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Real Estate Investing School Podcast
168. REAL DEAL: Why Tiny Homes are an Incredible Investment
00:31:09
Welcome to the Real Estate Investing School Podcast! In this episode, your host Brody Fausett dives into the details of his latest glamping project. If you're a fan of innovative architecture, glamping, and profitable real estate, this...
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If you have a good deal and it's a good quality deal, and it's exciting and it's a fun deal and it's going to make people money, the money is very, very, very easy to then go and get, even if you don't know a lot of people with a lot of money. What's up, everybody? This is your host, Brody Fawcett, and welcome to the Real Estate Investing Podcast. This is a Real Deal series. For those of you that are new joining us, we talk about one deal and specifically dive into how it was found, funded and forced. So today is a solo episode. I'm going to tell you about a deal that I'm actually in the process of doing. So I wanted this to be real, raw as I'm going through it. And so today I'm going to dive into that one and hopefully you guys can pull something from it with the whole intention of how do I take these principles and, and apply them to my real estate investing, implement them and not just listen about real estate, but do real estate. And the best way to kind of understand and do that is the more we hear about different deals and the way different things are funded, found, and forced, the more we're able to kind of take those principles and go and apply them. So today I'm talking about a glamping project that I'm doing now. I've kind of been hesitant on doing diving into this one too much and sharing too much about it because it is in the process right now, and we're getting ready to break ground on the construction. And so there's been a lot of work that's actually gone into it when it comes to finding the land, going through the city, getting things approved, getting things fixed in order to be approved. And it's just been a process. And so I think it's important to document some of that so you guys can understand it. I'm actually going to do more of this on Instagram, so you guys can go and follow along at Brody Fawcett or at Real Estate Investing School. And I'm going to share more of this journey because I think it's important to put together these pieces so that you guys that want to go do something similar can go and take that and put those pieces together. And hopefully it'll save you time, hopefully it'll save you money and stress and energy and all those good things. So I'll give you kind of a overview of this project and keep in mind, I'm going to do this again, you know, probably a couple more times throughout this process and then even afterwards. And once the, the project stabilized and it's being rented out, I want to go over like what the actual numbers are as opposed, as opposed to what the projected numbers are currently. But you guys know I have a tiny home resort in Brian Head, Utah and just finished phase one of that and that's been, been being rented out couple of months and I have two more phases that will kind of add to that project. All in all, we'll have about 24 ish units all said and done. And so that kind of concept has always been extremely fun for me. You guys that, that know me have followed along for a minute. You know, I am a lifestyle investor and all that means is I love doing things with my lifestyle in mind, right? I want to invest to increase my lifestyle. That doesn't mean like driving a nicer truck and living in a nicer house and all of those things, even though that can definitely be part of it. But it means I'm, I'm working with the intention of building my dream life as opposed to working without all of that in mind. And I think so many times if we're not intentional about what we're doing and why we're doing it, we end up in this rut of doing things to do them. And then we fast forward life and we look up and we realize, man, I, I went about the wrong way. And so for me, I want to live by this lifestyle filter. I want to think in terms of hey, what life do I want to live now? Let me go and find these investments that fit that mold as opposed to hey, I'm going to go work and with the leftover, that's going to be my lifestyle, my time. And so for me that's like comes down to cash flow. It comes down to high cash on cash return, that comes down to passive income. But it also comes down to experiences and being able to create these experiences for myself, my family, other people around me. And that's why I think I've gravitated so much to this idea of tiny homes and short term rentals and this experience. Like I'm really excited. In a couple months my entire family we, I blocked off half a week at my tiny home resort and excited to like bring my grandparents there and you know, my whole family and their kids. And it's going to be an exciting time. We're going to hang out for, you know, a handful of days up in the mountains and there's enough space to where everyone can have kind of Their own. Their own tiny cabin, and we get to hang out together and ride razors and play pickleball and sit by the fire pit and have a good time. And so for me, this is just part of my. My vision. It's part of what, like, I've