Building On-Farm Cabins...would it work? financing?

Question

Hi ya'll! First time posting, but have been listening to the podcast for a few months.

I have a livestock farm in North Florida (I raise cattle, sheep & layers), and people usually have a good time when they get tours of the farm. I'm located very close to major highways in the area, and also within 10-25 minutes of what I think are the major attractions in the area: many springs and rivers.

I want to add 6 on-farm cabins to offer as short-term rentals.

In your experience, do you think guests visiting the area would have an interest in a place like this? I worry that guests would favor rentals that are right in the heart of the attractions (no more than 10 minutes away). Any tips, or things I should keep in mind and/or consider?

Financing! I have a fair amount of equity and my home is on this property. Since my mortgage has a better rate than what's offered right now, I was thinking a home equity line of credit or home equity loan. Any other better options out there for something like this?

Oh, and you happen to know of any cabin manufacturers?

Super grateful for any advice and pointers!

Ken Boone · Answer

@Ana Puig

Ana I probably wouldn't do personal one on one farm interactions as that will definitely require more labor on your part.  If it were me, I would start off with providing the guests a schedule of the daily activities that you would normally do and guests can choose to show up.  So say for instance if you collect eggs from your chickens at 3pm, whatever guests are interested could show up there ( you would provide a map) and this way you can still do the chore, and a few guests might help out, and you can take a few extra minutes to explain about chickens etc..  Some days no guests will show up and some days a few will etc.  In Florida I'm guessing you are not raising milk cows but rather beef cattle but I dunno.  So don't know if you have a feeding schedule for hay or whatever but different events will happen throughout the year, gathering whatever cows you are going to take to market, vaccinations, or if you are rounding up for in vitro, etc..  The lists could maybe be made a week or so in advance depending on your schedule for whatever might be going on.  Sheep shearing will be a big activity, I think you really have a lot of potential for sure.   I would definitely talk to your insurance provider.  Any aggressive cattle, I would sell of right from the start though.

Your insurance would just be an overall cost factor of doing business this way.  I would just adjust your daily rental rate to reflect the "experience".  So higher rates than other regular rentals in your area for sure.  If you get a guest in your area it will most likely be because they want the experience you have to offer, so in a sense you might not be 100% competing with local STRs.  You will be your own niche market or attraction.

Michael Baum · Answer

Hey @Ana Puig., @Ken Boone makes a lot of good points here.

Regarding the cabins, a 12x24 is a decent sized tiny home. I would seriously look at putting them on a slab foundation. You will have to tie them into sewer/septic. Do you have enough capacity for that?

I would put it all in the daily rate. Like Ken said, if you are doing these things anyways, having people tagging along to "help" would be a cool thing.

Michael Baum · Answer

Hey @Ana Puig, have you checked with the county on what kind of structures you can actually build? Are you talking about small homes on foundations? Adding a pile of tiny homes on trailers? That will dictate you plan.

Also, if you have a working farm, you could create and experience with that. Make the farm the destination for city slickers. Get em milking, shearing and gathering eggs. Muck out the stalls. That sort of thing. Maybe horses? Lots of opportunity with that.

How many acres are we talking about?

Dave Stokley · Answer

Not super familiar with this but I think there could be ways to qualify for an SBA loan for something like this.

John Underwood · Answer

I would use the equity with a HELOQ and not disturb the low interest mortgage you already have. These will be gold for the foreseeable future.

Jacob St. Martin · Answer

Hello Ana, it sounds like you are in a great situation! My first thought is that you said, "what I think are the major attractions". You would want to make sure that there is actually a strong demand for STRs in your area (aka, are people visiting?). One way to do this is to go to airDNA and buy the market report for your area. Then, find an STR similar to what you would want to build and run comps. For instance if the comps you find are all booked at 80% occupancy and have a high ADR then there would likely be demand for what you build. If the occupancy is like 30% then I wouldn't build here.

I do think that there is a lot of opportunity for a STRs on a farm where you can advertise it as a farm stay and maybe let the guests feed the animals. As for the cabins, you would probably have more success going for a rustic farmhouse style than a typical cabin style because it will fit more with the niche you are trying to satisfy.

For financing, a HELOC is probably the way to go.

Ken Boone · Answer

So from a financial perspective I don't know how well it will work.  What I can tell you is that I have seen this model working in Townsend, TN.  Basically just like you describe, horses, cows, chickens, goats, pastures, barn and about 8 small cabins on the property spread out.    The largest space for rent and the largest "cabin" space was the space over the barn and over the hay stalls, where a cabin type setup was built on top of that.   Had a fishing pond etc too on the property.   Now that place is literally right on the edge of the Smoky Mtn National Park and people are looking to rent cabins in that area to start with.  I don't know that people are looking for cabins in N Florida so that is where I just don't have any idea how it will work from a financial perspective.  It is a niche and people like niches for sure so I think it would definitely work if done well, but don't have any idea on numbers.  I def think it could work though.  There are many types of vacationers and there are those that want to be in the middle of everything and those that want to have more of a casual remote away from everything stay.  So you would be attracting those guests.  And it provides a unique experience and sounds like it would def be family oriented.  You could post your feeding schedules and let guests partake etc.. It could work.

Andy Whitcomb · Answer

I don't know Florida at all so I can't speak to your specific area, but I will say in general this plan could work out very well.

If you plan to build these cabins as permanent structures on foundations, make sure your zoning allows for that. You could also look into tiny homes on wheels, again zoning may come into play with that.  The nice thing about tiny house on wheels is you can probably finance those, so you'll need much less cash. I think a HELOC is probably your best option unless you want to take on a partner. In that case there are lots of ways to structure it, but essentially they could either loan you the money and get paid back over time or you could bring them in as an equity partner (they'd have a percentage ownership of the tiny houses and the revenue they generated, not on the land).

Sara Levy-Lambert · Answer

I believe that guests visiting the area would have a great interest in a unique farm stay experience like the one you're offering. The fact that you're located close to major highways and popular attractions, such as springs and rivers, makes your farm an ideal destination for nature lovers and those looking for a unique vacation experience.

When it comes to positioning your farm stay in the market, I recommend emphasizing the unique aspects of your farm and the activities available for guests, such as farm tours and proximity to nature. This will help distinguish your farm stay from other rentals that are located closer to the heart of the attractions.

As for financing, a home equity loan or line of credit can be a great option for financing the construction of the cabins on your farm, as it allows you to leverage the equity in your property. It's also worth exploring other options such as business loans or crowdfunding, depending on your personal financial situation and the amount of funding you need.

When it comes to cabin manufacturers, there are many options available, ranging from small, local builders to large, national companies. I recommend doing your research, getting quotes from multiple manufacturers, and considering factors such as cost, quality, and lead time.

Best of luck and happy investing!

Building On-Farm Cabins...would it work? financing?

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