How to finance conversion of building to 5 bedroom vacation rental/B&B

[Jessica Yau]

We own a farm property (5 acre rose farm) with an existing AirB&B cottage in Sonoma County CA. The property also earns rental income from hosting weddings and other events. We have a beautiful 3,300 sq ft Carriage House barn that is very underutilized. I have design plans to convert it to a 4-5 bedroom vacation rental/B&B but financing is a complex problem and I wonder if the juice is worth the squeeze. 

We have invested heavily the last 5 years in renovations of the existing gardens, AirB&B cottage, and structures for the event business. As of 2022 we have completed all the major deferred maintenance for the rest of the property and operating costs have stabilized (2022 loss was $12k on $165k revenue). We have over $1m in equity in this property (purchased at $2m / currently valued $2.6-$3.2m / with a $700k mortgage). The renovation would likely cost ~$1m and add an additional $100-$125k in annual revenue. I think realistically stabilized cash flow with the additional rooms would be ~$70k ($250 revenue - $180k total expense).

Wondering what the group thinks as far as 1) is it worth pursuing 2) how could I finance a $1m renovation with 5 years of losses under my belt?

Here is a link to our existing AirB&B: https://www.airbnb.com/rooms/1...