Valuation of unconventional and profitable STR property

[Derek Stevens]

I have an 8+ac parcel in Dripping Springs, TX (outside of Austin) that has two small STRs built on it. Both units are approximately 400 sqft, "yurt-style" cabins with large decks.

We have 2 full years of revenue history, grossing just over 100k in 2024. After some investments in amenities (primarily hot tubs), our last 3 months have averaged 12k/m.

This property is owned outright, and due to the size of the property, the small square footage of the units, and the lack of comps in the area we have found it difficult to lock down any refinancing. We have spent approximately 500k in improvements on the land in the structures and the infrastructure. We also have infrastructure in place at a build site for a 3rd unit on property.

With it being a difficult property for an investor to find traditional financing for, how would I go about assigning a realistic valuation for the property if we were to entertain a sale? From what I've been reading, cap rate is not a reliable metric for STRs.

Any insight is greatly appreciated!

[Zach Edelman]

Unfortunately - there are a couple of issues here that likely make this hard to finance:

-"Cabin style" dwellings typically are difficult to finance as the secondary capital markets treats these differently than standard single family homes as the buyer pool for a "cabin" dwelling is less than that of a standard home.

- Yurts: Lenders typically have difficulty financing Yurts as they are moveable collateral. Lenders want collateral that can't be picked up and moved overnight. Let's say they need to foreclose and the borrower picks up the Yurt and moves it - now the entire loan they underwrote is thrown out, along with title insurance, and the lien on that property.

- Value: A SFR, or 2-4 unit (what it would be in this case) are residential assets and thus are valued off the "sales comparision approach" rather than the income approach. An appraiser likely won't be able to value a 1-4 unit property based off STR rents (whether projected or actually incurred), and if they are, the lender won't lend off said valuation for their applicable value (value they're lending off of).

With all this said, to answer your question of how you'd value this for a sale, I'd get a STR specific broker that's able to market your property as a turnkey STR with data on the rents, figures, etc. An ATX friendly STR realtor that I reccomend is CRIBS Consulting. They do property management for STRs and are a brokerage. Here is their website: https://www.cribsconsulting.com/