“What’s the hottest market out there that I should invest in?” This is easily the most ubiquitous question I encounter on social media. And every Tom, Dick, and Harry who is performing moderately well will claim that their respective market is one of the best. Then, you’ll see real estate agents comment that they can help this novice find their dream vacation home in the best market they’ve seen, and pretty soon it just becomes a cacophony of voices, making it hard to discern the validity of any of their comments. Everyone is trying to offer help, and while they may subjectively believe their market is one of the best, the problem with these social media threads is that the information everyone is providing is already obsolete. Their data does not reflect the current performance of a market for prospective investors, because the majority of commenters purchased their property over a year ago for significantly less than current prices. They are reaping the rewards of being early to the party. Meanwhile, you’d be arriving at the party after the police raid, and we know there’s not a lot to gain from that. In the words of Warren Buffet, “The most important quality for an investor is temperament, not intellect. You need a temperament that does not derive great pleasure from being with the crowd.” In this article, I’m going to explain (with data) why I don’t follow the crowds to the popular investment markets.

After searching for new markets recently, my #1 rule of thumb is to not explore the markets everyone is talking about on social media. It’s too late for that. I find it dumbfounding that investors are willing to take returns less than 20% just to be in the hottest markets everyone is talking about. They are chasing the crowd. Meanwhile, I’m looking at markets in the vicinity of the “buzz markets” that are generating over 30% in returns. For example, while investors are clamoring over the overpriced markets of Gatlinburg and Pigeon Forge with average valuation prices of around $1.3 million, I’m looking in the nearby tier 2 or piggyback markets of Cosby and Townsend, Tennessee where the average valuation prices are around $700k and the average returns are 3% to 4% higher than those in Gatlinburg and Pigeon Forge.

However, reality can set in very quickly in these tiny tier 2 markets when you can’t find any properties for sale that fit your expectations, or you lose out to the hungry investors paying grossly over asking. That’s why I’m no longer looking in the Smoky Mountains. In fact, I’m looking east of the Smokies to the Blue Ridge Mountains of North Carolina. Although it may be true that the downtown areas of Asheville, North Carolina have a temporary ban on new vacation rentals, the surrounding areas of this region are flourishing, even mimicking some of the returns we saw in the Smokies at the end of 2020 and the beginning of 2021. I am mainly targeting areas around Asheville, Black Mountain, Hendersonville and Lake Lure where you can still find large cabins similar to those found in the Smokies yet under $1 million. A word of caution about this market though–the prices are climbing each month and I’ve noticed revenue growth is no longer on pace with current prices. I would not recommend purchasing a property over $1 million in this region, because the revenue will not match the prices for an ideal return. I find these markets fiscally attractive now, but I may not have the same sentiment in a few months as prices continue to rise.

For those with higher budgets of over $1 million, the ‘High Country’ of North Carolina is an excellent market. In the cities of Boone, Banner Elk, and Blowing Rock, most of the properties that have more than 5 bedrooms can provide well over $200k gross yearly revenue depending on their condition. With ski resorts and breathtaking views nearby, it’s easy to see why travelers come to explore this area. Typical of a traditional vacation market, there is competition in the market for the best deals; however, you often don’t have to worry about offering way over asking price or waiving inspections. This market is gaining more and more traction amongst investors, so if you are looking for that ideal ski market now is the time to take action in these markets.

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