Finance Construction of Shipping Container Home for AirBnB

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Finance Construction of Shipping Container Home for AirBnB

Evan York
Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes

Greetings from Charlotte, NC. My name is Evan York, and I am new to the forum in hopes to find some answers for a project a business partner and I are pursuing. 

My Co-Founder and I are developing concepts to up-cycle shipping containers for multiple functional uses - beginning with homes to list on AirBnB. 

There has been a few examples of this that have been successful, and we have found a niche in Asheville, NC that we believe would be successful for our flagship location. 

Here's the good news: 

1. We've designed the concept with an architecture firm and an engineering firm who have history of designing shipping container homes. 

2. We have found a plot of land that fits the criteria of our project, and the county will allow us to build there despite the "non-tradutional" building materials

3. We have mapped the process to get a container from the Port of Charleston all the way to a completed shipping container home for people to stay in. 

4. Invested in market research on AirDNA.co and have revenue potential of $76K annually with LOW operating expenses (they're only 320 sqft...)

Here's the BAD news: 

1. No traditional lenders have an appetite for our project, despite the relatively low cost (Approx. $200K including land)

Our Challenges:

1. We have 2 "dwelling units" on a single plot of land. In the banks eyes, this is like building 2 homes, and would need 2 separate loans

2. It's an "investment property" 

3. We're using shipping containers. 

4. Despite that a construction to perm loan would be not much over $1,000 a month (with 2 Co-Founders with a credit score well above 750, and a healthy combined income) banks see it as "high risk" 

5. Even as a "2nd home", there's a risk because we will be listing it as an AirBnB under an LLC.

Our Needs: 

1. $200K to build 2 shipping container units on 1 plot of land 

We launched a crowdfunding campaign to raise some upstart capital, which got us up to $6,000. At this point, we need quite a bit more cash. We have had several angel investors express interest in getting us some upstart capital, but not enough for the entire project. 

Suggestions on how to raise the capital we need to upstart this concept is welcomed!!

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Jody SchnurrenbergerPro Member
Investor · Asheville, NC · Member since 2017 · 506 posts · 404 votes
8y

You could try another crowdfunding campaign on another site, but I doubt it will get you the tons of money you need. Perhaps ask if they would be willing to refinance after the stuff is built. Maybe that would be easier and you could go with a hard money lender in the beginning. People who buy really crappy homes that need serious amounts of work often can't get traditional funding, so they go through a HML at first, then after the rehab is done, get a traditional loan. Of course, because HML loans tend to be shorter and have higher interest rates, you'd need to be pretty sure a lender would finance you when the project is done so you don't have to fret about the HML costing so much for a longer period of time than absolutely necessary. That's my only thought.

I just wanted to be sure you weren't planning to do AirBnB in the actual city limits of Asheville. As I understand it, it's a really bad idea or perhaps not even allowed. You mentioned the county, so hopefully you're just near Asheville, but not actually in the city limits. If you haven't already, check out the local Carolina Real Estate Investors Association (CREIA). You can go to 1 meeting for free, then once you pay, there are like 8 different meetings to attend monthly, though you wouldn't qualify for some like the Advanced or probably even Intermediate, but if I recall, there is actually one just for people who do vacation rentals, along with one for beginners and the regular one and even one in Hendersonville, if you're interested. These are great places to meet folks, get ideas, and maybe even get some money...after you've developed relationships. If you actually live in Charlotte, as your profile suggests, I'm sure you can still benefit tremendously from joining your local REIA. :-) Google it or find it on MeetUp.com (or better yet, do both so you don't miss out on anything lol).

Good luck!  

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    8y

    Just hope that you don't interact with someone with initials AK on the internet in regards to container homes. He's a scammer. Don't want to write more in the open. He's all over the internet , supposedly the container home expert. 

    1Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    Thanks for heads up @Michaela G. - I believe we've done the research and have pulled the resources together. Container homes are really, quite simple. Financing them, however, is a different story. 

