Funding New Construction STR?

Question

Does anyone have experience obtaining funding for building a STR property? I will be building a unique STR property and am in need of capital to develop this project. Due to being recently self-employed I do not believe institutional financing will be an option.

The building is currently being designed by an architect, and I am a General Contractor so I will be handling the construction. I appreciate any feedback!

Thank you,

Parker

Luke Carl · Answer

@Parker H Matson building is going to take forever and involve way more details id forget about that idea and just do a second home loan on a beach or up a mountain in an area that has proven cash flow.

You’re thinking too hard

Kerry Baird · Answer

@Parker H Matson

Be very careful: the various municipalities have different legal stances about short term rentals. Rockledge gave me a “no” when I called regarding STRS. Satellite was a no, Indian Harbor Beach was a yes, Indialantic is a NO, Melbourne Beach is a yes, and Melbourne proper is OK until someone complains. Have anything different? I did not ask the communities farther North.

Mine is in Melbourne Beach. I’m pursuing financing for another set of buildings that I hope to renovate, and use for short term rentals. I’m still learning....just doing STRs for a snippet over a year now. I’d be glad to answer any questions.

Parker H Matson · Answer

@Kerry Baird Great advice, thank you for the response.

I am actually from the Rockledge area just north of you.

Kerry Baird · Answer

I'd work on cleaning up my credit.  I use myfico to check my own scores.  And then I would start dialing small local lenders and asking about construction financing, given a credit score of ZZZ. I don't allow lenders to pull my credit until we have a product that works.

Different lenders have different appetites, and we don't know your local lenders.  If you don't have a community bank, then call credit unions.  Lastly, call the bigger banks.  TD Bank is quite flexible, as are US Bank and BB&T.  These are the 3 bigger banks that have good options.

Lastly, if none of that pans out, call your favorite title agent and ask them who is closing construction loans in your locality. They see who is actually closing and what lenders are not.

Parker H Matson · Answer

I appreciate all the feedback, I figured it would not be easy, but I also know I need to just get started in REI.

@Michael Baum I could contribute $30k as a down payment. It sounds like my best and possibly only option would be to find a private money partner that would trust me enough to go into the deal.

Michael Baum · Answer

Hey @Parker H Matson, welcome to the forum. Like @Luke Carl, I think this will be tough. You could do hard money, but the interest will be outta sight if you can even get it.

You have no experience in this segment so sitting down with a lender will be difficult. Even a well thought out business plan it will be hard to convince a lender to go in on it. Do you have a huge down payment?

Collin Hays · Answer

Where do I sign up?

Luke Carl · Answer

Hum. So you want to fund a project you have no experience with and you've got no way to personally back it? Sounds like this one is going to be a tough gig.

ANYHOW... It'll be a lot like funding a long term rental new construction.

Funding New Construction STR?

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