related to an investment portfolio is one of the few ways to make a significant dent in the potential money, time, and opportunity lost when a real estate scam succeeds. There are multiple victims at every point in the scam, from the property owner to the “employees” and “interns” working unwittingly for the scammer to the renter hoping to establish a household in the property shown by the fraudulent listing. According to Georgia Legal Aid, an organization based in Atlanta, Georgia, which is currently a hotbed of rental fraud, the two primary types of rental listing scams actively deployed at present included renting properties that the scammer is not authorized to rent and creating property listings for properties that do not exist and soliciting deposits or application fees using those listings. However, this simple explanation barely scratches the surface when it comes to the ingenuity and brainpower cybercrime syndicates dedicate to this type of fraud, Fahsel said. “These are teams of people who wake up every day and think, ‘How do we scam these people? How can we hack the system and take advantage of it?’ If they put half the effort they do into pushing these scams into a legitimate business that would help people, they could do really well,” Fahsel explained. “Sadly, that is not the route they take, so Property Shield spends every waking moment thinking about how to stop them.” Lind added, “Our system stands out from other fraud-prevention platforms because we are using the same tools that the scammers are using to fight them. Machine learning is a critical component of our system, and we have been ‘training’ our models for a long time.” To “train” a machine learning model, the algorithm is “fed” data from which it can learn. The more training the model receives, the better it becomes at identifying threats and classifying them as such. Lind noted, “Our model is also multi-modal, meaning it can process multiple mediums of data, including text and images.” This enables Property

Regional Spotlight

Orlando, Florida

Florida’s “City Beautiful” Endures a Statewide Market Shift by Carole VanSickle Ellis The third-most-visited city in the United States could see a shift in the next few years as formerly happy pandemic-era homebuyers put their properties back on the market and flee inland once more…or the market could “correct” in one of the gentlest “softening” events in the country. Analysts can make compelling arguments in both directions. “Florida’s real estate market has a split personality,” wrote Realtor.com data journalist Evan Wyloge in August 2024. The same is arguably true on an individual level for at least some of the state’s markets, including Orlando. After weathering multiple named storms in 2024 alone, including Hurricanes Helene and Milton, many Orlando residents say they are considering listing their properties and relocating closer to their pre-pandemic stomping grounds. Given how prices have risen over the past four years, many expect to liquidate to great effect and, furthermore, they have high hopes of an expedited experience thanks to rising demand for housing around the country. The sales process, however, may not go as smoothly as many expect. “We could see some price deterioration in some areas,” warned Florida Realtors chief economist Brad O’Connor in an interview with the Wall Street Journal in early October of this year. He added, “[There has] definitely been a sizable increase over the last couple of years in inventory.” The combination could spell bad news for Florida homeowners who purchased at peak pandemic pricing and are now hoping to sell quickly for top dollar and make an exit. While Orlando has not been hit as hard as much of the Gulf Coast of Florida this year, the city did experience tangential economic impact from the rough weather associated with Hurricane Helene. The storm made landfall in northwest Florida but created a preemptive economic impact as Orlando’s theme parks and other tourist attractions and services shut down or cancelled certain seasonal events. Orlando experienced more direct damage from Hurricane Milton’s flooding and extremely high winds, which caused damage in the Orlando area as well