    0Reply
  • Jody SchnurrenbergerPro Member
    Investor · Asheville, NC · Member since 2017 · 506 posts · 404 votes
    8y

    You could try another crowdfunding campaign on another site, but I doubt it will get you the tons of money you need. Perhaps ask if they would be willing to refinance after the stuff is built. Maybe that would be easier and you could go with a hard money lender in the beginning. People who buy really crappy homes that need serious amounts of work often can't get traditional funding, so they go through a HML at first, then after the rehab is done, get a traditional loan. Of course, because HML loans tend to be shorter and have higher interest rates, you'd need to be pretty sure a lender would finance you when the project is done so you don't have to fret about the HML costing so much for a longer period of time than absolutely necessary. That's my only thought.

    I just wanted to be sure you weren't planning to do AirBnB in the actual city limits of Asheville. As I understand it, it's a really bad idea or perhaps not even allowed. You mentioned the county, so hopefully you're just near Asheville, but not actually in the city limits. If you haven't already, check out the local Carolina Real Estate Investors Association (CREIA). You can go to 1 meeting for free, then once you pay, there are like 8 different meetings to attend monthly, though you wouldn't qualify for some like the Advanced or probably even Intermediate, but if I recall, there is actually one just for people who do vacation rentals, along with one for beginners and the regular one and even one in Hendersonville, if you're interested. These are great places to meet folks, get ideas, and maybe even get some money...after you've developed relationships. If you actually live in Charlotte, as your profile suggests, I'm sure you can still benefit tremendously from joining your local REIA. :-) Google it or find it on MeetUp.com (or better yet, do both so you don't miss out on anything lol).

    Good luck!  

    1Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    Thanks for the insight @Jody Schnurrenberger - great thoughts on the crowdfunding. Where does one begin finding a HML? We're looking to build this into a business beyond real estate. Containers can be used for many other uses!! Hence the reason some investors have expressed interest.

    And good point on the Asheville ordinances on STR's. We're intentionally staying out of the city limits and focusing on the "surrounding area" such as Arden.

    1Reply
  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    8y

    Have u tried any of the lenders that lend on floating homes? They are different than your normal mortgages

    0Reply
  • Jody SchnurrenbergerPro Member
    Investor · Asheville, NC · Member since 2017 · 506 posts · 404 votes
    8y

    I've never used a HML, myself, but I googled and found a link on BP. Hahaha

    https://www.biggerpockets.com/hardmoneylenders/north-carolina 

    0Reply
  • Jody SchnurrenbergerPro Member
    Investor · Asheville, NC · Member since 2017 · 506 posts · 404 votes
    8y

    Also, I don't know if this thread will help, but it's got a lot of ideas for renovations, many of which can be applied to non-renovations, as well.  ;-)  But some things like an outlet that also has the USB outlet is nice.  Other ideas listed help protect your property like putting vinyl leftovers under the dishwasher and sinks (up the sides some to protect) or just using shellac, so if there's a leak the whole cabinet isn't damaged.

    https://www.biggerpockets.com/forums/67/topics/516793-what-special-touches-amenities-do-you-add-when-you-renovate

    0Reply
  • Account Closed
    Investor · Asheville, NC · Member since 2015 · 187 posts · 112 votes
    8y

    Evan, try Alfie Investors for hard money. They're the cheapest option I've found locally, and are reasonable to work with. And beware Arden if that's your land purchase- I heard they just illegalized vacation rentals. 

    I'm currently working on financing building two custom vacay rentals on one lot, but with a lender who I have a strong relationship with. They indicated they would definitely not do this for a new client.   :(    However you will likely have fine luck refinancing it once complete, probably on a business loan. UFCU, HomeTrust and First Bank are good options. Good luck and keep us posted as it goes along!

    0Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    @Account Closed - huh, would figure our Realtor would have mentioned that Arden illegalized vacation rentals as he’s aware of what our project consists of. 

    Otherwise thanks for the insight! Been in touch with several of the banks you've mentioned. Seems like HML might be the way to go and refinance to a loan.

    1Reply
  • Jim Goebel
    Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes
    8y

    @Evan York

    I've got some interest in container homes as well.

