Financing a treehouse Airbnb/business project

[Laurence Houde]

Hi everyone! 

I am currently looking at lands to buy in order to build a luxury treehouse business. My goal is to construct about 6 treehouse in a town in Quebec that is well know for tourism. It's a year round destination since it's a too ski destination and it's a in demand location for summer vacations. 

Me and my husband are currently on a lease and we want to make our first real estate investment. What I am thinking about doing is to create 6 treehouses, live in one of them and rent the 5 others.

What I have a hard time to wrap my head around is how exactly is the best way to finance this project. 

Questions : 

- Should I try to get a business loan or a construction loan? 

- Should I buy the land as a part of a business project or with a typical mortgage or land loan that I would put a down payment?

Me and my husband have limited financial ressources (70k to 80k to start with) but I have the drive and the determination to do this. I want to leave my 9-5 government job and focus 100% of my time on building cashflow and capital gains.

Any advices would be greatly appreciated!

I see a huge potential with luxury treehouse to make a lot of money on airbnb.

I studied my market and competition and it make sense. 

The one thing that I am struggling with is finding the funds and understanding which type of funding is best for me for this business/short term rental concept.

Thanks and have a great day!

Laurence

[Leslie Anne Morris]

I’m in Tennessee so this may not work for you but my experience was to buy the land with cash. Then to shop my project idea to several lenders until I found one that was the right fit. The end result was a construction line of credit and after completion a take loan that turns into your typical principal and interest mortgage for 30 years. I would guess you would need the equivalent of a commercial lender in Canada that finances special use projects. 

[Dave Stokley]

I’m surprised to hear @Leslie Anne Morris say she was able to get funding for this. Maybe there are some missing details about the project?

I’m looking into some similar ideas and I’m just planning to raise all cash from investors, which I think will be way easier than getting financing for something like this. One difference may be that I’m not looking into building permanent structures, so maybe it’s easier to get a construction loan if your treehouses somehow are considered a permanent structure?

[Leslie Anne Morris]

Quote from @Dave Stokley:

I’m surprised to hear @Leslie Anne Morris say she was able to get funding for this. Maybe there are some missing details about the project?

I’m looking into some similar ideas and I’m just planning to raise all cash from investors, which I think will be way easier than getting financing for something like this. One difference may be that I’m not looking into building permanent structures, so maybe it’s easier to get a construction loan if your treehouses somehow are considered a permanent structure?

This was my experience with construction. I did not build treehouses. Although I know folks in my area who have and their process was fairly similar. I think experience in doing projects like this goes a long way in finding willing lending partners. 

[Greg R.]

Unfortunately I can't offer any suggestions about financing for your idea, but I did want to say that it sounds really cool. Unique ideas like this usually do really well as a STR as long as the numbers match up. Good luck.

[Luke Carl]

I don’t believe you’ll find financing on anything that doesn’t have a real foundation 

[Laurence Houde]

It seems like a tree house is not considered a permanent structure but I am not sure if it depends on the size. I will need to search a bit more.

Quote from @Dave Stokley:

I’m surprised to hear @Leslie Anne Morris say she was able to get funding for this. Maybe there are some missing details about the project?

I’m looking into some similar ideas and I’m just planning to raise all cash from investors, which I think will be way easier than getting financing for something like this. One difference may be that I’m not looking into building permanent structures, so maybe it’s easier to get a construction loan if your treehouses somehow are considered a permanent structure?

[Laurence Houde]

Thanks Leslie! That is good to know. For my part, I can't pay for the whole land without a mortgage or a loan. I have a down payment that could cover 1/3 or the 1/4 of the price of the land.

Quote from @Leslie Anne Morris:

I’m in Tennessee so this may not work for you but my experience was to buy the land with cash. Then to shop my project idea to several lenders until I found one that was the right fit. The end result was a construction line of credit and after completion a take loan that turns into your typical principal and interest mortgage for 30 years. I would guess you would need the equivalent of a commercial lender in Canada that finances special use projects. 

[Leslie Anne Morris]

Quote from @Laurence Houde:

Thanks Leslie! That is good to know. For my part, I can't pay for the whole land without a mortgage or a loan. I have a down payment that could cover 1/3 or the 1/4 of the price of the land.

Quote from @Leslie Anne Morris:

I’m in Tennessee so this may not work for you but my experience was to buy the land with cash. Then to shop my project idea to several lenders until I found one that was the right fit. The end result was a construction line of credit and after completion a take loan that turns into your typical principal and interest mortgage for 30 years. I would guess you would need the equivalent of a commercial lender in Canada that finances special use projects. 

Ah I see. You would need to find a lender to finance the whole deal then. I know that was an option with my lender here but I had already bought the land a year earlier. 

[Michael Baum]

I doubt any lender would consider a tree house as a viable asset in case of default. What I would look for is a straight up business loan. Get all your ducks in a row. Business plan, projections, competition etc. The whole 9 yards...er...meters in your case. :)

The value will be in the business and land, but not the structures. Some local, small lenders might give you a better shot. They might value the tree houses at 1/2 or 1/4 normal value for a standard stick built cabin on a foundation.

Check out this site - https://www.thecanopycrew.com/...

They do tree house rentals in Kentucky.

[Laurence Houde]

Thanks a lot Michael & Leslie!

I will pursue a business loan or find a lender to finance the whole project.

In either case, I will need to build a business plan. It will be my next step :).

[Kevin Sabatino]

Quote from @Leslie Anne Morris:

I’m in Tennessee so this may not work for you but my experience was to buy the land with cash. Then to shop my project idea to several lenders until I found one that was the right fit. The end result was a construction line of credit and after completion a take loan that turns into your typical principal and interest mortgage for 30 years. I would guess you would need the equivalent of a commercial lender in Canada that finances special use projects. 

Hi Leslie!
I’m looking in the Tennessee area. Do you have any experience with the treehouse type of investments? Zoning, financing..?

[Leslie Anne Morris]

Quote from @Kevin Sabatino:

Quote from @Leslie Anne Morris:

I’m in Tennessee so this may not work for you but my experience was to buy the land with cash. Then to shop my project idea to several lenders until I found one that was the right fit. The end result was a construction line of credit and after completion a take loan that turns into your typical principal and interest mortgage for 30 years. I would guess you would need the equivalent of a commercial lender in Canada that finances special use projects. 

Hi Leslie!
I’m looking in the Tennessee area. Do you have any experience with the treehouse type of investments? Zoning, financing..?

I don’t. I’m building myself now but it is a single cabin.