intentionally created and dreamed about for the longest time now. And so it's so fun and so cool for me to see it all kind of come to reality. And so with that being said, like, this project that I'm gonna talk about today is kind of an extension of that. And so part of this process that I've built in Brian Head and gone through, you know, acquiring the land, working with the city, getting things approved, getting infrastructure in there and then getting everything built and now being stabilized and being rented out. Like, it's been a process. And so I've learned a ton through that. And so this is kind of an extension of that now. One of the things that I realized throughout the process of doing this in Brian Head, Utah, is there's a lot of snow. And so everything has to be up to code. Like, the roof has to be, you know, engineered to fit the snow loads. And they're a lot more strict on, you know, insulation and all these different things, as opposed to an area that's, you know, maybe in a climate where you don't have to worry about the snow and is more lax in those areas. I could save so much money in the build cost. And so this concept of glamping. I don't know what those words combine. What is it? Glorious camping? I don't know. I don't know. I guess I haven't stopped to glamorous camping. I don't know. I haven't stopped to think about that. But it's this, you know, luxury version of. Of camping. So you're not necessarily out in a. In a tent, but there's running water, there's plumbing. There's different things like that. And I'm going to explain this project and how it works a little bit and why I designed it the way I did. But that's what it is. It's this glamping project. And I. I love the idea of the tiny homes. If you guys listen to past episodes, because. Because they're tiny. Price per square foot is going to be more. Right, just in general, but it's so much smaller of a square footage. So the build cost isn't nearly as much as it would cost to build an entire house or to build an entire cabin. But because it's an experience and it's unique. And if you design it and build it the right way, it gives you an opportunity to leverage that and to still charge the same amount per night as you would spending way more and building, you know, more of a standard but. But larger space to be able to rent out. And so for me, like this glamping, I've kind of seen it take off, especially in these areas around national parks. And this is where this project is. It's right outside Zion national park, right off the freeway. And so a lot of hikers and a lot of people, you know, from other countries coming to see this awesome national park. And so it stays pretty busy throughout the entire year. And so I'm really excited because I found a piece of land in that area that is zoned to be able to do that. And with it being a glamping resort, the cool thing is it's less money to build these units. To give you an example, what we're doing, they're. They're called geodesic domes, and so they're kind of funky looking and not gonna lie, it took a second for this idea to grow on me because it's so kind of far out there. You might have seen them around, you might have seen them online, but it almost looks like a snow igloo. Just this bubble, right? And one kind of third of it is all windows. And this property is really cool because you get all the red mountains and they're built on these decks. But to buy like the units themselves, they're. They're steel frames, you know, that you put together. And then there's kind of like this canopy thing that they goes over the top, this like pv, PVC tarp thing. And they're more heavy duty than what it probably sounds like. Even like with the windows, a lot of people will just go with, you know, your, your like PVC plastic windows. But that kind of fades over. Time starts to turn yellow. And so we're doing like upgraded windows and whatnot. But I'm getting into the weeds quick on this one. Just kind of like zooming out. It's a project, it's about two acres, and I can fit 20 units on it. And so there's a lot of kind of behind the scenes design that went into that. And I think that me talking through some of this hopefully will help you guys understand my thought process and going into it why I wanted to find something like this and how much I, I spent on it and what the kind of the plan is. And so for me, kind of comparing this to my project in Brian head, and I'm like, holy smokes. If I can rent this out for what things are renting out for around here, which is insane for, you know, these luxury glamping setups. Some of them don't have any plumbing inside of them, don't have any ac, even inside of them. And they're still getting, you know, a couple hundred dollars a night, sometimes three, $400 a night out of these, you know, units that essentially cost anywhere from 10 to $30,000 to construct. And so you start to do the math on that, and you realize, holy smokes, I can get a return on my investment really quick if I were to buy something like this. Now, what people don't understand is there's costs that go into it. With infrastructure, there's costs that go into it. You know, being able to get everything set up to where it's approved. To be able to do that, you need fire hydrant, you need, you know, a paved parking lot, you need lights, you need, like, there's so much that