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Australian Property Podcast


May 8, 2022

So today let's talk about eco cabins and how much cash flow they can actually generate if you'd like to get in touch i'd love to hear from you please send me an email at jp australianpropertypodcast.com or give me a call on 0423 475-336 and please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should take professional advice before making any investment decisions so i wanted to talk a bit about today about an article that was in the financial review about eco cabins and so these are basically off-grid really small houses and they're being rented out for holiday purposes i think primarily sort of being used for romantic sort of getaways by couples uh typically um they are quite small and so i want to firstly mention i've got no affiliation with the company they're called intrepid travel wasn't familiar with them until yesterday um the note in the article is that they are investing 7.85 million to build 70 of these cabins um and i know that's a cost of only about a hundred and twelve thousand per cabin and they have a number of these cabins actually operating successfully already and the occupancy rate is over 85 um so i was doing some quick maths you know on that in my head and i was realizing you know that is actually a lot of cash flow relative to the cost so i basically dug a little bit deeper into that um and i think that you know the key issue is that you didn't tell me to put these so you need a big piece of land ideally you know in a decent place um and on their website it actually indicates they are looking for land owning partners that they can uh put these on um and you know ideally for sites that can house multiple ones these cabins so uh that is i guess clearly identified as one of the biggest challenges behind it um the lens i'm seeing this through however is the opportunity for someone to potentially build a bunch of these uh put did you put them on say like a regional block of land and then you know just rent them out so whether you maybe already own the land or if you've got one in mind um so i think that there is some you know real opportunity here for a lot of cash flow and then you know that's stacked on top of a big piece of land because obviously you're going to need to own um you know quite a bit of land to put one of these on or hopefully a couple of these on and so it seems so far they're based in south australia victoria queensland and um it lists on their site rental amounts and so looking at this here you can see i've actually bought up some of their smaller cabins these ones here are the more entry-level cabins and they're starting at about 229 per night um and you can see i'll sort of scroll through a couple of these here you can see they're relatively um you know quite small generally sort of one to four people um and you can see they're typically you know in quite scenic kind of locations you can see sort of like convenience and that kind of thing in a lot of cases um and if we click on one of these here you'll be able to get a rough idea um in terms of sort of a bit more about the specific property and and how much you're going to pay and that kind of thing as you can see these are really quite basic um it's really not a you know super high-end fit out um and if you look at that you know starting rates from 229 a night and you know in high season they're looking at 349.99 and this is for you know quite a basic cabin now um if we go over to another example they've got this one here which shows another one here and you can see that there's a really beautiful um vineyard in the background there so you can sort of see the appeal of these and um i guess the interesting piece is you know just how cheaply you can build these relative to how much cash flow that they're going to potentially generate and so in addition to those they also do a higher end cabin which is called cabin x and basically here's an example of one this is called the william this one is obviously designed as a higher end of the market um you can see it's the sort of more sophisticated looking uh one here and they've got a sort of bit more kitted out looks like they've got the um the high ends at a barbecue it looks like it might even have a sauna there and then you've got um you've got some other nice things here like the eames chair and that kind of thing so this is the higher end offering this is called cabinets and if you scroll down to here if you look at these rates you are looking between 595 a night and 7.95 at night so um again you know you're gonna need land but you can see here the cash flow potential against the cost price uh can really be something uh so i thought i'd point that out today in case a few people were interested again i'm not affiliated with this company i've not dealt with them i've only just discovered them the other day uh but i like the concept of um you know building these and the the high yields that could be associated with it to talk about financing i think that's probably one of the biggest challenges and we do get a number of inquiries about this kind of uh thing as well what we have over the years um in my opinion realistically you might be able to get a loan for the land you might be able to get up to say 50 lvr maybe on the land and this is going to depend on where you are financing it the challenges that you are likely looking at vacant land perhaps you can get a higher level of financing you know maybe if you buy something that's got an existing house on it with heaps of land that will still allow you to build these on but could be financed in resi or something like that but i'm going to assume that you're going to be looking at commercial zoning here or some uh kind of farming or commercial center zoning somewhere and then with that it's going to be financed as a commercial loan and then you know noting also that it's likely going to be regional acreage that's where you know vacant land regional acreage is not the most loved type of security for a bank to finance and so i think that you know um if you do your rough math on maybe up to 50 on the land that's you know potentially doable um and then uh with cabins you know you're likely gonna need to build them with your own cash so you're likely gonna need to have quite a bit of capital for a project like this but um as you can see here you know you may end up owning a big piece of land with a bunch of cabins on them that are generating you know north of 200 a night up to 800 at night and if you you know stack a bunch of those you can obviously the cash flow opportunity um can really compound uh quite quickly there in terms of how much you can generate and so you can see you know they do pay off pretty quickly uh compared to the construction cost so um you know look i do think there is um going to be a lot of nuance to this you know uh you know you need the right location you need you know to be able to put these on there you need to make sure you know zoning and everything permits but i really do think there is some value here if you look at the cost price versus what people are actually paying and the occupancy um it seems like there is opportunity in this sector i have had a number of inquiries about these over the years as well so i think this is a growing a growing thing um and yeah i just thought i'd talk about it today in case there was someone out there that had a nice piece of land that might think hey this is a great you know way that i can make use of that or potentially you know it might give you a pathway to um you know consider this as a strategy for property investing going forward but please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile i'm a mortgage broker not a financial advisor and so you should seek professional advice before making any investment decisions i really appreciate you tuning in as always thank you so much