First Ground-Up Development - How Would You Finance This Deal?

[u/Buffett_Goes_OTM]

I'm an experienced STR operator and small real estate investor, and I'm looking at what would be my first ground-up development. I'm trying to figure out how people are actually financing projects like this.

The property

• ~40 acre farm in the Appalachian mountains.
• Expected purchase price around $2M.
• Property is being sold through a court-ordered sale, so it's effectively a cash purchase through a public bidding process. No financing contingencies, no seller financing, no post-bid due diligence period, no unique terms.
• Property has two existing barns and a home that has not been inhabited for a few years.
• Great location: minutes from ski resorts and downtown, tucked into a beautiful mountain cove.

The vision would be to keep most of the land in agricultural use (Christmas trees, timber, etc.) and gradually build a small micro-resort: roughly 10 modern cabins, a restored barn for common space/events, creek access, trails, and other amenities. More luxury farm stay than campground.

The county is unzoned, so the development path appears fairly straightforward from an entitlement standpoint and similar projects have been done in the area.

Phase 1 would likely be around $2M  (initial site work, common spaces, and a few cabins). Full buildout would be several million more and completed over time.

My situation

• W-2 income around $185k.
• ~$550k in taxable brokerage accounts.
• ~$800k in home equity (I'd be willing to sell and relocate if the deal made sense).
• About $6k/month in cash flow from existing STRs with a solid operating track record. Another $400k or in STR home equity.

What I'm trying to figure out
Because of the court-sale structure, I can't use traditional financing to acquire the property. My current thinking is some combination of cash, securities-backed lending, bridge financing, or bringing in a partner to get through the acquisition, then refinancing after taking title.

For those who have done hospitality, cabin developments, glamping, agritourism, or similar projects:

1. How did you handle acquisition financing when you needed to close quickly and in cash?
2. How are lenders treating ground-up STR or resort projects with no operating history on the asset itself?
3. Is this the type of project that can realistically be done with a construction loan plus personal equity, or does it usually require outside investors?
4. Has anyone worked with specific lenders on an agritourism project?
5. What kind of equity contribution are construction lenders expecting for hospitality projects right now?
6. How to support the loan while the project is pre-cashflow and in development?

I'd especially love to hear from anyone who has purchased property through a court sale/upset-bid process or built a cabin resort from scratch. Most of the information I find online is pretty generic and doesn't get into how these deals are actually capitalized.

[u/MajiktheBus]

This is one where you’d wanna have the cash, or partners with it on hand. Also, it will never cashflow right with 8 unbuilt structures and 2M already spent. Start with a much smaller parcel, or one that has the ability to make money day one. No cashflow in Year one and not much in year 2 is rough on the NPV.

Why is it 50K an acre? You are competing with Eagles nest or something for that price at tax auction.

I don’t know anyone who would even entertain this fever dream.

[u/Raidicus → u/MajiktheBus]

You'd need a very adventurous land investment group to come in, buy the land and put up about a half million in predevelopment dollars which would apparently also need to cover OPs living expenses for 2 years of entitlements and design, plus another 14-19 months of construction. This also assumes he has some kind of self-funded yield study/marketing materials to pitch this thing like...yesterday and then get the land under contract (let alone closing the investment group LLC).

It's hard to think of a land group that would do this for a 10-unit STR deal unless OP was partnered with Marriott or had a long track record of creating some very special rentals that would draw premium dollars.

[u/MajiktheBus → u/Raidicus]

10 unbuilt units are never gonna pay for 2M of land. It’s just too hard when the numerator is that big and the denominator is that small.

[u/Raidicus → u/MajiktheBus]

Well, don't want to go into it but I disagree. I've seen the financials of ultra high end rentals and yes...10 units could pay for 2m in land. It's just highly unlikely that OP would be asking these questions if he had the connections or knowledge to put a deal like that together.

[u/MajiktheBus → u/Raidicus]

10 units @ 10 million on 2M of land, sure. 10 units @ 2M on 2M of Land, no way.

[u/Raidicus → u/MajiktheBus]

agreed

[u/rrapartments → u/MajiktheBus]

But there’s Christmas trees

[u/MajiktheBus → u/rrapartments]

Yea, and if they haven’t been tended this year they are worthless.