as throughout much of the state. Investors should note Orlando may be classified as an “inland market,” but this does not exempt it from looming threats associated with the departure of property insurers and rising rates associated with inland flooding and other natural disasters. Unfortunately, the classification often causes property owners to forego flood insurance if they are not located in an officially designated flood plain. Some insurance companies in the Orlando area will not insure properties once they reach a certain value unless the owner also takes out flood insurance even if the property is not in a flood plain. These storms and others are causing property insurance premiums to skyrocket across the state, including in Orlando. Katherine Frattarola, an insurance agent at a firm catering to high-net-worth clients, noted earlier this fall that many of her clients are reconsidering waterfront Florida property acquisitions in response to these premiums. “People are making different choices as a result of the rise in insurance costs,” Frattarola told WSJ. According to a report from the Florida Policy Project, Florida homeowners saw rates rise 45% between 2017 and 2022. Since 2022, areas hit by hurricanes have posted insurance premium spikes as high as 400%, according to Moody’s Analytics. Moody’s also predicted rates would rise still higher in areas affected by Hurricanes Helene and Milton. Although state legislators have attempted to insulate property owners from instability in the insurance market by creating a $1 billion “reinsurance fund,” disincentivizing “frivolous lawsuits,” and establishing stringent deadlines for the claims process, it appears unlikely that such measures will hold in the face of homeowner discontent and increasingly strong hurricanes and rainstorms. Florida governor Ron DeSantis noted more than one in 10 Florida homeowners do not have property insurance (vs. about one in 20 nationally) and expressed hope that the bill would keep the state’s residents insured at affordable (or at least only gradually rising) rates. Critics of the bill said it would not stop rate increases or cancellations; investors should note ten insurance companies had left the state due to “choice or insolvency,” as the Insurance Information Institute described it, as of August 2024. Florida’s “Split Personality” Could Make Orlando Investing Complicated As the state of Florida experiences volatility in the housing market, markets like Orlando are divided not only by the extent to which they are affected by extreme weather but also by housing sectors. For example, insurance premiums and fees play an outsized role throughout the state, but particularly in prime landfall locations on the coast. On the other hand, state regulations on condominium assessments and related regulations have softened up the condo market substantially in the past few years, including in the condo-flush Orlando market. At present, about one-third of all listings in Orlando are for condo properties. “Nobody can afford the association fees anymore,” realtor Jennifer Levin told Realtor.com in mid-August of this year. She cited legislation enacted in the wake of the tragic collapse of the Miami Surfside condominium building in 2021 as a significant component of the softening condo market. “The big pullback in the market is in the condo market because of rising insurance costs and new laws that require buildings to have full reserves by next year,” Levin said. Realtor.com reported condo prices have fallen about 12% since 2022, while single-family homes have held steady or risen in value in most markets. In Orlando, single-family home median values were up slightly year-over-year in August 2024, reported Bankrate, posting gains of 9.3% year-over-year but falling slightly from a July 2024 peak of $412,000 to $399,000 in August. Readers should note the state of Florida remains one of the most attractive states in the country for new residents and gained a net of nearly 250,000 new residents in 2022 alone according to the most recent available data from the U.S. Census Bureau. The Orlando-Kissimmee-Sanford metro area holds steady in the top three most-popular Florida metro areas and

