STR Free land / cabin build opportunity in Red River Gorge (2024)

🚨**Seeking equitypartners**🚨

hello my name is Zach! Short term rental investor and building cabins in the Red River Gorge (Campton) KY.

- the lot is 1.74 acres allowing up to two builds per acre. This is an option for equity partner to qualify for loan and build their own cabin on my lot (hence my claim to offer “free land” to a partner)

- construction loan of 285k has been spent

- needing 100-120k to complete the project

- pre build appraisal was 385k, comps support an appraisal of around 400k for this home on completion

- market is highly desired by STR investors and my a frame will be one of the most unique in this market less than 15 minutes from Natural Bridge State Park entrance.

- unfortunately my first contractors refused to provide receipts so I do not have a record of funds for the first 136k spent on this cabin. But would be happy to discuss in detail the situation or provide details as needed.

DETAILS PROVIDED BELOW…

🚨ESTIMATED BUDGET EXPENSES FOR COMPLETION OF PROJECT:

1. Exterior siding install – have not gotten a contractor quote on this as they have not installed Quality Edge siding before2. Windows install – all windows have been purchased and are on the build site. Current contractor Kyle Murray (Unique Contracting frenchburg ky says around 10,000$ for all windows install)3. Alside soffit and addition foe wood siding – 7000$4. Septic remaining due – 4,400$5. Well install – 10,000$ quote from well installer6. HVAC remainder due – 10,220$7. Finishing electrical – yet to be determined75-80% of electric is completed8. Finishing plumbing – yet to be determined75-80% of plumbing completed9. Flooring – est. $7,00010. Insulation – 7500$11. Toilets – 500$12. Tile shower x2 tile – 8,000$13. Kitchen install including cabinets, countertops, island 4x6 ft. – 10,000-12,000$14. Staircase in the house (free floating metal beam staircase)- price yet to be determined, current contractor has metal fabricator in his group our plan doesn’t really work without using some variation of this. Solid wood steps would block too much of the limited interior space the floor plan has. My guess is 5-8,000$ for beam and labor.15. Exterior deck railing – 3000$16. Paint / primer – 5000$17. Base board/trim – 4000$18. Fireplace – yet to be determined, likely leaning toward electric fire place, have notdecided on where to install and what budget should be for this. Est. 4000-5000$19. Bunk beds wood framing for game room – 2300$20. Trex decking (toasted sand) for exterior deck – 7000$21. Radiant heat floor in downstairs bathroom including heating element, thermostat, radiant heat matt – 1300$22. Shims/frames/ casem*nt – 1000$23. Outlets/ switches – 600$24. Finish for bathroom – 2200$25. Driveway stone / 57’s – 3000$26. Water filter for well system (necessary due to heavy soil) – 1500$

Estimated cost to complete for materials – 100,000$

Estimated cost of laborquote from Richard Osborne of Osborne Pro Builders is 60k in labor/GC. If I GC myself will cost approx 25k for labor for total cost to complete at 125k.

🚨Lot 51 Victory Falls, Campton Ky Rev/Exp projection

A. Expenses –

Mortgage – 285,000$ at 7.25% interest – 2000$/month

Prop Tax – 200$

Insurance – 200$ / month STR specific plus regular insurance (this is estimated high)

Septic – 0$

Well water – 0$

Public Electric – 250$ / month avg est.

HOA fee – 42$

Hospitable Pms – 40$

Pricelabs – 20$

Security system – 75$

Trash – 100$

Wifi – 100$

Clean supplies – 150$

Total expenses per month: 3177$ per month including PITI

Total expenses per year: 38,124$

B. Revenue Projections –

Supporting comps give a reasonable gross Revenue projection number of low, medium, high (range). Year one of operation it is likely the property will perform on the low end, gaining speed as marketing on social mediapicks up and the listing gains traction on OTA’s like Airbnb.

1. Low – 60,000$.

60,000 – 38,124 = 21,876$ net

2. Medium – 70,000$

70,000 – 38,124 = 31,876$ net

3. High – 80,000$

80,000 – 38,124 = 41,876$ net

C. Final Expense (Cleaning) –

Cleaning fee on average for a 3 bed / 2 bath of similar size would be 150$ / clean. With an average length of stay (ALOS) of 3 days at 65% occupancy we would be looking at 79 cleaning turns costing 10,280$ / year paid to cleaner/cleaning company.

- Now subtracting that from our net above at 60,000-80,000 gross revenue numbers we get a net income of 11,596$ / year net income final at 60,000$ gross income after all anticipated expenses subtracted.

- 21,596$ estimated at 70,000$ gross final income.

- 31, 596$ estimated at 80,000$ gross final income.

🚨OPTIONS FOR THIS DEAL… IDEAS

Current bank loan amount is 285,000$. Pre build appraisal came back at 385,000$. Nearest comp was a 2/2 at 1550 sq feet sold for listed on MLS at 400,000$.

Option 1 - Bank will give 75% LTV, meaning of that 100,000$ equity I could pull out somewhere around 70,000$ to pay capital partner back for bringing capital to complete the project within 1 year or less. Money needed (see above) to complete the project is estimated at 170,000$.

Ideally looking to partner in a manner whereby I retain at least 50% of the equity with a buyout option later to buyback the remaining equity at some point. Cash flow has to be negotiated in such a manner as that it makes sense to the capital investor. If 70,000$ is paid leaving 100,000$ and net income is in the medium range of 22,000$ then it would take 4.5 years for a capital investor to break even. I do have one contractor highly rated and has been working for people that got into the situation imin and he estimates he would likely be closer to the 50-60,000 on labor costs to complete which would obviously change all the numbers to making a payback of closer to 3 years plus interest with medium listing performance. There are comps supporting a gross income of 80,000$ as likely. Meaning im looking to partner with someone to 3-5 years to finish and run this property as a full time STR with buyout option on the back end for the equity and cash flowgiving them 50% ownership outright minimum and cash flow. I would be the management partner running the air bnb daily activities and listing management.

Option 2 – The issue is how to make this deal in the “positive” again. With a payback period of 3-5 years for 170,000$ plus interest, for many that is too long a time. One fix for this is that I add a partner onto the deed of the land the cabin sets on. They then would build another cabin ground up on the same lot adjacent to my aframe that’s needing finished. So, the partner could build another cabin, complete it. Then on the re appraisal of the now two cabins and entire lot would be higher, on the refi once the second cabin is done we could pull the capital out to finish my a frame in question. This is essentially a “FREE LAND” opportunity in a high demand market like the Red River Gorge / Natural Bridge State Park. In adding a partner to the deed so they could build, we could raise the total appraisal value to give us that needed capital to complete the first a frame in question. And building a second cabin would take a year, not 3-5 years to do. This would create more equity, alleviate the negative number nature of my a frame, and create a second rentable property in a high value area. This is the option I am most hoping to propose to investors who may be willing to partner with me.

Zachary Humphrey RN

Bluegrass Rentals of Eastern KY LLC

606-923-2788