I’m considering buying 40 acres that is split into 3 parcels: 1 waterfront, 1 field, 1 wooded w/rock outcroppings. My plan is to build 3 small off-grid eco cabins and rent them out on Airbnb. The market is strong for this kind of rental in my area. Land cost is $200k. It’s off market and I would be buying directly from the owner.
Banks only finance single family home construction, so any improvements I make would have to be in cash. I have three options for financing this project:
1. Cash - We could do the whole project with cash. Pros: no loan. Cons: limited $ to make improvements (cabins).
2. Bank loan - options here include a land loan with 35% down payment, 10 year fixed note at 6%. Pros: more capital to work with, we keep our $ for improvements (cabins) which might be hard to come by if we burn through cash during construction/unexpected costs. Cons: loan interest, in debt to bank, longer time to close deal.
3. Involve friends & family as investors. Create a joint venture agreement, share profits. Pros: It would be pretty easy to get investors and it might be fun to involve others in crafting the vision/project. Cons: less profit since it would be split, JV agreement might get complicated.
Which would you do?
Why?
Are there other options I’m missing?
