New to Real Estate · MI · Member since 2021 · 54 posts · 13 votes
Good Afternoon,
My husband and I have been looking to purchase a property as a STR in a specific area that has become popular in the last couple of years. We are getting priced out left and right. So we thought we could purchase land and build what we want.
Does anyone have experience in this route for STR? Any recently with the cost of building supplies up due to the bottleneck situation?
Did you take the route of purchasing the land in cash or getting a loan for it? I'm just now researching what the process entails and am looking for some IRL experience from anyone on here.
Developer · GA · Member since 2019 · 74 posts · 42 votes
4y
This is what I'm doing. I purchased a vacant lot and am currently under construction for a 5BR 3500 sq/ft STR. Takes a lot of patience and capital for down payments on the lot and construction loan. Process is taking way longer than I anticipated. However, I'll be able to cash-out refi almost (if not all) my capital when I get into the long term loan.
I purchased the land via loan and then started the process for finding an architect and builder. Didn't start construction until about 15 months after I closed on the land. Happy to answer any questions for you for what I've experienced.
Developer · GA · Member since 2019 · 74 posts · 42 votes
4y
This is what I'm doing. I purchased a vacant lot and am currently under construction for a 5BR 3500 sq/ft STR. Takes a lot of patience and capital for down payments on the lot and construction loan. Process is taking way longer than I anticipated. However, I'll be able to cash-out refi almost (if not all) my capital when I get into the long term loan.
I purchased the land via loan and then started the process for finding an architect and builder. Didn't start construction until about 15 months after I closed on the land. Happy to answer any questions for you for what I've experienced.
Developer · GA · Member since 2019 · 74 posts · 42 votes
4y
@Shannon Vistisen I initially had a land loan. Then moved to a construction to permanent loan for the build. During the construction phase, the payments are interest only on the amount drawn. Once the build is complete, my plan is to cash-out refi into a DSCR loan to clear my DTI so I can get another construction loan on a different property.
Pain points were that it took so much longer than I anticipated. Mostly due to two reasons, first was the back and forth with the architect for the build design took way longer than I thought was necessary. I also added a 3rd level and 5th bedroom after I had a final plan so that took even longer. Second, I needed a few environmental surveys and permits by both the state and county due to the location (I have a beach front lot) and there is a protected animal that lives in the sand dunes.
The loan for the vacant lot required 20% down using a local bank. When it went into the construction loan, the vacant lot loan got paid off and was rolled into the construction loan.
New to Real Estate · MI · Member since 2021 · 54 posts · 13 votes
4y
Hey Dan, thanks for the information. I'm trying to read and learn everything on vacant land loans to construction loans and how to make this idea tangible. Is there anything that you've come across in terms of learning how this process goes or the ways to make this a seamless journey for reading, listening to, etc?
I've read and consumed everything about short term rentals in the past year. But being priced out of the market I want to get into, possible purchasing of land and building might be an option for me. But, I coming at this route brand new. I don't want to end up loosing money or coming up short. Any good articles, websites, podcasts that can help teach me about loan/construction loans, building processes, etc.
Developer · GA · Member since 2019 · 74 posts · 42 votes
4y
Unfortunately, no. I haven't found any education resources for this process. I can get on a call for a Q&A with you and your husband to explain the process I went through if you'd like.