Looking for feedback on an idea - I have an opportunity to purchase a half acre of land wayyy below market value and I have this vision of a purpose built vacation rental setup that I would like to build. The land is approx 25 mins outside of a major tourist town (Asheville NC) and zoned open use so hopefully no issues there. I want to pursue building a fairly basic mountain/cabin style house on a full basement with (hypothetically) 2 beds 2 baths on the main level and 2 beds 1.5 baths on the basement level. It would be easy to meet all plumbing/electrical/egress requirements being new construction, and the land is laid out perfectly for separate entrances. Also an ideal layout for a hot tub to be incorporated. With all the interest I see in Short term rental arbitrage, I am thinking about renting the home as a long term lease to someone but allow them to offer either the entire home on Airbnb/VRBO or just list the basement apartment while they live on the main level. My reasoning for this is reduced cost of having to furnish it upfront, more passive income for me for now, and lenders will be much more favorable to refinancing it with a long term lease in place + with this arrangement I could ask a premium for rent. Does this sound crazy? Am I asking for a legal nightmare?
I think if you can afford the house you should be able to afford a little more to furnish it. The pay back should be quick to pay for the furnishings from doing a STR.
I agree with @John Underwood here. Build it for pure STR. You'll have a lot better results with a purpose built property than trying to split a house and expect guests to share common space with someone else. If anything, I'd consider building two separate cabins before I would do an up and down split.
@Jason Faulkner Just operate the STR yourself. You can always hire a co-host to help you until you get comfortable. Trusting a tenant to take care of your property while allowing other people in is risky business. Plus you are taking a disproportionate amount of the risk for a fixed rent when you could be making that premium yourself.
Don't assume you're allowed to use it for STR. Read the zoning code, and if it's not crystal clear call the powers that be.
I agree to check to make sure the town/county you are in allows STRs. We have several 45 mins north of Asheville and we know that Asheville is pretty strict on rules. I also agree that if you're doing all that work to build it, make all the profits from it. If you are going to arbitrage it out, the person who rents it from you will want it at a LTR rate for a lease so they can make money, so in that case, you're probably better off renting as a LTR yourself (and then you dont need to furnish if you don't want to).
With the cost of construction now, get your estimates for new build. The other factor is getting a builder (unless you already have one lined up). I'm hearing big delays in good quality construction in and near Asheville. It may be several months out.