AirBnB & VRBO in Small Markets

[Cody Dastrup]

THE QUESTION (s): Is there a workaround to financing a prefab as an investment property (short term rental) through a traditional lender (example https://factoryhomesoutlet.com...)? If not, is there a modular builder that is affordable and has cabin-style options? 

If you're interested in my story, here is what I am trying to do... 

Hey Everyone,

This is my first post and I am brand new to the Bigger Pockets network/world of real estate investing. I will preface what I am about to post first by saying that I have access to quite a bit of private capital and a great relationship with a lender but that I want to do this the "right way" as I am looking to scale this and help others that I care about building wealth.

The "Bad": I've identified multiple markets that have large barriers to entry including a limited supply of homes on market, significantly inflated housing prices. Markets are long-distance from a major city (lack of contractors, crew, supplies, etc.). The high level "problem" is that to buy into these markets would cost way too much and eat into revenue significantly.

Example: A cabin town in Montana that is within 20 min of Yellowstone, with 0 active listings sub $350k. 2 bed, 2 bath 1500 square foot cabin listed for $475k (.8 acres).  

The "Good": Because these markets have such large barriers to entry, there is little competition. Very few "investors" in area. No major hotels/Mdu's. Anyone buying an investment property is paying well over normal market value, thus increasing $ on nightly rental market. High demand/low supply. The land is cheap and always for sale.

Example: .62 Acre lot available for 65k currently

Opportunity: Building is too expensive and time-consuming based on a lack of supplies/labor in area. I'd like to purchase a plot of land (65k), pour a foundation (15-20k), and place a modular/prefab home on the property. The issue with prefab homes is that the bank is telling me that I cannot take out an investment loan on the property and that it would have to be listed as my primary residence. I asked about a modular home and have been told that a modular WOULD NOT be considered prefab, and that I could do a modular. Problem is that the modulars that I am finding are all "environmental companies" that are selling a product that is overpriced and frankly ridiculous options for what I am doing. (would cost the same as building).

[Luke Carl]

@Cody Dastrup

Read through this entire forum. You will find millions of dollars worth of education :)

[Luke Carl]

@Cody Dastrup

There’s is a reason there are no other properties on Airbnb. Probably 2 or 3 reasons. Like they don’t make money there :(

[Michael Baum]

Hey @Cody Dastrup, welcome to the forum! I have looked into modular home building for lots in north Idaho. Most people hear modular home and they think single wide mobile. So much mis-information on these.

What I would do is look at what various modular builders offer for financing themselves. For example:

https://lpratthomes.com/about-...

I have no affiliation with Pratt, but they have some nice designs that would do pretty well.

Does that look like a mobile home? That is one of their models and offers some mods. Like a massive porch with timber details etc.

Personally I think that with the costs of housing continuing to rise, modular homes built in a controlled factory and assembled on site will be the wave of the future. They just need to get by the mobile home stigma.

[Cody Dastrup]

@Luke Carl sorry, I was a bit confusing in my explanation. There are 0 active real estate listings "for sale" under $350k. Airdna shows some pretty favorable rentability scores/has 500+ active listings in the town w/ 52% occupancy. The market seems prime, but the barrier ($$$) to entry keeps new investors out.

[Cody Dastrup]

Originally posted by @Michael Baum:

Hey @Cody Dastrup, welcome to the forum! I have looked into modular home building for lots in north Idaho. Most people hear modular home and they think single wide mobile. So much mis-information on these.

What I would do is look at what various modular builders offer for financing themselves. For example:

https://lpratthomes.com/about-...

I have no affiliation with Pratt, but they have some nice designs that would do pretty well.

Does that look like a mobile home? That is one of their models and offers some mods. Like a massive porch with timber details etc.

Personally I think that with the costs of housing continuing to rise, modular homes built in a controlled factory and assembled on site will be the wave of the future. They just need to get by the mobile home stigma.

 This is fantastic. Thanks so much, Michael!

[Michael Baum]

You are welcome @Cody Dastrup! I was surfing looking at other sites and man there is a plethora of modular builds out there. There are some great log cabins made in modular. How cool is that!

I will say that many of them are regional only. So don't fall in love with a builder until you know they will setup in the area you are building in.

I also think this could be a good way to build some kind of cabin in the Smokey Mountain area where lots are cheap, builders are shady and real estate prices are skyrocketing.

[Cody Dastrup]

Originally posted by @Michael Baum:

Hey @Cody Dastrup, welcome to the forum! I have looked into modular home building for lots in north Idaho. Most people hear modular home and they think single wide mobile. So much mis-information on these.

What I would do is look at what various modular builders offer for financing themselves. For example:

https://lpratthomes.com/about-...

I have no affiliation with Pratt, but they have some nice designs that would do pretty well.

Does that look like a mobile home? That is one of their models and offers some mods. Like a massive porch with timber details etc.

Personally I think that with the costs of housing continuing to rise, modular homes built in a controlled factory and assembled on site will be the wave of the future. They just need to get by the mobile home stigma.

Just reached out to them and unfortunately they only ship tiny homes up to the area I want. She gave me a few referrals though. Champion Homes, DeerValley, and Sunshine. Will reach out to them 

[Michael Baum]

Good to know! Thanks @Cody Dastrup. This is a cool topic IMHO. Keep us posted on your progress.

[Nathan Gesner]

I'm in Cody, Wyoming. It's a similar market. Very expensive to buy into, hard to make good money with a short tourist season.

If it were so easy to buy a piece of land, slap down a foundation, and throw a modular home on it, other people would be doing it already. A lot of people want to be in these markets, but they just can't make the numbers work.

I don't mean to rain on your parade. Just make sure you've done your research before diving in and losing your shirt.

[Michael Rutkowski]

Hi Cody, this is right up my alley, and I'm always shopping around for land deals in rural Montana. Shoot me a DM if you want to chat. I am currently looking in a town of just over 100 residents, and am confident that it will be a cash cow. It's all about what amenities are around. Montanans are outdoorsy. Hunting, fishing, hot springin', stay-cationing peoples. If you find a spot in SW Montana, and there is a dot on the map there, you will be getting RV traffic during the summer, occasional out of state tourists, and then hunters, snowmobilers, and especially fly fishermen/women coming through during the off season. 

So if you can figure a way to take a bite out of that market, then you should be able to cashflow. Make sure the county you are looking in has some relaxed rules, and no zoning. If you're looking for speed in a build, why not consider a pole barn, and make it a multi-unit? There are a lot of pole builders in our state, and you get some great bang for your buck. Mix up the use to hedge your bets. Why not do a cabin on your property, with maybe a small shop, or internet cafe? If there are no services in the area, like food, or shops, integrate that into your plan. Obviously, this goes outside the bounds of strict real estate investing, but you may need to do that to be successful way out in the country.