Advice on financing off grid property

Advice on financing off grid property

Breeding, KY · Member since 2015 · 3 posts · 1 vote

I am new to the forums. Lots of good advice on here but haven't found anything that matches my situation. I bought 10 remote acres and have a small cabin on the property. We bought this home to remodel and live in, not planning on selling it. We have a spring fed creek in front of the house and a spring fed creek beside the house. We are planning on building 2 more cabins on the property also on the creek to rent out. Now we have a chance to buy an additional 15 acres joining ours, and the creek runs directly thru the center of it also. Would like to purchase it and add 3 more cabins to rent. The problem I am having is that all of this property is off the grid with no electricity available. It is not a problem for me as for my house I have an inverter, batteries and a generator, and putting in solar panels. We use gas for cooking and heating and water from the creek for everything but drinking. Will have the same system for all of the cabins. I have not found anyone willing to make a loan because of the off grid location. Talked to an appraiser and he said a house with no commercial utilities is not anything they would appraise. I don't owe much on the first house and land but looking for about 100,000 to pay off  the original land and house and purchase the additional land and build the cabins. We do not want to sell any of the cabins or land but use them as rentals, and also make part of the new acreage and area for a campground for rv's. Because of this we are looking for a longer term loan, probably 10 to 12 years. Any advice appreciated.

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  • Investor · Freeville, NY · Member since 2014 · 131 posts · 37 votes
    11y

    I have been considering doing pretty much the same thing. Unfortunately you wont have much luck finding money. I have not found a single bank willing to finance a house that is off the grid.

    You have a couple options

    1. Find an equity investor and form an LP for your rental business
    2. Find an angel investor and get a loan from him/her. It will be high interest but at least you wont have to give up any equity.
    3. Open up multiple credit cards at the same time (they wont show up on your credit report if you open them at the same time) and use the cash to build your new cabins. This option is very risky. Only do it if you are sure you will have no problem renting the cabins and obtaining the income to pay off the cards. I am doing this successfully on the construction of a duplex that I couldnt get funding on. It works but you have to be good with money to do it.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    @James Hart welcome to the site. I am thinking it will be an uphill battle. Your best course of funding may be a business loan as residential lenders likely will not touch this.

  • Breeding, KY · Member since 2015 · 3 posts · 1 vote
    11y
    Originally posted by @James Klafehn:

    I have been considering doing pretty much the same thing. Unfortunately you wont have much luck finding money. I have not found a single bank willing to finance a house that is off the grid.

    You have a couple options

    1. Find an equity investor and form an LP for your rental business
    2. Find an angel investor and get a loan from him/her. It will be high interest but at least you wont have to give up any equity.
    3. Open up multiple credit cards at the same time (they wont show up on your credit report if you open them at the same time) and use the cash to build your new cabins. This option is very risky. Only do it if you are sure you will have no problem renting the cabins and obtaining the income to pay off the cards. I am doing this successfully on the construction of a duplex that I couldnt get funding on. It works but you have to be good with money to do it.

     How does a person find an angel investor?? Have looked on the internet but all I have found are scam sites wanting money to connect people with angel investors. We have had many people telling us they want to rent the cabins as soon as available. We will not be dependent on the income from the rentals to make the payments as I do have retirement income. I also thought maybe I could find an individual person that would loan the money  to make more on interest than they would get from normal long term savings and they would have first lien on all of the property to guarantee the loan, but, don't know where to find persons looking to invest money this way. Thanks for your advice.

  • Investor · Freeville, NY · Member since 2014 · 131 posts · 37 votes
    11y

    Its hard finding them. I didnt have any luck so I had to go the credit card route. 

  • Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
    11y

    @James Hart I love your idea, it's the kind of thing I'd love to do as well, except maybe with bamboo houses on acreage somewhere tropical.  You're going to need a business loan or private partners, and to get those you're going to need a clearly written business plan with realistic financial projections.  Do you know anyone else who is running a similar business that can help you put together numbers?

  • Breeding, KY · Member since 2015 · 3 posts · 1 vote
    11y
    Originally posted by @Micki M.:

    @James Hart I love your idea, it's the kind of thing I'd love to do as well, except maybe with bamboo houses on acreage somewhere tropical.  You're going to need a business loan or private partners, and to get those you're going to need a clearly written business plan with realistic financial projections.  Do you know anyone else who is running a similar business that can help you put together numbers?

     No, I have not found anything like this anywhere. I have a lot of people that have said they would rent in a heartbeat and even have a college that would like to have field trips for students in their alternative energy classes. I don't know anyone that would want to become partners in this and it would depend on how much percentage of the business they would want. I will get this done someway, not sure how yet but with the response I have gotten so far I can not walk away from this plan. So many people want to know what it is like to live off the grid and they would have a hands on experience with my cabins. Possibly could work out to also sell off grid equipment and parts, but first want to get the cabins up and running. As far as a business loan, the banks I talked to used the same excuse as just getting a home loan, because it is off grid they would not be able to get an appraisal so would not be able to process a loan  of any kind. I will not quit. Thanks for the advice.

  • Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
    11y

    @James Hart I completely agree, I can see the potential opportunities.  When you say business loan did you mean a commercial property loan or an actual business loan. It's hard to get a business loan for a startup, but they'll lend based on your idea and business plan rather than tied to the property itself.  The SBA 504 loan is specifically designed for acquiring or improving property in order to run a business.  Venture capital might also be an option.  I encourage to look at it as a business rather than trying to get a real estate loan, you'll be more likely to find funding.

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