Largest Return on 100k / Property Development Consultant?

Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes

3y

Seems interesting and achievable. A lot of work, but if you are willing to do it I think it could be lucrative. I have done new construction homes but never a development like this.

Another note is you can buy STR's (at least here in Tampa) for $500k doing over $300 ADR for $500k here providing a similar return with much less effort.

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John Carbone

Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes

3y

Quote from @Jayme B.:

My mind has been all over the place on how to maximize our money and borrowing ability to achieve the largest return on investment. I've researched finding that 500k home with 15% down + furnishings + closing costs means 100k cash in. An average nightly rate at $200 with 70% occupancy doesn't even cashflow. I don't want to invest that much of my money even if it cash flowed 20k per year. It's tying up too much of my money that I feel can be leveraged better.

Alternative thought process:

I'd like to create a small community of cabins that isn't considered "glamping". No detached bathrooms, showers or tents.

I can owner finance a 5 acre property for 50k ($600-700/mo payment; down payment 10k), put in a well for 5-8k along with a septic 5-8k, grading/dirt work for 2k and build 3 small a-frame cabins myself for less than 60k. Total cost high end = 88-90k.

The rental numbers: $80 avg nightly rate x 50% occupancy = $1200 / mo. * 3 cabins = $3600 / mo * 12 mo = $43,200 gross profit / year.

$43,200 - $8,400 (land payment) = $34,800 net profit / year

ROI: 38%

I could pay off the land after the first year of operation which would result in an income of $43,200 the 2nd year with the ability to build more cabins.

--

I've never developed a property before and would most likely choose an area with loose restrictions and permitting. There are lots of things to consider with this approach vs going the traditional STR route of buying a home. Choosing the best building sites, septic location / size, well location and the proximity of the cabins to reduce cost (trenching, piping, conduit) but still giving enough privacy. Another thought is to have walking paths to each cabin with one parking area to reduce clearing and driveway expense.

If anyone has done this type of STR approach before, I would be interested in consulting with you. I realize that I've just hit the basics with my thought process.

Be easy on me! Haha.

You are underestimating costs on the infrastructure by quite a bit. For $1200 a month, why not find a place where you can do something similar but rent them out as LTR.

1 Reply

Jayme B.

OP

Member since 2022 · 42 posts · 16 votes

3y

Quote from @John Carbone:

Quote from @Jayme B.:

My mind has been all over the place on how to maximize our money and borrowing ability to achieve the largest return on investment. I've researched finding that 500k home with 15% down + furnishings + closing costs means 100k cash in. An average nightly rate at $200 with 70% occupancy doesn't even cashflow. I don't want to invest that much of my money even if it cash flowed 20k per year. It's tying up too much of my money that I feel can be leveraged better.

Alternative thought process:

I'd like to create a small community of cabins that isn't considered "glamping". No detached bathrooms, showers or tents.

I can owner finance a 5 acre property for 50k ($600-700/mo payment; down payment 10k), put in a well for 5-8k along with a septic 5-8k, grading/dirt work for 2k and build 3 small a-frame cabins myself for less than 60k. Total cost high end = 88-90k.

The rental numbers: $80 avg nightly rate x 50% occupancy = $1200 / mo. * 3 cabins = $3600 / mo * 12 mo = $43,200 gross profit / year.

$43,200 - $8,400 (land payment) = $34,800 net profit / year

ROI: 38%

I could pay off the land after the first year of operation which would result in an income of $43,200 the 2nd year with the ability to build more cabins.

--

I've never developed a property before and would most likely choose an area with loose restrictions and permitting. There are lots of things to consider with this approach vs going the traditional STR route of buying a home. Choosing the best building sites, septic location / size, well location and the proximity of the cabins to reduce cost (trenching, piping, conduit) but still giving enough privacy. Another thought is to have walking paths to each cabin with one parking area to reduce clearing and driveway expense.

If anyone has done this type of STR approach before, I would be interested in consulting with you. I realize that I've just hit the basics with my thought process.