Profile

Madison Trust Company

Making Control, Versatility Easy for Self-Directed Investors by Carole VanSickle Ellis In 2009, the real estate market was hovering near the bottom of the post-housing-crash slump of the mid-2000s, and Madison Trust Company CEO, president, and co-founder Daniel Gleich was focused on helping his father diversify his retirement investments. In the short-term, this was something of a challenging experience, as one investment manager after another informed Gleich retirement assets were “limited” to stocks and bonds. Gleich, a real estate developer who was well aware of the massive, positive potential in the coming decades’ property markets, was undeterred. The long-term result of his mission to challenge what was, at the time, standard operating procedure for retirement investments, has been life-changing for more than 20,000 of Madison Trust Company’s clients today. “When I heard these financial advisors say, ‘Retirement money is limited to stocks and bonds,’ I just thought to myself, ‘That doesn’t make any sense!’” Gleich recalled. “I understood that we would have to pay taxes on the money if we wanted to move it and diversify, but why couldn’t I invest it where I wanted to?” Soon, he had discovered a relatively unknown vehicle for the time, the self-directed individual retirement account (IRA), and one of its most valuable features, checkbook control. From that point forward, Gleich never looked back. He had found something that would change his father’s retirement investing and that of many, many others over the next 15 years. “It worked beautifully,” Gleich said, “and I was telling friends and neighbors all about self-directed IRAs with checkbook control. After I had set the checkbook control structure up for a few other people, I spoke to one of my partners, Mervyn Klein, future co-founder and shareholder at Madison Trust Company, and we agreed there was a huge opportunity.” They, alongside E. Brian Finkelstein, shareholder and chairman, first opened Broad Financial, an IRA LLC facilitation firm, which worked with a third-party IRA custodian to help investors open checkbook IRAs. By 2012, the founders had realized, as Gleich put it, “the level of customer service that the custodian was offering was not nearly on par with what we were offering.” With an eye toward offering clients a “seamless transaction, all in-house,” the group began the two-year process of meeting with regulators and becoming a trust company. In 2014, the doors of Madison Trust Company opened for the first time. “We wanted to make sure people could invest their retirement money and have more control over those investments,” Gleich said. “There are millions of people out there who could use this investment vehicle and should know about it. At Madison Trust Company, our goal is to help them make that happen.” It was a daunting task, particularly given that around the same time Madison Trust opened for business, the U.S. government actually started work on a report focusing on the dearth of information available on self-directed IRAs and calling for the retirement industry and the IRS to provide more guidance on the topic. That report would be published three years later in 2017. Prioritizing Investor Education & Cutting-Edge Strategy While the federal government began its own research on educational materials available to self-directed investors in the 2010s, Madison Trust Company began a carefully researched educational outreach of its own that would, ultimately, enable the company to grow to the size it remains today. “We spend a lot of time working with our compliance team, consulting the IRS website, and making sure the content team is familiar with all of Madison Trust’s initiatives to ensure that all of our educational material is informative, accurate, and digestible,” observed Brianna Avillo, Madison Trust’s marketing manager. Avillo’s team spearheads content creation for all educational resources on the Madison Trust website, including animated “explainer” videos, infographics, educational webinars, written material, and beyond. “We have an investor-first approach, so our goal is to always make things as easy as possible for our clients,” Avillo said. She explained that for Madison Trust, making things easy for investors means making operations within the organization smooth and pleasant as well. “One of our mottos is that happy employees lead to happy clients,” she said. Gleich elaborated, “If we, as owners, take good care of our employees, and our employees are happy, they will take care of our clients, and our clients will be happy. If our clients have a smooth experience, our shareholders are happy, and the loop continues to go around.” He cited the company’s 900-plus Google reviews with an average star rating of 4.9 out of 5 stars as evidence of the success of this policy and the company’s clients in their self-directed investing endeavors. “If people can successfully self-direct their retirement account, they will have a richer retirement, and Madison Trust aims to provide clients with a pleasant journey getting there,” Gleich said. “The key is providing investors with the opportunity to invest in what they know and believe in.” Dana Udumulla, who serves as investments manager for Madison Trust, said her team relies heavily on the education element provided by the company when she travels on its behalf. “We not only have an education-first approach with our current clients and investors; we are always trying to educate wherever we go,” Udumulla said. “There is a huge retirement crisis looming right now in America, and a lot of people are experiencing anxiety and insecurity when it comes to their finances. By providing education and insight that is simple and straight to the point, we make it possible for anyone to become educated on self-directed IRAs and begin gaining control of their situation.” Walking with Investors Creatively & Constructively Customer care and guidance are crucial elements at Madison Trust Company, Udumulla said, explaining that unlike many other SDIRA custodians in the industry, the Madison Trust investments team has the educational background and training to provide guidance with regard to client inquiries within the self-directed investing space. This means members of the investments team are available to clients

