All Forum Posts by: Mike Bator

I shouldn't have complained - we've just raised $1m in equity funding from a proactive investor.

Our LLC owns one raw forested land lot in each of 4 states. All were bought in 2023 or 2024:

- Virginia: $50,000 - 1.5 acres
- Vermont: $33,000 - 3.3 acres
- Tennessee: $34,000 - 1.4 acres
- Maine: $27,000 - 1.1 acres

Total: $144,000 - 7.3 acres

We bought all for cash with the intention to build on each in due time, depending on where we can first have all ducks in a row: general contractor, permits, etc. For simplicity, let's assume we can only build on one per year, so we would love to refinance all with some lender(s) to have more cash to work with.

Can banks or lenders do combo-multi-state deals like that? Or is it 1-2 lots per bank max? I have experience with commercial construction loans and cash-out refinancing after construction completion, but no experience with refinancing raw land yet.

Quote from @Aditya S.:

Reach out to them to do what?

I was mainly referring to providing equity-based financing to those top operators to scale from 2+ to 100+ more quickly. Like VCs do all the time in Silicon Valley. Considering the figures of 95% occupancy and $750/night, it's akin to a software business having 2+ customers on a $21,500/month subscription EACH.

Unlike software startups, real estate offers "easy" bank loans, so each dollar invested effectively becomes $2-4. With the numbers provided, such STRs operate at 50%-60% margins like software companies. So, with some cash for fuel and board-seat-like guidance - oh boy.

Seed-stage startups in Silicon Valley have an average valuation of $10m, a 90% failure rate, and are often unprofitable for many years while hoping for the next round. All that valuation is based on some basic MVP, yet VCs are okay with it since they only need one out of a hundred to achieve a 100x return to make it all worth it. Then, they double down on winners in Series A, B, etc. I might be wrong, but it seems that many in real estate failing to learn from Silicon Valley's success. Everyone is looking for a short-sighted win of getting a monthly dividend or payout, instead of becoming deeply involved to help the company 100x the revenue in 5-8yrs while maintaining 50-60% margins. With 100 properties at those margins, the public markets would assign a 10x multiple on revenue, equaling a $258m valuation (100 properties * $21,500/month * 12 months * 10x). In any case, perhaps I'm just wrong and don't know it yet.

Quote from @Jay Hinrichs:

how do you find the owners ?  do they post their personal phone numbers on A BNB ? and are they going to share all their secrets.  in addition not every investor wants to get into the lodging business. I know i tried for a few months and no thank you..

Since having a "brand" and an "Instagram" presence is fifth on my list, owner-operators can be reached through their website, social media, etc. Their guests do this all the time to save on AirBNB fees and book directly. There isn't a need to message through AirBNB at any point.

I'm genuinely curious – why aren't real estate investors proactive? For instance, with STRs, why won't an investor spend an hour on AirBNB for their area to identify listings that:
1) rank the highest
2) occupancy 95%+
3) ADR $750+
4) hosts have 2+ properties
5) listings are branded with 20k+ Instagram followers
etc

Then, reach out to those top operators; as many don't have the time or gave up on cold outreach, yet they've done the hardest 90%, have skin in the game, and outcompeted thousands of listings nearby.

Quote from @Olga Daisel:

@Mike Bator

What's the location?

I think that matters the most. People tent not to drive several house for cabins.

How many bedrooms?

Can you share listings?

No, sorry. This group is too savvy to share such details.

Quote from @Jeremy H.:

And each cabin brought in 280k in 2023? 

The first cabin has 24 months of history, and the second cabin has 8. The occupancy and nightly rates I provided are for the entire history. In total, we only had 9 unbooked nights in those combined 32 months. To date, both cabins have brought in $749,048.96 in revenue. 

Quote from @Chris Seveney:

@Mike Bator

Might be interested but would need to have audited financials on the current rentals to even have our investment team consider it.

Fair enough, I will get started on that. 

Quote from @Mike Dymski:

Refinance after they are built with commercial or DSCR loans.

If you are cash flowing that much per property, there is no need for 100 cabins, investors, and so many headaches.  Your cash and portfolio growth will snowball quickly.

I guess the full story is:
1. Began with $620k cash.
2. Constructed cabin 1.
3. Appraised at 80% all-in costs.
4. Refinanced at 75% LTV, retrieving 60% costs.
5. Reapplied 60% + profits + personal cash = cabin 2.
6. Same 80% * 75% scenario
7. Currently repeating step 5 for cabin 3.

This rinse-and-repeat process would enable the construction of 1 cabin per year, until profits expand to allow for 2 per year... All that while state and IRS taxes on profits are increasingly challenging, as refinanced funds for construction in progress aren't deductible expenses, thus not lowering tax bills.

All that said, the "snowball quickly" effect you mentioned isn't quite happening yet. I'm aiming to be part of something exciting, not just a lifestyle business. Besides, we've already secured over 100 domains for future builds nationwide :)

I've self-funded the construction of two STR cabins ($620k each; land included) in separate locations over an hour's drive apart. Both are probably in the top 0.01% of all STRs nationwide at 99.2% occupancy, $772/night even when accounting for unbooked nights as $0. This equates to $281,965/year/cabin, with revenue covering all-in costs in 26 months and profits in 43.

Naturally, I aspire to build more. The goal is at least 100 cabins by 2030, but I only have the resources to construct one more in 2024.

How would you go about financing it? Challenges I'm facing:
1. My personal DTI ratio is at 49.9%, so personally I can't take any more loans.
2. Many lenders avoid funding construction loans for an LLC in rural areas.
3. Although I receive investment inquiries from guests every 2-4 weeks, none can invest a substantial $500k+. Dealing with less substantial amounts like $50k creates more trouble than it's worth.

Ideally, I need a single investor who can engage deeply with our numbers & vision and finance the construction of 3-10 cabins at once ($2-6m). After an 8-12 month construction phase, we can refinance the cabins, freeing up to 75% of the invested cash for the next construction round. And so on.