Financing Tiny homes/cabins

[Dana Thilges]

My husband and I are interested in potentially creating some cabins on a piece of land to create a short term rental business. They would potentially be simple with no plumbing (central bath/shower house). So far our experience includes the home we live in (which we flipped ourselves) and one other rental property (long term rental). I've only talked to a couple of lenders, but they both told me we'd need more experience under our belts to take on a project like that. Has anyone done this successfully early on....or are we crazy? :)

[Zach Edelman]

You will need someone on the borrowing entity that has experience with ground-up construction. They don't necessarily need to be involved past that for you to get accepted but they need to have an equitable interest in the property. 

[Paul Erickson]

There are plenty of banks or individuals out there that would be interested in providing a loan for such an investment, my experience however is that without a well written plan with supporting information, you will struggle finding someone to say yes, it isn't always about experience, but about how you are able to convey your plan to them. Look into business lenders instead of mortgage lenders, additionally, you may want to consider making this deal as an LLC and fund it from your retirement (Self directing it) if you feel strongly about your ability to succeed) this may allow you to come up with a down-payment that you may not have otherwise been able to. If you already own the land, this wouldn't be possible. And if you are looking to use the money to replace income today and not in retirement, this strategy likely isn't for you. But there is a lot to consider and I would love to help you work through it, the BP community is great for this

[Michael Baum]

Hey @Dana Thilges, so the kind of structures you are talking about would most likely not be considered real property. The essentially are sheds so no mortgages on those.

You would most likely need to seek a business loan. Maybe a SBA loan.

Now if you don't own the property already, you will need to make sure whatever you find is zoned properly. What you are talking about doing is more of a resort type thing, rustic glamping and the like.

Having the central bathroom/shower area kinda confirms that.

@Paul Erickson has some good ideas there. You will need solid business plan, proof of concept, competition analysis etc. 

[John Carbone]

Quote from @Dana Thilges:

My husband and I are interested in potentially creating some cabins on a piece of land to create a short term rental business. They would potentially be simple with no plumbing (central bath/shower house). So far our experience includes the home we live in (which we flipped ourselves) and one other rental property (long term rental). I've only talked to a couple of lenders, but they both told me we'd need more experience under our belts to take on a project like that. Has anyone done this successfully early on....or are we crazy? :)

I’d say you are crazy, with no plumbing to boot. Many have tried this out in the smokies and they are seeing the reality post covid of how it will play out. 

[Leslie Anne Morris]

It isn’t difficult if you qualify and have the down payment to get a construction loan and build. Is now the best time? It’s better than when lumber was a lot higher. If it makes sense in your market then go for it. But I’ve held a piece of land for over 2 years. Started building over a year ago and we’ve just barely got the house seat cut. 

[John Underwood]

See if you can find a money partner that has some experience. 

[Dana Thilges]

Thanks, all for your input! We are very much in the beginning phases of this research and know nothing about the business loan, etc. Advice on where to start with companies for that, and finding out information on zoning? But we have stayed in some places like this and have very much enjoyed it, and were thinking of doing it near a national park (not Smokies but somewhere truly more "out there) or in northern MN near Lake Superior (there are some really beautiful glamping or dome type places up there already that are super popular). 

Like the idea of a money partner with experience, for sure!

And yes, this would definitely be a long term play for retirement. 

[Brooklyn McCarty]

Have you reached out to Brenna Carles at the Mortgage Shop?

[Zach Edelman]

You will need someone on the borrowing entity that has experience with ground-up construction. They don't necessarily need to be involved past that for you to get accepted but they need to have an equitable interest in the property. 

[Brian Rogers]

Hello, I'm in MN and will be starting a tiny home short term rental business on a half acre of land I acquired last year up in northern MN. There is a lot of good information on bigger pockets for sure. You really need to do a lot of research before you go jumping in. Spend sometime on websites of people who are already doing this sort of thing reading everything about them and study what there are doing and offering.

Yes it's true, funding your dreams can be difficult, but there are many ways to leverage what money you may already have. Sometimes it's better to first learn about the funding part of it, than actually the other.

Find yourself a business mentor who has run a small business and maybe they can become a private lender or silent partner. Took me years to locate mine.

One other thing about studying others who are already doing such business, brainstorm or make a list of how you can maybe do it better or provide something no one else is. 

[Brian Rogers]

Another quick thought, there is always different opinions on this matter, but some people find it easier to invest and start a business with family members or very close friends and be really successful. Who knows, you might have some family or friends who might share the same dreams or interests........just stay away from those who try to discourage you!