A pair of real estate investors took a niche approach to building a money-making portfolio: going all in on tiny homes and taking a little inspiration from “The Hobbit.”
Nestled close to the popular Great Smoky Mountains National Park, Mountain Shire is a tiny home short-term rental village that evokes Tolkien’s fictional universe.
The village in Sevierville, Tennessee cost about half a million dollars but is on the way to netting Joe McCarthy and his nephew Justin Kersey a sizeable passive income stream a year into operations.
Tiny homes are proliferating as a minimalist and inexpensive way of living, and are increasingly used as Airbnb properties. McCarthy and Kersey told Insider how good timing and a curated approach to design helped them beat competitors.
These figures were verified by documents shared with Insider.
Kersey, a tech consultant, wanted a project he could work on part-time. McCarthy told him about an idea he had for a tiny home village.
Instead of lending McCarthy money for the project, he thought it would be better to go in as partners. He moved from Florida to Tennessee to help construct the village in mid-2020.
They bought a plot of land in the area around the Great Smoky Mountains after McCarthy saw an opportunity to turn the small village into a tourist draw.
The pair enlisted Randy Jones from Incredible Tiny Homes to make their bespoke 10x20ft homes. Each one cost them $50,000. They spent an additional $40,000 on refurbishments, amounting to a total outlay of nearly $500,000.
Incredible Tiny Homes work with several budding real estate investors keen to build up passive income with relatively affordable tiny homes.
They opened their first home in December last year, which has since generated as much as $55,000. Their five homes have made about $120,000 combined this year.
“It’s getting more manageable every day where it’s not a full-time job anymore. And by this time next year, you could call it passive income,” Kersey said.
Most customers are aged between 25 and 40, including many couples wanting to visit the nearby national park.
Finding land in a popular tourist spot was clearly a boon for the pair, and would be difficult to replicate in the region now, they say.
But McCarthy and Kersey say competition for tenants is stiff in the tourist spot, so they’ve tried making their offering unique.
The pair debated whether to make the tiny homes relatively plain, or to go all in on a quirky design with a sizeable up-front cost. “If I were to offer a piece of advice, I’d say try to make it unique, you know, give people a reason to stay there,” McCarthy said.
They’re maintaining that approach as they continue to add to the site, with garden gates and chickens that lay eggs for breakfast in the works.
“You need to stand out. This is a competitive market. And even though there’s a lot of tourism, there are lots and lots of choices and people are looking for something different,” McCarthy said.