goes into it. And so it's not always as, like, cool as it seems from a cost standpoint. Like, there is other costs that go into it. But if you run all those numbers, you do it right, you can realize, hey, there's a lot of margin in something like this if I can find the right piece of land and get it for the right price. And so for me, this had always kind of been on my radar, especially as I went through this process of building in an area that it snows, and there's snow on the ground eight out of the 12 months of the year. So your building window is really, really small. And if you guys remember, on my tiny home project, what I did was get these homes that were built by zip kits, and they build them in a warehouse. And these ones, they actually, they weren't prefab, so to speak, where they just shipped them, and it was all completely done, and they, you know, craned it in, but they did all of the panels. So they pretty much put it together and built it in the warehouse. They put all the siding on, they put the windows on. They did, like, the roof, all of that, right? And then they took it apart and stacked it on top of each other in these big, you know, walls, roofs. And then they brought it on site where we had the foundations poured, we had all of the, you know, utilities in place, and they just put it together a lot quicker. And then we finished the insides. And so a lot of different ways to do that. They have some of them that are a little bit smaller where they can actually ship down the road, and then it's all the way completely finished, and they just drop it on site. And that's more of what we're doing for the next phase of this project. But with these ones that are near Zion National Park, I knew didn't have to worry about all of that, Right. I knew it could go up fairly quick just being built on site once the decks were all built out. And so the way that I found this project, once you understand that it's been on my radar for a while, I knew what I was looking for. I knew why I wanted to buy something like this. Right. I'd done my research. I'd seen that, hey, these things are renting out for this much money. People are renting out campers for, you know, hundreds of dollars per night and high occupancy rates. All of this went into it beforehand, right? So now when the land came up, I kind of knew what to look at. I knew what to look for. It wasn't just this thing that was out of left field and decided on a whim to go and do it. So I wanted to explain that thought process for you guys. But diving into how I found it, I actually didn't find it me personally, okay? So somebody that I know had found this project, and I'd kind of been helping them out as far as, like, consulting them through, like, a lot of the process and getting it all built out. Well, the cool thing, when they brought this. This project to me initially, I always thought, like, oh, it's. It's awesome. Because they were able to negotiate with the landowner that owned a lot of property. I close to a hundred of a hundred acres. They were able to negotiate them selling a portion of that. And to me, that was really special because I didn't want to go buy, you know, 50, 60 acres just because of all the risk that's involved in that. Right. For me, that's a big, big project. And not saying it's not worth it or it wouldn't pencil, but in order to break even on something like that, there's just a lot more risk involved. Right? You're having hundreds of units on there. And so that means, you know, if you're not renting all those units out or a lot of them, you can go in the hole really quick. And so for me, kind of that, like, sweet spot was anywhere from, you know, 10 to 20, 30 units. That way I could still maximize my return. And then on top of that there wasn't so much risk involved, that it was like this. This scary thing that was going to cost millions and millions of dollars. And so that's kind of behind the scenes. So I always thought that was cool and kind of walked them through the process of, hey, here's what you need to do, getting things approved. And they ended up having this under contract for close to a year. And it got to the point where one thing or another, they weren't able to execute on it and actually close on the property. And so they even had financing that was all approved through, like, an SBA loan, which. Which is a awesome hidden kind of gem that we could dive into a little bit more. But it's basically small business financing. And so things like, you know, a hospitality setup that you're going to rent out, which is what this essentially is, it's considered a small business. So a lot of times you can get better financing through, like, an SBA loan. You can get less money that's. That's required to go down. You can get better terms, all these different things. So it's a great route to go. There's a few more hoops to jump through, but you can do the same thing with storage facilities. A lot of times people will apply to get this SBA financing, right, because it's a business. Yes, it's a. An investment. It's a real estate investment, and there's passive income involved. But the SBA sees that as a. As a business, and so you can qualify for financing on it. So it already been approved for this, but for one reason or another, they weren't able to close on it. And so he finally came to me. I'm like, hey, I