Regional Spotlight

2024 Election Could be a “Wash”

The Impact of Elections on the National Housing Market by Carole VanSickle Ellis Conventional wisdom states that uncertainty in almost any element of the economy will usually result in “bad news” or short-term negative behavior in most financial markets. Presidential elections have historically been considered a prime example of how uncertainty affects investor behavior, with financial markets typically responding to the election process and months following the actual vote with less movement and lower gains. While this holds true for many areas of industry, the housing market seems to stand apart from the trend. New research published by the Yale School of Management and Northwestern University could hold the key to identifying how any given election cycle could affect housing on national and local scales. “There is good reason to believe that just uncertainty by itself is bad, but we also know that when there is high volatility, there is also high opportunity,” said study lead Stefano Giglio, Yale’s Frederic D. Wolfe professor of finance and management. Although the study focused primarily on financial markets, the research team said the broad array of sources from which it drew data for analysis meant the study “has implications for both financial markets and the broader real economy.” In financial markets, investors tend to react to the potential for volatility by “shoring up” portfolio defenses, sometimes paying “heavy premiums to insure against the risk of an actual loss.” However, in nonfinancial markets, such as real estate, investors actually tend to take the opposite approach, attempting to insure “against periods of low volatility,” Giglio said. He concluded, “Periods of high uncertainty are not necessarily ‘bad’ economic states, but possibly times of innovation, creative destruction, competition, and, ultimately, growth.” Sharper Business Solutions founder Gary Harper, whose company helps entrepreneurs and real estate investors scale their businesses, agreed with Giglio’s assessment that high uncertainty is not necessarily bad for business as long as investors are cognizant of how external factors, such as consumer confidence, affect their company’s performance during election years. “Consumer confidence often fluctuates during election years, so it is important to gauge market sentiment and adjust your strategies accordingly,” Harper said. He suggested implementing strategies that emphasize stable, long-term investments during times of broader economic uncertainty. “While election years can bring volatility, they also present unique opportunities for savvy investors,” he said. Monick Halm, a California-based real estate investor and founder of the REI Goddesses mastermind, observed election-year reticence on the part of some investors could represent opportunity for others. “While others are holding back due to fear or uncertainty, there may be less competition in the market, which can lead to more favorable buying conditions,” she said. Halm continued, “This is the time when strategic investors step in, take advantage of potential price adjustments, and set themselves up for future gains. The key is not to get distracted by the ‘noise’ or the headlines. Instead, focus on your long-term goals and stay adaptable.” Establishing Causal Relationships Between Politics, Consumer Confidence & Housing Although consumer sentiment surveys have been around for roughly three-quarters of a century (the Consumer Confidence Index, or CCI, made its debut in 1967), economists have historically struggled to establish clear causal relationships between sentiment and specific areas of consumption. However, since 1991, one relationship has emerged as an increasingly powerful driver of consumption of everything from household appliances to home purchases: a November win for a consumer’s preferred political party and increased short-term spending. Hector Sandoval, director of the Economic Analysis Program and a research assistant professor at the Bureau of Economic and Business Research (BEBR), explained that a party shift, in particular, seems to improve consumer sentiment and increase spending on the part of the party entering office. As politics become increasingly partisan and consumers’ feelings on the topic become increasingly passionate, the fallout for local housing markets could be stark, particularly in markets where there is a marked political shift in the wake of November’s elections. Sandoval’s research focuses primarily on consumer sentiment and spending within the state of Florida, where there have been relatively few major power shifts in the last 30 years at a state level. As a result, he said, his team was unable to determine “a statistically significant relationship” when it came to gubernatorial elections, but a study of national politics revealed that the “widening gap between Democrats and Republicans” is affecting actual consumer spending. Based on their beliefs, consumers were likely to make larger purchases when their preferred party was in power, with this trend becoming more pronounced when the preferred party was reentering office after a period of absence. Interestingly, if Sandoval’s conclusions hold on a national level, the 2024 election might not necessarily have a substantial net impact on consumer spending or the national housing market simply because the nation is divided relatively evenly over the perceived unsuitability of theopposing candidates. For former president Donald Trump, in particular, it may surprise readers to discover that the country is split roughly down the middle when it comes to his presidential performance. Pew reported in March 2021 that 38% of Americans believed he had made “progress toward solving major problems facing the country during his administration,” while 37% said he “made these problems worse.” The remaining respondents said he had either “tried but failed” (15%) or “did not address [major problems]” (10%). At that time, Pew analysts observed that although “Republicans and Democrats offer starkly different assessments of Trump’s presidential legacy,” the actual numbers indicated public sentiment could be considered something of a wash, since 47% ranked the Trump administration as “great,” “good,” or “average,” and 53% ranked it as “poor” or “terrible.” In 2024, these sentiments became more passionate (and more evenly split), with 51% of Americans rating the former president “very coldly” and 49% stating their feelings were “very warm,” “warm,” or “neutral.” As a result, if studies like Sandoval’s hold true for the 2024 election, one half of the population’s shifting sentiments and spending patterns are likely to cancel

