Hi All, looking for a bit of guidance from my fellow travelers.
About to hit 60 and I have left Florida for the NC mountains. The Fl house is a 3/3/3 pool home on the water and its paid for. (worth 850k)
Over the past 10 years I purchased land in the mountains. It took 3 years, but, I finally navigated the permitting process and now have all the permits I need to build 6 small cabins on a river in the mountains. I would not wish this on anyone. This was very hard and time consuming, but I'm on the other side of the permitting process and ready to build.
I am estimating the 6 cabins will be about 900k to build and will be worth 2x that when built. Cabins should cash flow nicely based on my location and research.
So.... do I sell the Fl house so I have plenty of cash on hand to do my 6 cabins? or Do I turn the Fl house into a short term rental property and look to finance the 6 cabins? I have some cash on hand, but, the Florida house and NC real estate is 90% of my net worth.
I have fallen down the paralysis by analysis hole and hopefully your thoughts will help me to dig out.
Sell the Florida house. Unless you're up for another challenge holding and renting creates headaches and PM "fun" you don't have time for.
Follow your dream in North Carolina. Maybe you're in limbo renting for a year while the primary residence gets built. Imo it's still better than operating an OOS, STR, at 60 years old.
Lots to pull apart here. The FL home is a personal decision you have to make for yourself. Don't forget your taxes on a sale! This is a situation where you need to run a few scenarios and see how the numbers shake out.
Sell vs. Rent (and the tax implications of both). I'm a fan of using HELOC or LOC if you have the equity. I used a LOC to build a 12 site RV park in a small town, opened it up and 1.5 mnths later, I'm full occupancy and servicing the debt (some of it at 8.75%) & cash flowing. Just foced on long term RVer's, no transient.
Cabins are a different beast, I have 10 at another campground I built- Broad River Campground located in Mooresboro, NC (Has Cabins/Domes/RV Sites, Tent Sites)
Cabins are sexy to talk about for sure, but you are now entering the hotel business my friend. The OUTDOOR hotel business. Not only do you have to do all the things needed for the inside, but you also have the outside to worry about as well.
It can be done, but don't assume "they will cash flow nicely". Occupancy rates are not 90%, it's seasonal, especially the mountains. I would run occupancy rates at 40-50% and see how the numbers look. Unless you're just going for long term tenants.
Also the value (in this case) is determined by the NOI, so assuming it will be worth 2x, is assuming your NOI is thru the roof (which is can be, but it's not likely in the first 5 years). I love cabins, and the RV park space, but like anything else, it's about NOI and there is a ton of blood, sweat, tears and busch light that goes into that number. It's not a get rich quick scheme, it's a lot of active work and I would have 5 yrs in my head at a minimum before you truly become established and stabilized.
Sticking things AirBnB does get you traffic, however it's not a 90% occupancy rate, again it's seasonal.
Hi John! Sounds like you’ve built an amazing opportunity with your cabin project. Turning your Florida home into a short-term rental could give you steady cash flow and help fund the builds. You might also be able to leverage its equity to keep both investments working for you.
Would love to hear more about your NC project as we have a good presence out there as well (1-Mars Hill, 1-Burnsville, 4-Hendersonville). We've also bought and sold several in that area and have several connections if needed.
Ours do very well all year long. The winter months bring people from the south who want to see snow and plenty of outdoor and winter activities in and around the area. Summer months are always popular for both locals and again those from the south looking to escape the summer heat.
Always happy to connect and share stories and resources.
As for the Florida property, as other s have said, its a personal preference. I've regretted selling a few properties that I wish I held, but also very glad I sold others for the cash to use on other projects.
Thanks for the comments everyone! I don't think I'm the guy that can manage 2 properties in 2 different states. So I'm leaning toward selling the FL house. Although getting a Heloc for the cash flow does make sense.
As Tyler points out I have taken on a lot to build 6 cabins in one go. and yes i only think about the sexy part.
I was hoping the perfect solution would just fall from the sky. But alas, this is going to be hard work.
How do these numbers sound?
I have 10 water front lots on a trout river in WNC with mountain views, they are cleared. i have the site permit, i have the well and septic permits. Some lots are used for well and septic so the 10 lots support 6 cabins. (as permitted by my engineer) My permits are good for 18months.
I am working with a builder that thinks we can do the 20x24 cabins for 100k each. so that's 600k plus another 200k for site work.
i think the cabins will fetch 225 a night. however lets use 125 @ 50% occupancy. that's 22k x 6. So I'm looking at 132k a year.
The land I bought years ago for a song. I'm 25k out of pocket for permits and clearing.
I bet the pre-permitted 10 contiguous lots on the river would appraise for at least 150k.
Am i being overly optimistic? or do these numbers work?
@John Dallas Nice! I don't think that's overly optimistic at all. Who said you need to build all 6 cabins at once? Build 2 or 3, get them running, collect some cash-flow, and see how the business goes. That gives you options to expand, hold, or sell land if the income isn't there.
That's my two cents. We love North Carolina but we're 20 years from the retirement dream.
@John Dallas Welcome to WNC. I would consider the cost of extracting your equity from the FL property by sale and then compare that to pulling equity by way of a cashout refinance. I don't say that to be self-serving, being a lender. There's also the fact that you'll stop growing equity there, when you could instead access most of the equity and keep growing wealth through the home. I saw your comments about not wanting to manage properties in two states, but perhaps you can find a great PM for the FL home.
Regarding the numbers you mentioned above, it very much depends on the specific location. I would highly recommend you create a Market Report in PriceLabs to see how similar properties nearby are actually performing. It's a $10/mo subscription that you can turn off after starting it, meaning you'll have 30 days to play with it. You'll likely find it easy to find people who will tell you what you want to hear, but you really need hard facts not speculation.
But for some speculation, if you're talking about the Nantahala River or Little Tennessee, sure I think you might be able to do $22K/yr, but not much more, unless perhaps the places are uniquely styled. Down around those areas you'll be swimming in a sea of cabin competition, so a Scandinavian style or something otherwise standout might be the only path to making more.
That said, I personally don't think $22K/yr gross x 6 separate dwellings are good numbers for an $800,000 investment, not to mention costs for furnishings and such. Perhaps the numbers will turn out to be much better, but I'd be careful to not let your personal love for the area lure you into an investment that you might someday loathe due to ill performance coupled with management headaches. And I would perhaps instead start with one to make sure it's going to work well.
On another note, living near the Swannanoa River myself, your comments about building cabins on a river give me pause. Quite a few investors just lost a ton of wealth here, so be careful about nearness to a river, elevation, etc. And be sure your insurance costs won't be insane.
Finally, if you're near Asheville at times we have two BP meetups per month here. We'd love to hear more about your ideas, share some others, and help in any way that we can. I can add you to our events list if you DM me your email address.