Short Term Rental Yurt

[Fraser Kersey]

Hello All-

I own two lots next to each other in the mountains. One is has a 3bed/3bath that I live in with my family. The 2nd lot has a gully through the middle, but buildable on either side. Long-Term I would like to build an ADU, but I am considering building a large free standing deck and putting a yurt on it as a short term rental. I would build an outdoor bath house and have a swanky outdoor sitting area with a hot tub. The Yurt (aiming for 20') would have a king bed and pull out couch, so it could sleep 4 but ideally 2 for the size of space.

I figure it would be cheaper upfront cost, for which I would being using a HELOC to fund. I have been approved for $100k, but believe that the build out would cost around $50k. I would take the revenue from the short term rental to pay off the loan, then supplement my income. I would hope to rent the unit out at $200-$250/night aiming for minimum of 8 nights per month - $20-25k per year in revenue. Once the loan is paid off, use the HELOC + extra income to start designing / building a larger ADU. My rough budget on the ADU is $125k to build for a 2/2.

My Question is: Is this the correct thought process, start small to fund a bigger project?  Is there any consideration that might present red tape? (e.g. I may need to permit the deck, but not the structure)..  Has anyone short term rented a structure like this?  Any advice is appreciated.