    A few thoughts on container homes:

    1. Great learning experience and accessible.  Lower capital inlay per home compared to anything else so from an educational standpoint I've heard about many architecture programs using these as learning experiences.
    2. Per above, this will generate some 'buzz' but buzz and hype are completely different than being ready for prime time.  You're pretty far down the road here which is great so I'd really love if you can answer some questions:
      1. How are you developing your site?  Are these units presumably going to be stacked up on top of each other?
      2. How are the units going to be purchased - who owns them?  If you, does that mean you'll be a leasor of those units (via AirBNB)?
      3. Site development: how are you going to tie in the plumbing/mechanical/HVAC systems to your central utilities?  Related to this, how are you going to meter these?  
      4. How mobile are your 'units' going to be?
      5. How do your site development costs break down vs your 'per unit' costs ?  If I'm wearing my lender hat I want collateral and I don't want my money used for stuff that isn't backed by collateral.  For instance, land purchase price, and site development costs should be separately financed.
      6. Per #5, also wearing my lender hat, what community/etc is out there so that if a lender did have to take control of these units, they have the assurance that they can do something with it?  IE it has liquid value, etc.
    3. Tied to this, concern from traditional institutional perspective (regulatory, permitting, lending) is going to be unique to each institution but here's what I see:
      1. Regulatory ie Permitting Etc: major concerns here because how the containers are tied together from a systems perspective, metered, etc has major life safety implications.  I'd guess the code on this is nascent at best.  If stacked up, how do you disconnect the plumbing, electrical, etc.  What's the longer term end game of your land and plan after you get past 2 units?
      2. Lending: If I'm lending on a home I get collateral.  I don't like lending on something that's reasonably mobile given that I don't know 

    Honestly I don't know much about your area but 200k sounds like a lot.

    Granted you have some invested with A/E firms and land costs etc but I'd love to see how that breaks down a bit more...

    0Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    @Jim Goebel Great questions! I have some answers for you.

    1. How are you developing your site? Are these units presumably going to be stacked up on top of each other\
      No sir - they are 2 separate units that are side-by-side, connected with a "commune" space for a deck, fire pit, etc. I could share drawings privately. But the concept is very similar to what someone is doing in Carolina Beach, NC...except ours will have the deck bringing the 2 units together for common space. See link: https://www.coastalliving.com/travel/rentals/tiny-...
    2. How are the units going to be purchased - who owns them? If you, does that mean you'll be a leasor of those units (via AirBNB)?
      That's where we're running into road blocks. We intend on owning them. Several people have expressed interest in being an investor in the business for a share of equity. We have plans beyond the real estate in our business plan. We would be the leasor via AirBnB and our own site via Lodgify. 
    3. Site development: how are you going to tie in the plumbing/mechanical/HVAC systems to your central utilities? Related to this, how are you going to meter these?
      Water and electrical are already at the street from the city on the land we are in due diligence on. Our engineering firm mentioned that centrally locating the tie-ins on the units would reduce cost for us, and would be metered as any regular home. "A home is a home - despite the building materials" said our engineering firm. HVAC can be done with simple "hang-in the wall" units.
    4. How mobile are your 'units' going to be?
      They'll be welded onto cylindrical foundations. Theoretically, they could be transported...but with as much floor-to-ceiling glass that will be in it, it would be risky. We intend on it being a permanent structure. The "modular home" solution is on our radar - just not for this project....
    5. How do your site development costs break down vs your 'per unit' costs ? If I'm wearing my lender hat I want collateral and I don't want my money used for stuff that isn't backed by collateral. For instance, land purchase price, and site development costs should be separately financed.
      We've discussed buying land, but financing it independently so we can save some operating capital for future projects. But if we had the land, we could use it as collateral. Otherwise, without having a 100% completed budget with contractors. At a high level, we're approximating for it to be no more than $125 per square foot ($40K x 2 units puts us at $80K to build). Then we're looking at a 2 acre lot of land at $90K. The remaining $30K is furnishings, deck, etc. We realize that we can't finance some of those miscellaneous items - but we've put it into our budget for our business plan as we conducted market research on what revenues we can generate. 
    6. Per #5, also wearing my lender hat, what community/etc is out there so that if a lender did have to take control of these units, they have the assurance that they can do something with it? IE it has liquid value, etc.
      Because it's a "non-traditional" home, there are some questions here. Our argument is - especially in the geographic region of the NC Blue Ridge Mountains - there is a strong desire for tiny homes, vacation rentals, and investments. Plus, the particular lot of land we are looking at allows for 2 units per acre. Meaning, you can subdivide that 1 parcel of land for 4 homes at some point. Considering there is a private residence within 20 miles of our proposed project made entirely out of shipping containers...we believe there's a place for it
    0Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    Continued @Jim Goebel