think there's. There's a lot you can do with this thing still. I think there's a lot of margin on this to be able to do something really cool for it. And at the end of the day, just didn't want to do it, didn't want to worry about it. And so they're out of contract. And I asked them. I'm like, well, I know you've put a lot of work into something like this, and I don't want to be the person that, you know, goes and just reaches out to the sellers and. And. And buys this underneath you by any means. And so I'm like, would you be willing to, you know, sell even though you don't have the project under contract, even though it's not something that, you know, like, is. Is completely ready to rock and roll just from the work that you've done, you're the one that introduced this to me. Like, you have, you know, a lot of these things done with soils testing, and you have a lot of things done with some of the engineering and whatnot. So would you be willing to sell all of that, plus, like, almost a consulting or a finder's fee, and that way I can pay you out, you can get some money, and then I can go do this project. And I feel comfortable taking on the risks and executing on it. And so ultimately, we worked out a deal where he got paid, made some money, which he was stoked about, because he was already walking away from the deal, not going to do the deal. It was kind of out of the picture for him, for me, which is interesting. It can be one of those things where you look at it like, ah, I don't want to spend money like, he wasn't going to do the deal anyways. But for me, I looked at it where, hey, me getting rid of this much money, is this deal still worth it? To me, like, is there still meat on the bone? Is it still something I'm stoked and excited to do, not including the money or including the money that I'm paying just to get access to the deal? And the answer was yes. And so for me, I tried not to think too much and get too caught up in, oh, man, this guy hardly did anything. He wasn't going to do any of it anyways. Um, for me, I tried to look at it from my perspective of just, hey, is this worth it to me? And the answer was yes. And so I was okay spending that money now, the next step to this. This project. And I. I want to say the. The purchase price of this was about 480,000 bucks. And so went back to the sellers. They're still willing to sell it, bought this property. And what's interesting when we talk about the financing of this thing and how it kind of worked out is the fact that I didn't put any cash into this deal. Now, we paid cash for the property, 480,000 bucks, but I didn't put any of my own money into this. And so what the breakdown of this is I own 51% of it, and the other 49% is split up between two investors that are good buddies of mine. And so for me, I'm like, hey, this is a project I'm taking on. You guys want to do something like this together? And they were stoked about it. I went over the numbers with them and the projections of what it looks like. And I'm like, hey, this is where I got my numbers from. This is what I'm projecting. This is what I think this deal, you know, is capable of doing. Let me know if you're interested in doing something like this. And sure enough, they were both like, yes, I want in. This sounds great. I'm stoked. And for me, more and more recently, kind of my qualifications for, hey, who do I want to partner with on stuff? Do I want to partner with with people on these certain things or certain deals? Because a lot of people will come back and they'll ask me, like, hey, if this deal's so good and there's so much margin in it, like, why don't you just use your own money to do that? And it happens all the time. And so for me, there's different reasons. Like, one, even if it is 100% cash on cash return, let's say if I'm putting money into it, that's also different because if I put no money into it, even if it's really, really good return, it's now an infinite cash on cash return. And so I think understanding those principles is really important, but it's also important to understand that it's going to allow me to save capital and I can pour that into the next deal, for example. But the other piece to it is more and more, I've just gotten to the point where I want to do business with people that I know like and trust. And kind of the requirement or one of them for me is like, hey, if we have a business meeting and it's in Mexico and we're going golfing and hanging out at a resort, like, who do I actually want to spend time with? And for me, like, these people checked those boxes and so I'm like, cool, rock and roll. Let's go. Let's. Let's make it happen. And a lot of people also ask, like, how do you find these money partners? It is so important to understand, and I'll say this again and again and again and again, but you don't find the money. You find the deal. And the deal is what brings the money. So understanding that is so critical because if not, you end up looking for money, looking for money, and you don't understand how to go find and create a deal. And then it's tough. Even if you do find the money, you never get to put it to use, right? So understand, if you have a good deal and it's a good quality deal and it's exciting and it's a fun deal and it's going to make people money. The money is very, very, very easy to then go and get, even