How I Financed My $7M Micro-Resort with Only $20k Cash
By Isaac French
In less than a year, I built a property that cost $2.4M with only $20,000 of my own money. I then sold that property for $7M, just 18 months later.
Let’s talk financing your micro-resort. We’ll start with the construction loan.
Most banks in this environment, if they get onboard, will offer terms like these:
70-80% LTV (loan-to-value, not loan-to-cost)
8-10% interest
I/O (interest only) payments for 12-24 months
Let’s be honest: trying to pitch a bank to get a construction loan for a micro-resort (especially as a bootstrapping upstart with no professional hospitality experience, which was me in 2022) is about like trying to sell organic kale smoothies at a fast-food joint.
Doesn’t work too well. They just don’t “get it.”
You’ve got to get used to “no”, because you’re going to hear that a lot. But eventually, persistence will pay off. Then they’ll order an appraisal, where the LTV is determined. Do everything in your power to show the appraiser that your property will be worth at least as much as you think it will.
Maybe the most valuable tool here? Comps! And Live Oak Lake is a perfect one. Nothing subjective or murky about it. I’ve shared all the numbers, including the sales price, freely.
Now what about the 20-40% you will need to come up with to complete the project?
Well, unless you’ve got some serious capital saved up, you need private money.
Depending on the project size — and your connections and ability to sell — you may even be able to finance the whole thing with private money. But at a minimum you should raise at least some capital from friends, family and/or other contacts to leverage your limited resources and fulfill your dream.
This is exactly what I did building Live Oak Lake. I talked my dad and 2 brothers into loaning me $700,000 for about 15 months. Now before you judge me as a trust-fund baby, let me say it bluntly: I’m not. Of course it was nice to have family with a small construction business (though the practical construction experience growing up in that family was more valuable than the access to capital, I would argue), but there were dozens of others ways I would’ve found the money if it didn’t work out there.
Guess what? They didn’t even have this money, but they had access to a business LOC which they were able to pull it from.
Equally important, they co-guaranteed the construction loan, which was essential to securing it.
I gave them 40% equity in exchange. I tried to bargain for a high-interest short-term loan instead of equity, believing in the tremendous upside of what I was creating.
But they wanted equity.
After we refinanced the project only 5 months after completion, I was able to pay that 700k back. Then they were in $0. Just over a year later, we sold the property and brand I’d built around it, for $7,000,000. They walked away with a combined $1,700,000.
Not bad for a $0 basis.
If hearing numbers like these doesn’t ignite you, whether you’re planning your own project like I was or whether you’re a passive investor looking to deploy capital, I don’t know what does.
As I said in the beginning, when you’re starting out without any previous experience, selling your idea for an experiential micro-resort is going to be hard. For anyone. To anyone. You’ve gotta believe in the project with all your heart (and have thick skin).
But you can absolutely do it! No, you don’t need a 30-page deck, either. You should’ve seen mine. It was so laughable from an institutional perspective. Just a simple 1-page spreadsheet, built by someone with little to zero knowledge or terminology in hospitality or real estate investments (or excel for that matter).
But I had conviction. And that broke through to the bank and investors.
(And believe you me, if they had said no, I would’ve politely moved along to other folks until I found someone to loan the money needed. It had to be done.)
So. My best tips for raising money and getting a loan?
Believe in what you’re doing with all your heart: have conviction!
Knock persistently and emphatically on doors with both banks and investors. Ideally it’s all debt, but do whatever necessary, even if you have to give up sizable equity (if it’s a partner you trust), to get the deal done. You’ll learn tons, and the next one will be 10x better and easier.
Get started now! The experiential hospitality wave is JUST getting started, and first movers will reap the biggest rewards.
You can do it! My $20k is now $2.4M. Let that be jet fuel in your engine!!
—Isaac