    1. Regulatory ie Permitting Etc: major concerns here because how the containers are tied together from a systems perspective, metered, etc has major life safety implications. I'd guess the code on this is nascent at best. If stacked up, how do you disconnect the plumbing, electrical, etc. What's the longer term end game of your land and plan after you get past 2 units?
      We intend on keeping each unit simple when it comes to utilities. Which is why we've opted for a single 40' containers for each unit.

      My business partner and I are staying at this unit in a couple of weeks to investigate exactly what you just mentioned:       https://www.airbnb.com/rooms/16189276
    2. Lending: If I'm lending on a home I get collateral. I don't like lending on something that's reasonably mobile given that I don't know 
      Fair - but the design we have isn't conducive for transportation. It's still a "house". Just made out of unique building materials. 
    0Reply
  • Anthony Conway
    Investor · Charleston, SC · Member since 2014 · 92 posts · 43 votes
    8y
    Although I understand the unique concept of container homes and tiny houses on trailer frames. I often think that people are overlooking the unique concept or trying recreate the wheel ( mobile homes). Mobile homes have been around for a long time and although they have a bad reputation they are essential the same thing that you are going for. They have some nice new models that would blow you away, prebuilt with all the amenities you need and ready to pass your cities inspection processes. The cost of brand new homes is much lower then what you are estimating and financing on new homes is available. Let me suggest that if you love how a container looks that much, buy a brand new mobile home, set it up on said property, pass all city inspections, then buy a container cut it apart and wrap the mobile home to look like a container. We have people that spent 90-120k on these tiny homes just to find out that the only place the city will allow it is in a mobile home park. Then they end of having the smallest (400sqft) most uncomfortable house in a mobile home park for the most amount of money, when they could have bought a 1300sqft double wide mobile home that is very comfortable for half the cost. Just my two sense. If you need help finding great mobile home manufactures and awesome new mobile homes I would be happy to point you in that direction.
    1Reply
  • Jim Goebel
    Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes
    8y

    A few follow up thoughts: 

    Anthony I think has some good points.  

    I don't want to disuade you especially because it sounds like you are a decent way down the road already, Evan, however here's what I think are the primary possible 'selling points' of a 'shipping container home':

    • Novelty - for people that want something 'new and fresh'
    • Mobility - ability to pick up and move, note that network effects and places to credibly move the container home to are going to be key here
    • Price - presumably a container home should be WAY cheaper than a full built home

    @Evan York

    Of those three, it sounds like you ONLY have the first, that there would be some novelty.  I think those selling points ring true to your end customers (renters or buyers) or for a bank.  If I'm a lender I don't want to lend on something unless I really think it has wings.

    I'm really not trying to be a wet blanket, I promise.

    I really think one of the biggest challenges (opportunities) from a design and conception point is coming up with a true 'quick connect' way to connect the utilities and maintaining control of that over time.  I think without that, these can't be mobile and I think that's a lot of what's driving your cost, too.  

    0Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    8y

    @Jim Goebel - All points heard, and I do not disagree with your "selling points". 

    This idea started with my business partner and I wanting to build a vacation home for ourselves, but learned of the viable business proposition it could serve to offset whatever our monthly costs are (and high chance of profiting based upon the market research we performed using AirDNA).

    We're not positive that the market is ready for living in shipping containers; hence, our reason to concentrate on the novelty. We believe everyone wants to stay in one, but not everyone wants to live in one - yet. Precisely why we are entertaining the idea of listing this on a short term rental site such as AirBnB. 

