The high inflation and high-interest rate environment is making things challenging for commercial real estate investors.
But there are opportunities to be creative. Why not think outside the box and diversify your portfolio?
It might be time to explore unique property investments like wineries, farms, driving ranges, and ski lodges.
Working with a private commercial lender can help you increase the profitability of these hidden gems.
In this blog, we will share details about these unconventional CRE assets and how they can turn a profit during economic downturns.
We will also talk about the importance of getting your financing solutions from a credible private commercial lender that understands these types of properties and can structure creative financing solutions for your project.
Wineries
You may have heard about tech tycoons, rock stars, and hedge funders buying wineries.
But did you know these CRE properties are not just for big earners? Wineries are not limited to Napa Valley in California, either.
The US produces more than 800 million gallons of wine annually, with California producing only 84%. Quality wine is also available from Oregon, Pennsylvania, New York, Maryland, and Virginia.
While the US produces over 800 million gallons and is a significant player in the wine industry, it’s not the only contender. Quality wines are made in many regions, from the Mediterranean to South Africa.
This global wine market creates exciting possibilities for investors seeking unique CRE opportunities.
Still, buying a functional winery is not for everyone — and it’s certainly not for novices. Plus, it is not cheap. Even credible wineries will never sell to a newbie. Instead, they want to see how well-known and well-connected you are in the business.
So, suppose you’re planning to borrow money from a private commercial lender to buy a winery in Napa. In that case, it’s a good idea to become at least a member of the Napa Valley Vintners Association and Sonoma Valley Vintners & Growers.
Start by forming good relationships with other winery owners. It usually takes years to build these connections, but you can get a head start by partnering with someone well-versed in the wine business and someone who knows the right people.
The price
A winery can cost several hundred thousand to millions of dollars, depending on its profitability, location, and size.
If you need more vineyard expertise but wish to buy an operating and ongoing vineyard, expect to shell out $35,000 per acre.
Assuming you need 20 acres of land to profit, this means investing a minimum of $700,000 with help from a private commercial lender.
Buying an operational vineyard can be a smart move. Existing machinery is often included in the sale, potentially saving you at least $200,000 compared to buying everything new from scratch. This can be a significant cost advantage, especially for smaller wineries.
Note that profits are highly variable and depend on several factors, such as production volume, grape varietals, and market reach.
Buying a larger and more established winery can be more profitable — especially if it has other revenue sources such as wine classes, wine-tasting events, estate tours, bachelorette and bachelor parties, food and wine sales, and delivery and pick-up.
Some wineries even offer bed and breakfast services to encourage guests to make the most of their visit.
Ski lodges
A ski resort town can be a lucrative investment. Contrary to popular belief, it can be profitable all year round and not just in the winter.
Some ski resorts are bustling even in the summertime, attracting income from outdoor enthusiasts and hikers.
On-site booking and management options can further simplify the investment by eliminating the need for direct, hands-on involvement.
While upscale ski lodges and chalets can be expensive (particularly in popular resorts), their profitability is well-documented.
Tech moguls and Wall Street figures often invest in these properties due to their potential solid returns. A helipad can cater to high-net-worth individuals seeking a luxurious and convenient ski experience.
Investors who don’t have deep pockets or who cannot picture themselves buying a ski lodge in Lake Tahoe and Colorado can consider other options in New Hampshire, Maine, Vermont, Oregon, and Pennsylvania.
The last two have the highest cap rates for ski vacation rentals, and median home prices are less than $300,000.
With the right private commercial lender, you can secure ample funding to invest in a ski lodge in these states.
Farms
Being essential, food will always be in demand. This is why some billionaires purchase private farmland in the US.
Investing in farm land loan can be done through REITs or with direct investments. If you invest privately, you can lease it to a farmer, own and cultivate the farm, or establish a partnership with an operating farmer.
In any case, a private commercial lender can help.
It is also possible to purchase farmland via a land auction—just be sure to do your homework.
Only some parcels of land are suitable for farming, and the price and long-term value can vary significantly between parcels.
According to the USDA, the average farm size in 2022 was 446 acres, with an average land value of $3,800 per acre. This means you need an initial investment of almost $1.7 million to afford an average-sized farmland.
Don’t limit yourself to direct land purchases. Crowdfunding and farmland syndication platforms like Acre Trader, American Farm Investors, Harvest Returns, Farm Together, and Farm Fundr offer alternative investment options.
According to Acre Trader, US farmland has provided 12.75% of average returns in the last 20 years. So, if you invested $10,000 in 2022, your farmland will now be worth more than $105,904.
Keep in mind that farmland returns consist of two values: property capitalization and land appreciation rates.
Driving ranges
If you have seen modern driving ranges on highways, you likely noticed how massive they are — complete with neon lettering, concrete walls, and netted enclosures.
Unlike regular golf courses, these facilities are not weather-dependent. Players can play in a covered enclosure with a digital scoreboard and access to a food service, much like a bowling alley.
Investing in a driving range is like entering a real estate partnership or syndication. You can expect to spend millions on operating and start-up costs. However, the profit potential is promising.
In 2023, off-course golf experiences like driving ranges attracted 32.9 million participants — an impressive number that exceeds the number of on-course golfers.
This trend and a $41 per-person increase in spending since 2019 suggest a growing market for off-course golf entertainment.
A private commercial lender can help you invest in a driving range, whether you’re buying an existing one or building from scratch.
These CRE investments are profitable because of their food and drink sales and golf membership fees. Additionally, they are year-round destinations for anyone, from party crowds and casual players to serious golfers.
Alternatively, you can invest in a franchise. The initial cost can be substantial (averaging around $18 million for the franchise fee and construction), but the potential returns are attractive.
Based on 2021 figures, these venues can generate around $17 million every year. A private commercial lender can support your purchase with the right loan.
The great thing about a franchise is that you don’t have to worry about tenants. Moreover, you can expect an ongoing stream of new guests every day. That said, managing a successful driving range requires a significant commitment because it can be pretty labor-intensive.
If you want something other than a franchise, consider buying cheap land and building a regular grass driving range. It’s a less expensive approach, and while it won’t have a food and drink service or a high-tech sound system, the start-up costs are low. Be sure to partner with a reliable private commercial lender to ensure enough funding for this project.
As your business grows, these lenders can even provide other loan products to help you add more facilities, like a food and drink service.
Get the right loan for these investments.
At Private Capital Lenders, we also work with investors like you who want to invest in wineries, ski lodges, driving ranges, and farms. We are not just direct lenders — you can also count on us for advice.
As your private commercial lender, we do our best to approve applications within 24 to 48 hours. For over 25 years, we have helped fund CRE properties from $2 million to $50 million with solutions such as:
- Commercial real estate funding
- Commercial bridge financing
- Hard money loan
- Stated income loan
As direct private commercial real estate lenders, we can help you easily and quickly secure loans from various CRE loan programs.
We also have a partner network that allows us to provide the much-needed capital for CRE investors growing their portfolios.
Our broad selection of financial products gives us confidence in our ability to cater to unique requirements.
Many clients depend on us as advisors and direct private lenders. They trust our long-standing correspondent relationships with local and global private investors, hedge funds, CMBs, life insurance companies, and banks.
Whatever loan product you choose, we guarantee a quick application process with minimal documentation, common-sense underwriting, and fast closing.
Moreover, we offer nationwide lending backed by our excellent customer service.
Call 972-865-6206 to learn more about our loan programs that can transform wineries, driving ranges, farms, and ski lodges into lucrative investments today.
