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I used to spend a lot of time at Kentucky Lake and Land Between the Lakes when I was younger, but I was usually at the northern part of the lake or near Paris Landing State Park. I didn't get down to Big Sandy very much. It should be a good location for hunting, fishing, or any other sort of outdoor activity.
I can only take a wild guess about construction costs in the area. I'll say $80 to $100 per square foot for a custom house in that area. (but I could be way off). One thing that might help to keep construction cost down a little is that Clarksville isn't that far away. A contractor would be able to price building materials in Paris, Dover, or Clarksville.
As far as tornado go, there's two things to consider: the actual number of tornadoes, and the time there's a potential for tornadoes. Nowadays the TV weather people go absolutely crazy whenever there is a tornado warning or watch. If you're not familiar with it, you will think one is bearing down right on your house. A couple of years ago Clarksville was hit with a couple of bad tornadoes, but you never know. You might live there the rest of your life and never see one. I don't remember any memorable ones hitting the Kentucky Lake area (they might have and I just don't remember it); it may be the topography of the area reduces their potential.
The worse season for tornadoes here is early spring, and to a lesser degree fall. Just use some reasonable precautions and tornadoes shouldn't be a major concern. Compared to car accidents, floods, fires, and other accidents, tornadoes are actually pretty far down the list as far as the number of people killed or injured by them in Tennessee.
Since you're building a house, I would suggest you look into putting is a "safe area"--this would be fairly easy to do if you plan on building a basement.
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