    This is our method to introduce this in a very small way while we continue to leverage additional uses of shipping containers such as mobile pop-up venues, shops, kitchens, urban agriculture, etc. 

    Set the business aside for a moment: my partner and I simply wanted to have 2 shipping container dwellings on a single lot for us to vacation together. 1) because we can afford to and 2) because it would be a fun project that is unique and inexpensive (relatively speaking for a "vacation" home at less than $100K a pop). Don't forget, that $200K price tag includes 2 acres of land in a desirable area with $30K of "unseen and unplanned" expenses. 

    No less, thanks for the input! All valuable things to consider if we get to a point where we believe the market is ready to adopt shipping container / tiny homes on a large scale!

    0Reply
  • Lance Branford
    Member since 2018 · 3 posts · 4 votes
    8y

    what if you combine them some how and make it a duplex container home?  Maybe connected via a courtyard  would that increase your chance of a conventional loan ?

    0Reply
  • James Call
    Specialist · Denton, TX · Member since 2018 · 126 posts · 84 votes
    8y

    I think one of the ideas that @Evan York was mentioning that seems confusing in the comments is that these are not really mobile homes. 

    They are a normal home on a pier foundation.  

    Look at this

    https://www.airbnb.com/rooms/15700427

    and

    https://www.airbnb.com/rooms/12072668

    These are a duplex.  They are not really mobile.  

    Here is another one that we have been watching in the bay area.  

    https://greendwellings.com/#/shipping-container-ho...

    So, I think the discussion about mobile homes probably isn't really in line with what he is talking about.  

    I just talked to the building inspector in my community and he said that if there aren't any CC&R's in my subdivision we can build with shipping containers if we want.   There are not any issues with the CC&R's so we can do it.

    We are exploring this option because of expansive clay issues.  We can theoretically put the shipping containers up on 4 piers per unit because they are so strong. 

    0Reply
  • Charles Boisseau
    Gainesville, FL · Member since 2017 · 1 post · 0 votes
    6y

    @Evan York

    This is a timely post. I’m buying a lot in Gainesville, FL. I’m looking to build a cottage or a small home if I can’t afford that. I spoke with a designer/builder who placed a shipping container in his backyard to rent as an Airbnb. It’s done well. This guy is a wealth of info about about a half dozen other shipping-container houses in this area.

    Let’s accept that shipping containers are a good option and you’ve done your due diligence. They are very feasible and they are being built nationwide.

    Now let’s move to your question of how to get financing. I have the same question.

    Does anyone have specific names of mortgage companies or other entities that do this type of lending? Non-traditional. I’d need construction to permanent financing.

    I’ve found this company but haven’t reached them yet. Has anyone dealt with them?

    https://containerhomefinancing.com/

    0Reply
  • Evan York
    OP
    Rental Property Investor · Charlotte, NC · Member since 2017 · 8 posts · 4 votes
    6y

    @Charles Boisseau - great to hear you’re starting a container project! I personally have not heard of them.

    We are starting construction on ours now, finally. 3 years in the making, but with a private investor.

    0Reply
  • Jamaal Ragland
    Member since 2022 · 2 posts · 0 votes
    4y
    Quote from @Charles Boisseau:

    @Evan York

    This is a timely post. I’m buying a lot in Gainesville, FL. I’m looking to build a cottage or a small home if I can’t afford that. I spoke with a designer/builder who placed a shipping container in his backyard to rent as an Airbnb. It’s done well. This guy is a wealth of info about about a half dozen other shipping-container houses in this area.

    Let’s accept that shipping containers are a good option and you’ve done your due diligence. They are very feasible and they are being built nationwide.

    Now let’s move to your question of how to get financing. I have the same question.

    Does anyone have specific names of mortgage companies or other entities that do this type of lending? Non-traditional. I’d need construction to permanent financing.

    I’ve found this company but haven’t reached them yet. Has anyone dealt with them?

    https://containerhomefinancing.com/

    Hey  Charles,

    Did you ever reach out to the container home financing?


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