Be easy on me! Haha.

You are underestimating costs on the infrastructure by quite a bit. For $1200 a month, why not find a place where you can do something similar but rent them out as LTR.

What are the expenses in infrastructure that I'm missing? It's $1200 * 3 rentals = $3600 / mo.

0 Reply

Jayme B.

OP

Member since 2022 · 42 posts · 16 votes

3y

Quote from @Andrew Steffens:

Seems interesting and achievable. A lot of work, but if you are willing to do it I think it could be lucrative. I have done new construction homes but never a development like this.

Another note is you can buy STR's (at least here in Tampa) for $500k doing over $300 ADR for $500k here providing a similar return with much less effort.

Hi Andrew - what's the average occupancy rate for those $500k homes?

At 15% down on 500k with ADR @ $300 / 70%, 20k to furnish I'm getting rough numbers of around $25k/year in return. That sound right?

0 Reply

John Carbone

Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes

3y

Quote from @Jayme B.:

Quote from @John Carbone:

Quote from @Jayme B.:

My mind has been all over the place on how to maximize our money and borrowing ability to achieve the largest return on investment. I've researched finding that 500k home with 15% down + furnishings + closing costs means 100k cash in. An average nightly rate at $200 with 70% occupancy doesn't even cashflow. I don't want to invest that much of my money even if it cash flowed 20k per year. It's tying up too much of my money that I feel can be leveraged better.

Alternative thought process:

I'd like to create a small community of cabins that isn't considered "glamping". No detached bathrooms, showers or tents.

I can owner finance a 5 acre property for 50k ($600-700/mo payment; down payment 10k), put in a well for 5-8k along with a septic 5-8k, grading/dirt work for 2k and build 3 small a-frame cabins myself for less than 60k. Total cost high end = 88-90k.

The rental numbers: $80 avg nightly rate x 50% occupancy = $1200 / mo. * 3 cabins = $3600 / mo * 12 mo = $43,200 gross profit / year.

$43,200 - $8,400 (land payment) = $34,800 net profit / year

ROI: 38%

I could pay off the land after the first year of operation which would result in an income of $43,200 the 2nd year with the ability to build more cabins.

--

I've never developed a property before and would most likely choose an area with loose restrictions and permitting. There are lots of things to consider with this approach vs going the traditional STR route of buying a home. Choosing the best building sites, septic location / size, well location and the proximity of the cabins to reduce cost (trenching, piping, conduit) but still giving enough privacy. Another thought is to have walking paths to each cabin with one parking area to reduce clearing and driveway expense.

If anyone has done this type of STR approach before, I would be interested in consulting with you. I realize that I've just hit the basics with my thought process.

Be easy on me! Haha.

You are underestimating costs on the infrastructure by quite a bit. For $1200 a month, why not find a place where you can do something similar but rent them out as LTR.

What are the expenses in infrastructure that I'm missing?

The amounts you are projecting for infrastructure just seem extremely low. Electric alone will cost a significant amount of money, have you seen prices on materials lately? If you are going to build them yourself and do everything then there is a cost for your time to do the project. My guess is your turn key price will be double when you factor everything in getting ready to rent.

1 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

3y

Seems doable, but those low rates and high turnover rate also mean a lot of work to manage for not that much money.

If your ok with that then go for it.

1 Reply

Jayme B.

OP

Member since 2022 · 42 posts · 16 votes

3y

Quote from @John Underwood:

Seems doable, but those low rates and high turnover rate also mean a lot of work to manage for not that much money.

If your ok with that then go for it.

I was calculating conservatively. 25k on $100k with all the equity tied up in it doesn't seem that exciting to me either.

0 Reply

Kurt West

Architect · Raleigh, NC · Member since 2021 · 51 posts · 12 votes

3y

@Jayme B.

I'm working on a similar project right now. Let me know if you want to chat.

0 Reply

Jayme B.

