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What We Learned from Hidden Lake

Although things didn't work out for the land in Howell, which we can now refer to as Hidden Lake, we did walk away having learned many helpful things for the next property. Many of them point to what we talked about in our new direction blog post, but we talk about them in more detail below.

First, in the future, we will likely have our excavator and engineer walk the property before moving forward with our wetlands consultant or even a purchase agreement. On the Hidden Lake property there was 2,000 feet of lake frontage, but most of it was a narrow ridge between the lake and wetlands. We envisioned this as the ideal building location for most of our accommodations; however, after we had engaged our wetlands consultant, our excavator stopped by the property and expressed some concerns with the width of the ridge. We needed to accommodate an access road, sewer line, electricity, and the actual glamping accommodations, and there just wasn't enough room without serious earthmoving and tree clearing. Adding to this concern was the need for special permits which became apparent after we received back our wetlands delineation and discussed the results with our engineer. The only way we were going to use this ridge would be through additional permitting and more expensive structures built on the slope of the ridge. We did have other building sites on the property, and we did consider saving the ridge for a future phase, but in the end we decided that there just wasn't enough room. If we had known this from the beginning, perhaps we would have never signed a purchase agreement.

Estimated Project Cost with Bank Fees & Costs
Estimated Project Cost with Bank Fees & Costs

We also learned that if we were going to finance our project through a bank, we needed to account for some rather significant fees. If you take a look at the table above, you'll see that our $3MM project grew by 30% to nearly a $4MM project, which was completely unexpected. Even our lawyer, who specializes in real estate, was shocked by many of the fees. We didn't encounter these additional numbers until we had the land under contract and submitted our financials to the bank. On top of the fees and costs, we STILL had to face a 10.5% interest rate on the loan. Fortunately this number was not a surprise. Nevertheless, this high cost of capital is a major reason that we decided to pursue a lease or partnership with an area landowner.

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