Building cabins for short term rental?

11 Replies

I've been I've been toying with the idea of purchasing a few acres of land in the Pacific Northwest and building a several small cabins to rent out as airbnb's. I've done a bit of research on a few towns and a couple counties in the region, and it seems that zoning laws might prevent this plan from becoming a reality. Either they do not allow multiple structures to be built or they require any short-term tenants to reside in the primary dwelling.

Does anyone know of a place where this idea might work? The ideal location would be rural but close enough to some local attractions to avoid high vacancy rates.

Any advice is much appreciated!

-Andy

Andy,

I love this idea and was working towards a similar plan this past summer in Colorado as I located about 160 acres about an hour outside of Denver. The county was initially fine with my plan, but then starting expressing concern about the maintaining the river front and flood plain. Once this started I could feel the bureaucratic nightmare building and thought it likely isn't worth the effort. That said if I was still in my 30's I would have pursued it further. I was looking at placing 8 - 12 cabins on the property, which would have afforded me amazing options for hosting 1 - 40 guests. I learned that finding properties that can accommodate a wide range of people is a great combination for STR's, but it doesn't have to be this difficult. They do exist in rural and remote locations. There are no shortcuts, you just have to hammer through the counties and do you due diligence.

Best of luck,

Mike

@Michael Greenberg , we are working on a side project that is similar but what I think will make ours easier from the bureaucratic side is that our units are attached.  Not nearly as charming as cabins but we will use them for short and long term rentals.  Our project is in central Colorado and I agree, it's a lengthy process of hoops and county/state requirements.

@Andy Rothermich I would suggest Wyoming. Just by reputation and without any first hand knowledge it probably wouldn't work in Teton County (Jackson Hole) or Big Horn County (Sheridan). That said, most parts of Wyoming have a pretty laissez-faire approach to regulation.

The real challenge is water, sewer, power and communication related to the cost to get these services to the site.

@Andy Rothermich

Let me tell you a story of what happened in this town.  20 years ago Amazon.com opened up a distribution center here.  1500 jobs.  An enterprising individual built an RV park 1/10 of a mile from the entry gate to the Amazon facility in the industrial park.  He did good business.  15 years later he borrowed money to purchase 24 cabins to put in his RV park.  They are about 240 square feet in size, and you have to go to another building to do your laundry.  2 beds next to each other, next to the kitchenette, next to the bathroom.  6 months later Amazon left town.  

The cabins still get the occasional travelling worker, but they usually stay there one week then move into one of my places.  That's a quote from the manager of the park. I charge about the same as the cabins, but my places are at least 3 times the size and not more than 60 seconds away from shopping and eating establishments.  Those cabins are next to a 65 mph 4 lane highway in an industrial park.

6 months ago a banker friend asked me if I wanted to buy some appliances from a house the bank owned that was going to be demolished to expand their parking lot.  We shoot guns and drink beer together when we aren't working.  I bought a washer, fridge, another fridge, hot water heater and a central heat/air system; all to use in my rentals.  The banker knows my rentals are making money, otherwise I wouldn't be buying those appliances.

A few weeks after that, the banker told me that the owner of the RV park came to his bank for a loan.  He was having trouble paying off the original loan on the cabins and wanted to refinance to a longer term.  He told the banker that he was going to make more money in the future because he heard that "Paul Sandhu has to sell all his houses".  I told the banker that most of places were currently rented out, no need to sell, and we pay cash in full when we buy properties.  The banker denied the loan to the RV park.  The owner of the park sold the whole thing shortly thereafter.

Moral of the story, even though those cabins might be new, someone else in your area might be renting out furnished houses that are older but bigger than the cabins, and the houses have better amenities like a full 4 burner stove (not a hotplate that's in a cabin), washer/dryer, cable, faster WiFi, better location, bigger beds, etc.  The previous manager of the RV park avoids eye contact with me when we cross paths.

Thank you all so much for your thoughts. You definitely gave me some things to consider.

I'm somewhat tempted just to buy the land, build the cabins and set up shop without bothering with the bureaucracy. I could try to keep the low profile, but if it was successful, the local officials would probably stick their noses in for their cut.

Jennifer, thanks for the idea or using attached units. That could be a good work around.

Paul, your points are well taken. I would definitely want to scope out the area thoroughly before pulling the trigger on anything. And also talk to some local investors to get the lay of the land. I'm looking for a nitch that hasn't already been filled.

Bill, thanks for the suggestion. I hadn't considered Wyoming, but I will definitely look into it!

Mike, it's nice to know that at least one other investor shares my enthusiasm for this approach. I know that wherever the plan is implemented there will be plenty of hoop jumping and red tape, but I'm going to keep at it!

-Andy

I think your biggest problem with multiple units will be sewer.  You pretty much have to get a septic permit to build any kind of septic system and then the bureaucracy sets in.

I’ve got 6 cabins in Pigeon Forge. There are thousands already built to pick from. We do great we’re very happy. And we manage remotely.

@Sourabh Bora   "Attached" probably means they are a 4-plex, 6-plex or 8-plex.  What is a "X-plex" you are wondering?  Think of a duplex, but 2-4 times as many units.

I wonder what zoning issues you will run into. I have been to a farm in upstate new york, ZONE residential, but grandfathered into having 57 acres of wood and farmland. They build all kinds of structures, tiny homes, yurts, tents ... cabins, even the barn, and put them up on airbnb, without bothering to ask the county/city, because, there is no neighbor to complain..@Andy Rothermich I wonder if you can do the same with a big enough land. 

@Sourabh Bora , sure, a du-, tri-, or quad-, plex or any multi-family housing is typically "attached". As opposed to single family homes, attached units share a wall. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here