Best way to finance this project?

[Thad Allender]

I’m considering buying 40 acres that is split into 3 parcels: 1 waterfront, 1 field, 1 wooded w/rock outcroppings. My plan is to build 3 small off-grid eco cabins and rent them out on Airbnb. The market is strong for this kind of rental in my area. Land cost is $200k. It’s off market and I would be buying directly from the owner.

Banks only finance single family home construction, so any improvements I make would have to be in cash. I have three options for financing this project:

1. Cash - We could do the whole project with cash. Pros: no loan. Cons: limited $ to make improvements (cabins).

2. Bank loan - options here include a land loan with 35% down payment, 10 year fixed note at 6%. Pros: more capital to work with, we keep our $ for improvements (cabins) which might be hard to come by if we burn through cash during construction/unexpected costs. Cons: loan interest, in debt to bank, longer time to close deal.

3. Involve friends & family as investors. Create a joint venture agreement, share profits. Pros: It would be pretty easy to get investors and it might be fun to involve others in crafting the vision/project. Cons: less profit since it would be split, JV agreement might get complicated.

Which would you do?

Why?

Are there other options I’m missing?