if you don't know a lot of people with a lot of money. So understand that concept. And that's exactly how this one was. Now, what I'm bringing the table, it might be a lot more valuable than money. And it was to these people, for example, the deal, the, the insight, the creativity, the experience, all of these things that they probably wouldn't have on their own or wouldn't be able to go and do on their own, or maybe they would, but it would take them a lot of time. And so they valued that for me, not bringing in any money, they also valued the return. Right. So many times we get caught up in, oh, what's this person doing? And how much are they putting in and how much do they where in reality, once again, it goes back to the scenario of me paying out my buddy for consulting the deal and doing the work, right? Is, hey, am I happy with the return that I'm getting? Am I happy with the work that's being put in? And for them, they were very, very happy with that. And so they didn't get caught up and they weren't as concerned on, oh, you're not putting any money into this deal. To them, it didn't matter as much because they were happy with the return they were getting and the work that they were putting in to get that return, and they were happy with the work that I was putting in to not have to put in any money, if that makes sense. And so, which is a lot of work, like a ton of work. And I could even justify that, you know, I got the raw end of the deal because of how much work, work and energy and experience and time goes into this back end of everything, Right? So it's important to understand those two pieces as we talk through it. But for me and for you guys that are out there, like, diving into this education space and learning about real estate investing and like taking this piece of it seriously, and you're listening to this podcast and you want to learn, you want to grow all these different things, it's so powerful to understand that education and hustle is powerful. It is so powerful once you get the knowledge. And that's why we're so keen on real estate investing, school, and working with a one on one coach, because one deal can absolutely change everything. And so the projected numbers on, on this deal to kind of give you an idea, right? The way everything's broken down and split, like on a very, very conservative level, we each should make over $20,000. I say each, each of them should make over $10,000 a month. And I should make over $20,000 a month profit after all the expenses. And so yes, this deal might take, you know, a year, a little over a year to get up and running and going and eventually like getting it completely built out and executed where people are renting it out. But when you look at that like how many times in life do you have a chance to work really hard for, for a year and that turns into $20,000 a month plus equity, plus for the rest of your life. Think about that. You know, and so that to me just solidifies how important education is and how important learning from the right people can be. And working with a one on one coach, like if you're able to go do that and understand what somebody else has done and just kind of reverse engineer it and how it applies to you, that is so, so, so, so, so powerful. Like that is so powerful. And I see it so many times and not just, you know, looking at it from, from our angle or our perspective as real estate investing school, but just in general. People are afraid to pay for education. They're afraid to bet on themselves. They're afraid to get a coach, get a mentor, join a mastermind group, go to an event. They're afraid to spend that money. They don't understand that it's not spending it, it's investing it. And sometimes that's the best investment you can ever make is in you and in yourself and be the person that truly bets on you. That says like, hey, if I invest money into anything, I'm going to get the highest return because I'm going to learn the most, I'm going to grow the most, and I'm going to go apply all these things in my life and absolutely blow it up. And if you can do that, you'll be successful at no matter what you do, especially investing in real estate. So that's kind of the funding process. Obviously, you know, the next step to that is paid cash for the land. Then you leverage the land being paid off and that turns into the down payment of the construction loan that rolls into long term financing on the, on the project. Right. So touching on like how we forced this deal so far and obviously this is one of those things that we could go so deep on. And I'm actually working on putting together like a, an entire step by step tutorial on how you guys can go and replicate something similar so if you are somebody that's serious about doing something like this and you kind of want some of that mentorship, reach out to me. I can kind of give you details on that. But I'm excited about that as I've kind of gone through this a few different times now to kind of make it as simple as possible for everybody else. But talking about how I forced this deal. So one of the things I want to touch on and then we'll wrap this thing up and once again we'll dive into this more later on and as, as we continue with this project. But one of the things I wanted to touch on with this one is how the resort itself is designed. So I already