Creative Financing for Building Airbnbs?

Question

Hello BP - looking for creative financing options for building Airbnb units on empty lots.

I have recently learned about 18 acres of land that is forested with beautiful areas for small cabins. Through some connections I know I can get the land for a decent price, but I will still need to finance building 2 small cabins (probably 2bed 1bath) - approx 20-30k each.

Has anyone done this in the past? What sort of financing were you offered? How was it structured? Lessons learned?

Michael Baum · Answer

Ok @Branden Pfaff, you got me there. The average 36x7 bin runs about 35k without any electrical. I grew up in north Idaho working farms during the summer so I am pretty familiar with them.

Now that the plan is building a bin, that sharpens things a bit. You will most likely have to go with some kind of hard money lender. I don't think any bank or other residential lender would lend on a grain bin as a home. I would have to guess you would have to meet building codes for a habitable which should be doable.

I still stand by my original thinking that you will be over the 20-30k for a habitable structure. If you can build one out new for 20k ready to go, that would be awesome to see! Just my 2 cents.

For those wondering what we are talking about, here is a pic of a cool grain bin converted to a home:

EDIT - Ok, a 36x7 is pretty tall, would make a really good 2 story place, but you could do a 4 ring instead and have a great vaulted ceiling single story.

Michael Baum · Answer

Hi @Branden Pfaff, I am curious as to how you can build a 2/1 cabin for 20k. I would have to assume they would be dry cabins. Site prep for 2 cabins would be more than 20k.

If you are planning to do a fully functioning cabin, you would be dealing with septic, a well and bringing in electricity. How rural is the property? Do they have any perk tests from the past? Have you contacted the county or a well drilling outfit about well depth?

There are a lot of variables here. You will have to figure out all those basics of pre-build before you can consider financing.

@Lucas Carl is correct that once all your ducks are in a row, as long as you can afford the nut, typical financing options should work.

Julie Groth · Answer

I've had good success with Patch of Land Lending, who is an asset based lender who will lend 100% on the construction. Need 20% down so the land could probably qualify as the down payment, depending on how you tweak your numbers. They do not need your financials, true assets based.

Jessie Leonard · Answer

We got one for free in El Campo, Tx. Property owner just wanted it gone. You take them apart ring by ring and load pieces in the trailer, off ya go. We will be repurposing into an outdoor kitchen.

Michael Baum · Answer

Hey @Branden Pfaff, ok so used ones. That would save a lot of dough.

As far as moving one, yes they can be moved. They usually are disassembled, especially when the units are 24’ in diameter or larger.

I have seen them moved from place to place but usually within the same farm. Not many roads can handle that wide a load.

I would expect to replace all the fasteners for sure. The estimates I have read and actual costs to finish one was $200 a square. I am sure it can be done for less but that is stick built house prices. I was surprised.

You know, you might consider shipping container structures. There are quite a few resources out there and they can be had for about $2500 for a nearly new unit. Get a high unit (9’ tall) and you could have a pretty easy build.

Noah Mccurley · Answer

@Branden Pfaff

There are many ways to gather money for a project. You could get private money from the contacts you have, you could get seller financing from the seller if the land, you could go the normal route of bank financing or you could go to a hard money lender.

Kerry Baird · Answer

What an awesome looking space!

Paul Sandhu · Answer

I'm pretty sure they come with 2 delivery options.  First option is assembled (and costs more).  Second option is the assembled sections, you have to put them together.  A couple years ago we bought a storage shed with a loft.  10' by 20' approximately.  It came assembled.  The guy took it off the delivery vehicle and set it up in about 90 minutes.  The inside is exposed 2x4's.  It would be pretty easy to wire and plumb it, put roll insulation in there, then cover it with drywall or OSB.

Branden Pfaff · Answer

@Paul Sandhu

I love that idea too! We get lots of pheasant hunters this time of year so I’m sure they would appreciate that as well. Do they come in kits that a contractor assembles?

Paul Sandhu · Answer

Have you considered buying a fancy storage building from Lowe's or HD and converting it into a cabin?  They make 2 story ones, sleeping quarters could be upstairs and the living area downstairs.  I'm assuming that your potential renters are coming to the area to experience outdoor things, and they just need a place to s.s.&s.  That's what myself, 10 other guys and half a dozen bird dogs are going to be doing in western kansas in 3 weeks.  Pheasants.  We're sleeping in a bunk house in the basement of a motel.  4 bunk beds, several sofas, 2 bathrooms.  This year I'm not going to fall out of an upper bunk.

Creative Financing for Building Airbnbs?

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