Financing a vacation rental expansion

6 Replies

My wife and I currently own and operate a small cabin rental business in Southern Colorado on the Rio Grande River.  We currently have 3 cabins and would like to expand.  We stay very busy and turn away more business than we currently do.  We own 3 additional 2 acre lots on the Rio Grande where we would like to expand.  Finding money is nearly impossible for a small business when you write everything off and wondered about trying to raise money through crowd funding?  Something like, pledge $100 for a one night stay, $190 for 2 nights, $270 for 3 nights, $600 for a week.  Has anyone seen an approach like this or have any thoughts or suggestions?

Thanks Fritz

        Your cabins are or are not profitable, accounting for property management and your deductions as an expense?  I'm confused as to why "finding money is nearly impossible for a small business".  Are you looking for a loan, or investors, or a mortgage lender, or something else?  Do you own the lots or cabins free and clear?  If so, why not borrow against them?

I understand what you're saying! I had some troubles with finding funding too but I am now working with lenders who are privy to vacation rentals. They are more focused on cash flow than debt to income, tax returns etc. Plus, they understand that $ in the bank in pre-paid rentals is better than a signed lease. Seek out these types of lenders. It costs a bit more but is a hell of a lot easier than trying to get through a residential loan. 

Hi Fritz, I think all of these ideas above make sense. Getting a business loan or a loan on new property can be challenging. 

I have heard of some higher percentage rate loans based on stated income. 

You could also see if someone here could maybe pay for one unit and own the unit but pay you management services. Depending on how much it costs, I am sure some investors would love a cabin in Colorado to make them some cash. Of course it would have to cash flow. 

Originally posted by @John D. :

        Your cabins are or are not profitable, accounting for property management and your deductions as an expense?  I'm confused as to why "finding money is nearly impossible for a small business".  Are you looking for a loan, or investors, or a mortgage lender, or something else?  Do you own the lots or cabins free and clear?  If so, why not borrow against them?

Hi John, 

Yes our cabins are profitable and this is our main source of income.  The cabins are part of our existing home so we also live on the property doing all of our own property management, because of this we are able to write off a lot of expenses making our income very low making it very hard to get a loan.  We do have a mortgage on the house and cabins but own the lots free and clear.  The 3 lots are worth $500-600K total but no bank will lend on them, its just crazy to me.  We are looking for a loan or investor but not a partner, the idea of doing some kind of crowd funding project might also be an interesting approach but was looking for some examples of that.

Thanks, Fritz

Originally posted by @Wendy Schultz :

I understand what you're saying! I had some troubles with finding funding too but I am now working with lenders who are privy to vacation rentals. They are more focused on cash flow than debt to income, tax returns etc. Plus, they understand that $ in the bank in pre-paid rentals is better than a signed lease. Seek out these types of lenders. It costs a bit more but is a hell of a lot easier than trying to get through a residential loan. 

Hi Wendy,

Thanks, I would love some examples of lenders you are referencing if its not too much trouble.

Thanks, Fritz

Originally posted by @Kevin Grinstead :

Hi Fritz, I think all of these ideas above make sense. Getting a business loan or a loan on new property can be challenging. 

I have heard of some higher percentage rate loans based on stated income. 

You could also see if someone here could maybe pay for one unit and own the unit but pay you management services. Depending on how much it costs, I am sure some investors would love a cabin in Colorado to make them some cash. Of course it would have to cash flow. 

Hi Kevin,

We have a very unique property and have had several people interested in partnering but it is really not something we are interest in doing (today).

Thanks, Fritz