OP

Member since 2022 · 42 posts · 16 votes

3y

Quote from @John Carbone:

Quote from @Jayme B.:

Quote from @John Carbone:

Quote from @Jayme B.:

My mind has been all over the place on how to maximize our money and borrowing ability to achieve the largest return on investment. I've researched finding that 500k home with 15% down + furnishings + closing costs means 100k cash in. An average nightly rate at $200 with 70% occupancy doesn't even cashflow. I don't want to invest that much of my money even if it cash flowed 20k per year. It's tying up too much of my money that I feel can be leveraged better.

Alternative thought process:

I'd like to create a small community of cabins that isn't considered "glamping". No detached bathrooms, showers or tents.

I can owner finance a 5 acre property for 50k ($600-700/mo payment; down payment 10k), put in a well for 5-8k along with a septic 5-8k, grading/dirt work for 2k and build 3 small a-frame cabins myself for less than 60k. Total cost high end = 88-90k.

The rental numbers: $80 avg nightly rate x 50% occupancy = $1200 / mo. * 3 cabins = $3600 / mo * 12 mo = $43,200 gross profit / year.

$43,200 - $8,400 (land payment) = $34,800 net profit / year

ROI: 38%

I could pay off the land after the first year of operation which would result in an income of $43,200 the 2nd year with the ability to build more cabins.

--

I've never developed a property before and would most likely choose an area with loose restrictions and permitting. There are lots of things to consider with this approach vs going the traditional STR route of buying a home. Choosing the best building sites, septic location / size, well location and the proximity of the cabins to reduce cost (trenching, piping, conduit) but still giving enough privacy. Another thought is to have walking paths to each cabin with one parking area to reduce clearing and driveway expense.

If anyone has done this type of STR approach before, I would be interested in consulting with you. I realize that I've just hit the basics with my thought process.

Be easy on me! Haha.

You are underestimating costs on the infrastructure by quite a bit. For $1200 a month, why not find a place where you can do something similar but rent them out as LTR.

What are the expenses in infrastructure that I'm missing?

The amounts you are projecting for infrastructure just seem extremely low. Electric alone will cost a significant amount of money, have you seen prices on materials lately? If you are going to build them yourself and do everything then there is a cost for your time to do the project. My guess is your turn key price will be double when you factor everything in getting ready to rent.

Thanks for the feedback. I really have no idea about the electrical costs. I'm assuming you mean wiring, panels and conduit being the bulk of the cost?

0 Reply

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

3y

Hey @Jayme B. I think it is a doable thing as well.

I also think you are underestimating the development stuff. It all depends on where you do it. I know that doing a septic in my area would be double or more than your estimate. That is with a normal septic and not a mound system or something more expensive.

I would be shocked if you could get anyone out there to grade and ready the property for 2k unless you know a guy or are renting the rigs and doing it yourself.

Plus you have to get electrical in there if it isn't stubbed out on the property already.

There is a lot of things to look at here, but I think you can do it.

Now, you can check out some of the modular home packages that are around 450sqft 1/1 cabins for about 25k. I think that might be a better way to go.

I would also put them on a foundation and not just on a trailer or posts. Do the slab or perimeter in concrete which will make the small cabins have value for a mortgage instead of a RV.

Check the zoning on the property. If it isn't zoned R3 or more you might have a hard time getting the county to approve the cabins.

I had been just looking at these guys - https://modularhomedirect.com/ after seeing them on the news. They have a lot of options for small cabins as complete kits. Just need to add plumbing, electrical etc.

2 Reply

Leslie Anne Morris

Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes

3y

I’d say really research the heck out of the market you’re considering because tiny homes / small cabins are not performing well right now, at least in my market.

0 Reply

Jayme B.

OP

Member since 2022 · 42 posts · 16 votes

3y

Quote from @Leslie Anne Morris:

I’d say really research the heck out of the market you’re considering because tiny homes / small cabins are not performing well right now, at least in my market.

Hey I shot you a PM.

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Largest Return on 100k / Property Development Consultant?

Largest Return on 100k / Property Development Consultant?

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