Profile

ZVN Properties

A Network of Consummate Professionals By Carole VanSickle Ellis When Deanna Alfredo, senior vice president of the ZVN Properties Inc.’s Single-Family Rental (SFR) division, thinks about how the company is evolving with the times and the industry, she can sum up one of the biggest changes with one word: email. The ubiquitous electronic mail communications upon which most of the world has relied for several decades when it comes to communicating quickly as easily about both professional and personal matters is, Alfredo notes, transitioning off centerstage in the SFR space, and it is doing so much more rapidly than many vendors, contractors, and even investors realize. ZVN, however, is ahead of the curve thanks to the company’s dedication to clear and effective communication with both clients and contractors in order to, as the company itself describes it, “provide high-quality service and accurate, on-time results [while] minimizing customer costs.” The advent of the service portal on the client side of the equation has not come without complications on the service side of SFR, Alfredo noted. Today, nearly every SFR provider has its own unique, customized portal designed with the needs of that company’s specific residents and investors in mind. As a result, contractors and other real estate-related service providers may flounder as they navigate a vast array of automated and AI-powered systems. This tough terrain, Alfredo said, is where ZVN really shines. “Nearly all of our clients have technology and portals in place today that require us to go into their systems [vs. the client using a ZVN-developed option] to submit results, photos, and invoices,” Alfredo explained. “That is a very different landscape from even just a few years ago, when most parties in the industry were still relying on email. It has made things very difficult for a lot of service providers, but for us, that is just part of the growth and maturation process of the industry.” Bryan Lysikowski, CEO and co-founder of ZVN, agreed, saying ZVN’s ability to navigate client portals and platforms rather than requiring clients to enter into a standardized ZVN option is one of the things that makes the company stand out in the field. “If you want to survive and thrive in today’s marketplace, you must be heavily technology-enabled,” Lysikowski said. “We are managing a network of professionals all leveraging elements including artificial intelligence, cost estimation tools, and many other technologies, so our clients can rely on us to communicate the status of any asset and also to react quickly to changes in the property.” Unafraid & Unintimidated by Technology in Any Industry ZVN combines cutting-edge technology from multiple industries and sectors in order to gain the best reaction times and results possible for their clients, even if that means diving into industries that might appear to have little to do with real estate on the surface. For example, when temperatures skyrocketed in Texas earlier this year, ZVN leveraged meteorological data and forecasting information in order to prepare for action despite the events occurring over a holiday weekend. “We leverage technology that tells us what regions are likely to be hit by storms or weather events, including extreme temperatures,” Alfredo explained. “We can see these things at a ZIP code level and be prepared to respond.” In the case of extremely high temperatures in Texas, ZVN reached out to their vendor management team, which Alfredo described as “robust,” and challenged the team to contact all ZVN AC vendors in the potentially affected areas in order to assemble a list of at least three names per service region that would be willing to operate on a 24-hour rotation of availability over the long weekend. When units failed under the pressure of the sky-high temperatures, ZVN clients were able to provide fast, effective maintenance to residents who desperately needed access to cooler temperatures. “We went into that weekend knowing that if things went wrong (and they did for many residents), our partnerships with clients, vendors, and residents would effectively get us all through that,” Alfredo said. “We went in with a ‘crystal ball,’ but it took planning and communication to make sure we were all on the same page.” Lysikowski added each client file has a comprehensive asset list indicating where properties are located and what types of events might affect them. “When things like tornadoes happen, we get a ZIP-code level indicator that we can run through a portfolio to let us know what areas are likely affected by the event. This enables us to provide a fast and accurate response. Such a response might include emergency inspections for properties in the affected ZIP codes to check on residents or visual checks on vacant properties,” he said. “A lot of these potential issues are particularly hard on the elderly and families with children, so we make it a policy to always treat these issues with a sense of urgency,” Alfredo concluded. A History of Evolution & Customized Customer Service When Lysikowski founded ZVN just over 20 years ago, he did so in response to the “wild west” element of asset management preceding and during the housing crisis of the mid-2000s. ZVN started out in default services, striving to create order from the chaos that ensued as high volumes of properties plummeted into REO status and, eventually, institutional ownership. “It has been a very interesting journey over the last 20 years,” Lysikowski said. “No matter what area of real estate field services you are in — fixing properties, maintaining them, cutting the grass, etc. — there has been a parallel growth of the SFR industry and that service genre as all the volume hit [the sector].” He described a burgeoning need for services like ZVN, which considers itself a “one-stop-shop” for real estate services, and the emerging demand for centralized, professional, technology-savvy companies to manage services on a national level. “When we entered the industry, there was not a lot of regulation surrounding what we did,” he noted. “Fast-forward 18 years, and you had all