told you locations, super important. You, you can see this right off the highway on your way to Zion National Park. It's really close. All those different reasons. Know it's going to run out. Did the research on it, et cetera, et cetera. But with this, it comes down now to, hey, these, these two plus acres, how do we design this to attract the most amount of people but spend the least amount of money? Essentially you want to get the highest return, the highest bang for your buck. And so what are these things that we can do? And once again, that's what led into using these type of units because we can get them at a fairly good price. But also it goes deeper than that. Like one of the things that we'll have is a really nice sauna. We're going to have a pickleball court. We have a big fire pit area. One of the geodesic domes is huge in the center. And so we're thinking strategically on, okay if we want to be able to host like a wedding there or maybe a corporate retreat where a company comes and brings. We need to have a place that's air conditioned inside for people to go to. Right. And so we're adding like an indoor, indoor gym. Right. These little things that, believe it or not, don't cost a crazy amount of money, but you can get a high return from it. And so kind of the design of this, there's a big, almost like a track if you picture it. And then each of the units kind of branch off from the track. Like we have little things like in the decks there's built in hammocks, if you guys have seen those hammock decks for some of the, some of the units that kind of hang off the edge. But the main thing here that I want to touch on is not every single unit has a bathroom shower inside of it. Once again, glamping. Right. So there's six semi, larger units, and each of those have a kitchenette, a bathroom. They even have a loft above them up top. But it has plumbing in it. The other ones do not. So there's three different sizes. That's the largest size, the medium size. You know, it has AC in there, it has heat. It has a little, you know, mini fridge, a cooktop stove. But there's no plumbing. There's no water. Right. There's no flushing toilet. Instead, what we do. And if you. If, you know, like, there's right, 20 units total. So you take away the six that have plumbing, that leaves 14 of them that don't have bathrooms inside. And so there's a reason we did that. There's two, like, bathroom houses that have, you know, full. Multiple full bathrooms in these little houses, essentially. And the reason we did that is all that plumbing is in one central location. So we don't have to provide a bathroom, shower for every single unit and a kitchenette for every single unit. Instead, people are coming and they're staying, and they're renting out these places. They have a lot of stuff they need. And if they need to go to the bathroom, yeah, they have to, you know, walk a little bit, 50ft or whatever to the. To the bathroom. And they have their own space, and it's not overcrowded. But from a development standpoint, it saves so much money because I don't have to run plumbing to every single unit. It's less fixtures, it's less bathrooms, all these things. But on the flip side, we want to make them nice enough that that's not going to deter people from renting them out. Right. It still has everything they need. It's still cozy and luxury, and they have their own private deck and all these different things that it feels like this really cool spot. And they can make their meals, do things like that. But if they need to go to the bathroom, right, they go to the bathroom house. Which sounds kind of ghetto when I say, like, bathroom house. But no, it's like this. This cool, modern luxury building that's got multiple private bathrooms in there. It's not like the. The tree of life shower where, you know, everybody's in there naked together. Not. Not one of those things. It's. You go in there, you can shower, you have your own vanity, your own toilet, your own spot. So which I'm curious your feedback on. Yeah, you guys should let me know if that's something that deters you. And you're like, oh, no, I definitely wouldn't stay there if I have to walk 50ft to use the bathroom. Or you're like, yeah, that doesn't deter me enough. As long as there's a king bed and it's cozy in the cool views and it's an awesome vibe, then it's not a big deal to walk a few feet to the bathroom. So let me know your thoughts on that. But that's kind of it for now on this one. I just wanted to, like I said, touch on some of these things as I'm going through them, as they're real, as they're raw. There's a lot of. A lot of hurdles to jump through, which, like I said, I'm putting this entire kit together to help save people time and money and energy when doing something like this. But hopefully you guys got some value out out of just diving into this quick one for just a few minutes. With that being said, if you did go, leave us a review. We want to reach more people. Send this somebody who needs to hear it. And thanks for tuning in. Appreciate you guys listening, learning. These are the things that make the difference. It's all of the little nuggets that you learn that go in your back pocket that add up that then you can go apply when you face certain problems within real estate investing. So much love to you guys and we'll catch you on the next one.