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Glamp Investing Vs. Real Estate Investing

Common refrains about real estate investing are:

  • There is never a bad time to buy real estate!
  • There is a real estate bubble – don’t invest until it pops!
  • Real estate gives guaranteed returns!
  • Real estate is a depreciating asset that costs too much to maintain to be worthwhile.

 

You’ve heard these, right? 

None of them are completely accurate.

Realistically, nothing in life gives guaranteed returns, and no one can predict the future value of real estate with absolute certainty. So, knowing that, how do you take the best parts of real estate investing and optimize them? My solution: Glamp Investing.

When I refer to traditional real estate investing, I mean buying a house, condo or apartment complex that you rent out to tenants or overnight guests. The idea is that you make gains in two ways: 1 – On the revenue generated from renting, and 2 – On the overall appreciation of the property over time. These revenues need to be considered against the costs of ownership, like mortgage interest, taxes, upgrades and repairs, plus any other costs.

As a small-time real estate investor (and big-time financial planning aficionado), I’ve noted a few clear downsides to traditional real estate investing : 

  • Firstly, owing a lot of money on a property is a risk I dislike. Unexpected surprises can affect your ability to make mortgage payments. Remember all those people who lost their jobs, then found themselves with expensive mortgages and near-worthless homes in the 2008 financial crisis?
  • The Return on Investment (ROI) on a rental property can be great on paper, but if you still have a giant mortgage, I find it preemptive to call it a « return ». The financial story hasn’t fully unfolded – you don’t know if you’ll ultimately get a return in the long run. What if rental rates go down in your area, or the value of your home falls, or major damage occurs that you aren’t insured for? Sure, you might be bringing in positive cash flow now – but your financial future isn’t secure as long as you have a big debt (with compounding interest!) hanging over you. 
  • As you wait for your property to grow in value over time, you’re not really feeling the benefits of that increasing wealth because it is tied up in a physical asset. Meanwhile, as you wait, there is a looming risk that the value of your property could decrease. 
  • Truly great real estate investment opportunities are few and far between – and bound to become rarer as more institutional investors continue to creep deeper into the rental housing market and outcompete smaller players like you and I.

 

So, how do we minimize these downsides and still achieve a great return?

 

Glamp Investing

I define Glamp Investing as the acquisition and overnight rental of any compact freehold structure outfitted to provide top-notch comforts in nature. This can include luxury tents, treehouses, tiny homes, stargazing domes, shepherd huts, Airstream trailers, and much more!

So, why is glamping a worthwhile alternative investment to traditional real estate?

Here are my top reasons:

  • Lower initial investment, and higher return. Consider that rural land is usually cheaper and larger than urban land, so start-up costs (and debt!) are minimized and opportunities for future growth are maximized.
  • You actually don’t even need to spend $ to buy land if you can work out a deal with a landowner, local/national park or wildlife area, which minimizes start-up costs all the more. 
  • There are often tourism grants available to defray upfront costs even further.
  • You can usually charge a premium for stays because of the unique accommodation experience.
  • You can realistically cover all of your start-up costs in 1-3 years (yay – no long-term debt!)
  • Demand for glamping has been on a steady upward trajectory – even throughout the 2008-09 financial crisis and 2020-21 pandemic crash, with positive forecasts for the future.
  • Although operating expenses are a bit higher for glamping, overall returns are significantly higher.

 

Example:

In our case, the out-of-pocket cost of setting up one high-end custom glamping unit is about $80K. This is net of grants received. 

If we charge $275/night and have a 60% occupancy rate (conservative estimates in our area), with operating costs of about 10K per year, our investment will be fully paid off in just 1.5 years. No mortgage with eons of compounding interest ahead! 

The best part: After we break even, all of the income goes into our pocket and is available to be reinvested into another unit or whatever we want. For us, this works out to net income of about 50K per year, per unit – if we don’t do any better than our conservative estimates suggest. Even just a few units translates into a great living. 

There are also a bunch of other reasons for Glamp Investing beyond quick profitability, like:

  • If trends change or you need to upgrade, you can sell individual units and keep the land. 
  • You can expand by adding new units without disrupting existing ones or pausing cash flow.
  • You can up-sell products and experiences to further boost your bottom line.
  • Existing platforms like Airbnb and VRBO make it easy to promote your glamping experience.

 

Bear in mind some of the downsides, however:

  • Even if you automate many aspects of the business, it is still more hands-on than overseeing residential rentals.
  • You’ll probably face more administrative hurdles at the front end, like getting construction approvals and ensuring you comply with regulations on septic systems, waterways, insurance, etc.
  • If you plan to apply for subsidies, you’ll need a solid business plan and be prepared to complete forms and reports. 

 

Conclusion:

To me, if you’re willing to put in the time and effort up front, the reward down the road is easily worthwhile. 

So, what do you think? Are you convinced about the benefits of Glamp Investing vs. Traditional Real Estate Investing? Have I missed any key points?

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