Purchase of multiple buildings - Cabins, cottages best strategy

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I missed out on a few opportunities and I am looking to refine my strategy for future, as the specifics don't align perfectly for this scenario very often.  We look for multiple (think cabins cottages) properties to rent out for vacation rentals.  The ideal is, near or on a lake, in mountain town (we are in colorado) and can be rented together for family reunions, events. Or separately.  The location does well and is basically a given that with rocky mountain national park nearby and a lot of other outdoor activities - everything rents out all summer and a few months on each end, no problem.  So when i've seen something remotely feasible financially - someone else usually gets it first.  

The questions I want to answer for future reference - do you offer before you see it? I know that its done that way for a lot of investor properties but with a group of buildings and a high down payment / total price, it seems riskier. However, ultimately you have the same "outs"...

The last one I believe I should have done this, as the buildings were dated back to the 1930's and such, however they were all currently renting and had a lot of great return.  So they weren't being sold because of excessive neglect, the owners were ready to retire and had kept them up functionally, just maybe not aesthetically.  

The other question reverts to financing.  I can't make necessarily a quick offer - i am not a cash buyer, I would be going through a 504 small business loan - which I have not done before.  I am reading through to get my ducks in a row on this but does anyone have experience with these on buying a commercial/residential property like this?  Would love any and all feedback on these concepts. 

thanks so much

Have you thought about purchasing land and building 4+ small cabins of different design ? (A frame style, log style, etc)

May be better for what you are looking to do and that way you can shape everything how you want it to be. 

Hi @Sarah Present , personally I don't buy anything sight unseen or without due diligence. I am not experienced enough nor wealthy enough to take a hit if things go south.

My thoughts are that you are in the same boat. You have to get a loan for all of it so if things aren't as they seem on the surface, you could get screwed to the wall.

The homes are nearing 100 years old. I would be interested in the foundations specifically as many places in Colorado and the mountain west were built on wooden pier foundations which have a finite lifespan.

Is the place listed? Is this something you came across through the grapevine? If it is not listed, then you have an opportunity to start talking to the owners. See if they might be interested in owner financing. Get a tour of the place. Bring someone with some home repair skills along to get an assessment.

If it is listed, then you will be competing with others for the place. Seeing as you don't have all your ducks in a row yet, that leaves you at a disadvantage.

How much dough are we talking? Is it a screaming deal?

@Michael Baum thanks! Yes - I am in that boat! And actually, now that I am reading closer on the 504, I would need to occupy 51% of the real estate, which would not be the case on any of these purchases...so... not sure if that excludes me - I wouldn't be renting it to another business, I would be using it as my own to rent out for my business... - so I THINK i still would qualify... We formed an LLC to use towards our additional properties, we own 1 that is in our personal names, but do not want to proceed with anything additional without the LLC.

I believe this last one was a screaming deal.  Any property on the lake at all, was running for $2-6 million, no joke, just to be on the lake. Whereas, this was 12 separate units.. for 1.5 million, just steps from the beach/lake use and town and everything. The fact that they were killing it on top of the search list for places to stay, made it sting that much more that I didn't act more quickly. I am not only suspicious... i am nearly certain that in 15 years it would easily be worth double the value the way things have gone in those areas. 

It was listed - and that is all i have at the moment to find such opportunities.  I do not yet have a network to get the grapefine effect - which would be great, but I'm not quite there yet.  Yes, I know what you mean on foundations.  If you go as high up as leadville (almost the highest town in colorado) the houses are from 1890's and they are built on a slab!  They are all slanted when you walk through them - its fascinating haha.  On the last few opportunities, i hadn't confirmed foundations - so not sure, but i think they were better than the Leadville situation.  

There are some much more affordable options, for say, a house but with extra land to build on - which could lead to some fun and high potential opportunity - but it gets into a lot of things I do not have expertise on, which is how to evaluate land to build on - permits, zoning, set up for plumbing, electrical - that is not in my wheel house at the moment, but i wish it was!

@Michael O'Brien Yes!  We love the thought of that concept very much - my comment above to @Michael Baum shows some of my need to learn on the land - how to know what to evaluate to strategize for such plans.  However, its also hard to get the land close on the lake or even a river - which is my goal.  That said, its always still a very good plan.  I think i need to revamp a network for knowledgeable people in that arena of how to buy land, because it would be a lot of fun.  I would also need someone to scout out the land before someone else gets it - because i'm never first in line, haha

I know some investors that make offers without seeing the property. You have the normal inspection contingencies but they usually add a clause that says the offer is subject to in-person viewing within XX hours. That gives them the opportunity to lock it up quickly, then look at it and see if they want to move forward or let it go.

Yes you can make an offer and tie up the property. Just have plenty of contingencies such as financing and inspection. Once inspected you can change your offer based on findings or just walk away.

