Putnam Valley, NY · Member since 2017 · 1 post · 0 votes
Hello community! I am looking to get started in the world of vacation/short term rentals and would love some advice on how to obtain financing for my first property.
The loan would need to include land purchase and construction costs of 3-4 structures (tiny houses/yurts/small cabins/etc). So pretty much building it from the ground up. The idea is to have each of the structures available for rent on sites like Airbnb, Vrbo, etc.
Most of the financing that I've seen available is only for purchase of a home and I have not seen much information on how to obtain a construction loan, land loan, or something similar. Are there any options for this?
Developer · Los Angeles, CA · Member since 2015 · 10 posts · 3 votes
9y
Would love to find out more about this if you get more information :)
Once your site is up and running, look into Hipcamp: it's the glamping/camping version of AIRBNB and does spectacularly well in attracting a good young crowd for yurts/teepees/airstreams/treehouses, etc. If you'd like to host, check them out HERE
Source: I'm a Hipcamp Fieldscout :)
I've seen them go around 200-250$ / night for cabins (some don't even have bathrooms).
Investor · Franklin, TN · Member since 2017 · 112 posts · 77 votes
9y
Good question on construction loans (and great idea on a tiny rental, yurt, etc).
Before you try and bite that off, make sure you are ready for all the hassles and time commitment of having you rental home built. I hope you are close by and can spend time on site each day. Only you will keep your best interests and vision in mind. The worst example I can think of is when my dad had a lake house built. He tried to get on site (5 hours away) every two weeks. In one of those gaps, the builder put the deck on the wrong side of the house - A true story. Also weather delays, change orders, unforeseen issues with permits or environmental, etc, etc. Just be prepared and build contingency into your timeline and budget.
A couple of notes on the specific question:
Construction loans are riskier for banks (no finished home as collateral) so hard to find info. Best place will be a local or regional bank. Go in and ask for a loan officer and you will quickly determine rates, amounts, and they will be more likely to be willing to just educate you on the process.
Another difference is typically after completion and a certificate of occupancy is awarded you have to convert the loan to a traditional mortgage. Make sure your lender will handle all that versus having to find different banks.
A couple of other ideas:
Find a credit union. Usually they have signature loans for members up to around $10,000. That won't cover everything but a nice start and lessens the amount on which you have to find other financing.
Take a little time to build up your local area or Bigger Pockets contacts and reputation (and get a business plan together). Lots of people out there who are looking for investments if a construction loan does not pan out.