Remote Business Series: What I Wish I Knew Before Investing in a Short-Term Rental

Mmkay we're back, and here is the fun story of investigating renovating buildings sitting off the housing market. It's a doozy. Come along with if you like spooky house stories.

It Won't Cash Flow Immediately

Indeed it won't. Here's the thing: we went in blind to investigating renovating real estate to get a bargain dipping our toe into real estate investment. But what we learned along the way? Zoning matters: you can't just set up a pub in an old assisted living home, however awesome an idea. For that we would have had to convince local zoning boards, financing, and even neighbors who literally sighed when they picked up the phone for me to talk about the businesses growing in that area. Thanks for your patience, Josh. We learned a lot.

We set off after looking locally to investigate discounted dilapidated hotel properties and similar buildings that could be repurposed as farming communes, tiny home communities, and bed and breakfasts of various stripes. Frankfort was on our list, as they had (still have, if you're interested) a former county poor farm assisted living home for sale with 19 bedrooms overlooking Crystal Lake, only asking $700,000. Yeah, you would go too, wouldn't you?

We got there, after an idyllic summer drive past sparkling lakes and beaches all the way up the Lake Michigan coast to near Traverse City, cherry capital of the world and near Interlochen arts boarding school, which has lots of personal connections of nostalgia for our family.

The porch foundation was cracked and falling off. The railing was rotten. The interior hall looked a bit more haunted than I remembered in the listing photos. Nicest and most up to date item in the place was a 1970s wooden couch with replaceable cushions. You know the kind. Cabin up north stuff. Was that why I insisted on seeing this place despite a weary realtor warning me it was probably trashed to be on the market this long at this price?

Josh from the grow farm across the road confirmed we were not the first to ask after this place and want to turn it into a BNB. Not even close. Apparently this is a weekly visit kind of thing for him, people calling and pouring out their hopes and dreams, then walking away immediately upon seeing the back shed under the girls dorm-style bathrooms with leaking floors is filled with a boiler for water fire sprinkler system that is the size of my first apartment.

The labyrinthine basement had a sign on a far door saying DO NOT OPEN. Hubby opened it immediately, dear reader, though all we found was an odd sort of laundry room meat processing looking area with painted shelving and windows looking through the walls. (Another boiler.)

The kitchen had the radio running and door to the back stairs hanging open in the sunshine, though we never saw a live person our entire visit. In fact I don't know where they would have hid, because the rooms upstairs had no privacy and the back yard was a literal cliff behind the building that was treed enough to block the view of the stunningly beautiful lake. So. The view out the front porch was rolling foggy farmland and dunes. Super pretty. But... yeah. How would you finance this place? I didn't know where to start. There are limits to how you can fund real estate, so this would be some kind of construction loan and business loan or seller financing. We weren't up to the task of renovating the whole thing in an area that is seasonal in tourism. Moving on.

Collabs Tend To Be Short Term

You can always ask, and that's what I did at the next property just up the road: a 150-year-old granary overlooking Crystal Lake. Extremely special property with cute apartments in the rafters and boat storage in the back. But here's the thing: you can ask about local government incentives for turning an abandoned granary into a hotel and home and garden store or winery: this one had a kitchen installed from previous wine tasting business installed on the main floor where the wooden grain elevators still sit. Gorgeous place. But they wanted $1 million or close to it, and when speaking to local government it became apparent they all wanted a business to bring more tax base into the area and would work with us on possibilities for expanding it into a full 10-20 room hotel or condo building.

It honestly would have been the coolest. But there were no incentives available in this small town of retirees, and we ran into an interesting problem I'm grateful they told us about in zoning: the sewer and water supply were the limits on how many units we could build here, not the zoning overall. Did they need more boat storage locally? Kind of, but this was zoned commercial or residential, and boat storage is something closer to industrial useage in that area so we would need a zoning variance AFTER buying the place. Nope. Too bad. It ran right past a snowmobiling trail, was a block from downtown Beulah and a public beach. It was a great opportunity for someone with more capital and patience.

So, once again not the expert on this, but I hope this tagalong gave you some ideas of what to ask and what to look for if you're following this same journey we are of getting into real estate investment, especially in a beach town or near Lake Michigan. Happy property viewing and renovating! Sleep on it, trust me. What seems a life dream one day can turn zoning nightmare in a flash. Not to discourage you, but I hope this saves you some trouble whether you take on a project property or not.