I buy bank foreclosures.  The banks use the same front door key for all their foreclosed properties.  When I see one for sale, I just let myself in with a key they gave me from a previous purchase.  No phone calls to a realtor necessary.  No waiting for someone else to let you in.  I don't think too many other people in this country do this with their potential STRs.  Just like I don't think too many other people in this country decorate their places like Hugh Hefners mansion and have a kegorator in them.

@Paul Sandhu that is really interesting!  @Tyler Hallman what a great idea, its about being creative and you are right, that is not a bad idea for colorado, thank you! @John Underwood thank you!!  @Nathan G. thanks!  It makes sense to lock it in as a serious buyer   @Michael Baum thanks for the info!  We have looked at areas around twin lakes and lake granby and a few others...but the cost is high.  I'm still hopeful though! :)

@Sarah Present I spoke with an SBA lender last week about the prospect of using a 504 loan to purchase a vacation cabin (2 single family homes and 10 cabins on a lake) property similar to what you're describing and they said that YES, they COULD finance the the purchase with as little as 10% down. The 51% owner-occupied requirement would be met as long as your real estate rental business rents the cabins on a short-term basis (less than 30 consecutive days to each vacationer). You couldn't purchase the property and run it like a multi-family with permanent, long-term leases in effect. It would need to stay as an AirBnB property which is obviously your intention.

I have an SBA 504 loan on a self-storage facility that I recently purchased in Connecticut and I'm happy to discuss my experiences with the loan program and process.

@Sarah Present

This is really about 7 questions in one.

Your brain seems to be hung up on a couple things that my brain wouldn’t care about. Like the location of these things. Just find one that will work then repeat it.

Http://myvacation.life to see my properties. I didn’t have a “plan” the first one made a ton of money so I bought more.

Yes I've bought sight unseen. Hell one time I even forgot to get an inspection and bought it anyway. A home inspection and a few videos should do the trick but certainly put eyes on them if you can.

It looks like you’re trying to buy properties with a Covid small business loan. Something tells me this will bite you hard if and when this thing ever gets over with. Or even if it doesn’t ever end. I think banks will not lend on anyone that took forbearance or loans of any kind. “Why would go into business with you if you needed to be bailed out because of Covid” I also don’t think it’s right to start a business with the governments money. Ruining it for everyone.

@Bill Couture thank you for your response!  I meant to put an update on this post actually on the 504.  It turns out 504 definitely was an option, and just as you described.  It falls under a "hotel" loan style within 504.  What bit me hard was that banks right now are crazy resistant with COVID19.  I mean, i could write a book about this experience, there was so much that has happened in the 5 months we tried to do these cabins.  What was probably the worst, was that the owners kept terrible records.  I mean awful, which was apparently very common in this mountain town with older owners.  Its fine till you try to sell it.  But the lenders were by far the most difficult.  It has been a crushing experience, as the lenders did not give us adequate guidelines or Time lines from the start.  Without going into massive detail, we extended deadlines once and then needed to again, but by then they had found a back up offer.  They did not sign the amendment to continue with us, and took the other offer.  We were able to see the offer which, helped for closure after all of the heartache.  It was obviously someone who could put more money down up front, and take a smaller loan.  Although what i've heard through the grapevine they are still having a difficult time.  Will be interested to see if they close on those cabins.  For me it got too emotional, it was a dream come true to run those cottages.  What I will walk away with - is a massive learning experience.  We put together a killer business plan and did research beyond what one could think possible.  I learned so much about the 504 and 7a loan structure and all that was possible for us.  The bottom line is I don't know that we ever would have made it through underwriting.  The banks (and we dealt with several) - changed the rules by the week.  They asked for proof of x,y, and z - we would work so hard, give them what they need, and then they would decide that it needed to be different or more.  We would say - ok - this is what you are asking for, they would say yes, and then when we provided it -  nope, just kidding, i want this instead.  It seemed as if they could not ever convince their executive management in this pandemic environment. Then we attempted to buy a plot of land to build on - lenders would not touch it unless we built a primary residence - no rentals.  Since then we  have been trying to do a construction loan to renovate our existing air bnb rental - and lenders won't do that either.  They are saying if you rent it at all, even one day, its considered an investment and they won't do it.  And that is with a house we already own!  Its very deflating, to have money and want to cease an opportunity but lenders will do nothing unless it is your primary residence or second home that you do not rent out.  They only way to do it is if you have ALL cash in the bank?  We simply aren't there yet.  I went off on a rant there because its been frustrating to hit wall after wall lol.  I'm still looking on our renovation and hope to find a construction loan solution to make it happen this fall - we have a general contractor lined up, design plan set and now our lenders have dropped out.  Its a crazy time.  Thanks everyone for your thoughts on this, it was bittersweet in the fact that we gained so much experience and knowledge in the process, but that someone took it from under us.  I hope to tell a success story in its place someday!