Regional Spotlight

Gatlinburg, Tennessee

“The Gateway to the Great Smoky Mountains” Attracts Visitors & Investors By Carole VanSickle Ellis Gatlinburg, Tennessee, has always been an attractive destination. Hundreds of years before the city was settled in 1806 as the settlement White Oaks Flats, Native American tribes traversed the area regularly as they hunted up and down the peaks and valleys of the mountain range we know today as the Great Smoky Mountains. Gatlinburg would have been founded three years earlier, but the original settler, a South Carolinian named William Ogle, died of malaria after prepping enough logs to build a cabin and then returning to his native state for the winter. Three years later, his widow and her remaining family returned to the area and assembled the cabin Ogle had left behind him in what is, today, the heart of Gatlinburg. In the wake of the American Revolution, the area around Gatlinburg attracted veterans from both that war and the War of 1812 who were eager to convert their war pay, 50-acre deeds for U.S. land, and become landowners in the beautiful and fruitful area that Ogle had dubbed “The Land of Paradise.” Many of their descendants make up the roughly 3,600 permanent residents of Gatlinburg today. Although fewer than 4,000 people live in Gatlinburg proper, which is often referred to as “The Gateway to the Great Smoky Mountains,” roughly 12 million people visit Sevier County, where Gatlinburg is located, each year. The area attracts tourists during every season thanks to a host of activities for history buffs, skiers of all levels, and nature lovers who want to visit the Great Smoky Mountains National Park or enjoy a vast array of activities designed to highlight different recreational elements in the region. “With the formation of the Great Smoky Mountains National Park [in 1945], tourism began to boost the area’s economy,” explained the Gatlinburg Convention & Visitors Bureau on their official Gatlinburg timeline. The group continued, “[Gatlinburg] has since developed into a four-season resort and convention setting.” The area is home to many artists’ communities thanks to investments around the same time into the Arrowmont School of Arts and Crafts and Pi Beta Phi’s public school, the first of its kind in the area, which was founded in 1912 and dedicated to “practical and academic education” and “the rebirth of Appalachian culture through arts and crafts and the ‘cottage craft industry’ movement.” A “Land of Paradise” for the Short-Term Rental Investor Today, those 12 million annual visitors not only spend heavily in the area during their stays; they support a vast real estate sector dominated by short-term rental options. “The combination of low property taxes, easy accessibility, and a supportive community makes Gatlinburg an ideal destination for short-term rental property owners,” according to a 2023 report published by local brokerage Colonial Properties. According to short-term rental resource hub Chalet, average property taxes in Gatlinburg hover just over 2.5%, lower than both state and national averages, and local short-term rental regulations are relatively permissive. Gatlinburg does have regulations in place governing noise and occupancy, but short-term rentals are permitted in nearly all residential zoning districts. Furthermore, at present, the city does not limit the number of rental properties owned by any one person or business entities, nor does the city restrict length of stay for short-term renters. The average daily rate (ADR) in Gatlinburg is higher than $300, and seven-bedroom houses post ADRs of nearly $600. “The town’s proximity to the Great Smoky Mountains National Park ensures a constant influx of tourists, driving demand for short-term rentals,” wrote Mashvisor analysts earlier this year. “[Proximity to the park] has led to a 15% increase in rental income for vacation homes compared to the previous year,” they continued. At time of publication, Gatlinburg’s average Airbnb occupancy rate was roughly 70%, with summer and fall occupancy rates exceeding 80%. Those numbers held firm across room counts from studio to 5+ rooms. “It is just explosive popularity,” said Airbnb spokesperson Ben Breit of the massive influx of tourists into the Gatlinburg and nearby Pigeon Forge areas. “The weather is perfect; you’re up in the mountains…I just can’t imagine a better place to be.” Investors should note Gatlinburg is also a hotbed for exotic, adventure-based short-term rentals, including treehouses. Treehouse rentals flourish in the area, with some investors reporting generating hundreds of thousands of dollars in annual revenue with these assets. However, investors must remember treehouses and “tree forts” come with many additional factors including zoning and safety ordinances that might not apply elsewhere. “Treehouse maintenance is required every year to ensure the structure and the tree(s) remain safe and secure for years to come and, more importantly, that its users are not put at risk,” explained Pete Nelson, master treehouse builder and host of Animal Planet’s “Treehouse Masters.” Owners of all treehouses, but particularly those who own short-term rental treehouses and may not be in regular, on-site contact with their properties, must be aware that treehouse hardware can shift over time, thus changing the load-bearing abilities of the massive treehouse attachment bolts (TABs). Vigilant monitoring is the only thing that can prevent disaster. A Booming Market Leaves Locals Concerned About a Correction At present, the Gatlinburg market does appear to be veering into a buyers’ market, with most homes selling below list price (see “By the Numbers” sidebar) and local housing inventory rising. Of course, this does not necessarily mean a crash is imminent. However, as pandemic-era investors who may no longer be able to work remotely or who find Sevier County’s decision to classify some short-term rentals as commercial properties (resulting in higher tax rates on related income) does not work within their budget leave the area, there will likely be a significant slide in investment-property prices. “The tourists are leaving the industry and the professionals are coming in and making the market better,” observed New York-based short-term rental operator Paul Kromidas in July 2023. At the time, he predicted this shift would happen “over 24 months.” This

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