Hill Country Lodging and Retreat Feasibility Study, Johnson City, Texas: An SBA 7(a) Worked Case

The subject is hypothetical: a Hill Country retreat of 14 guest cabins and a lodge with a meeting hall on about 15 acres of rural land on the US 290 wine corridor near Johnson City, financed with an SBA 7(a) start-up loan. The market evidence is real and dated. Inputs the research could not source are labelled as assumptions in the model.

Johnson City's demand base changed in two years. The town's historic anchor was the Lyndon B. Johnson National Historical Park. Visits there fell from 119,278 in 2024 to just over 38,000 in 2025, a drop of nearly 70%, according to NPS data reported by the Houston Chronicle, and the Texas White House has been closed to tours since August 2, 2018 [31][32]. A lodging plan built on park visitors would be built on a number that no longer exists.

The wine corridor took its place. Fredericksburg, west along US 290, counts more than 75 wineries, vineyards and tasting rooms [27]. The Hill Country's luxury wave confirms the demand: Forbes listed a 210-room Kimpton in Fredericksburg targeting late 2027, a Waldorf Astoria with 60 rooms, 42 resort villas and 50 residences on 106 acres, a 41-room boutique hotel approved at a Fredericksburg winery, and Canyon Ranch's 141-room resort near Lake Travis taking stays from October 15, 2026 [27]. Developers do not commit that capital to a region without weekend demand.

The local economy is small, affluent and older. Blanco County had 13,581 residents on July 1, 2025, up 19.4% from 11,378 in April 2020, against 8.8% growth for Texas [1]. Median household income was $92,425 in the 2020 to 2024 survey, 17.8% above the Texas median of $78,476 [1][3]. The median age was 51.5 against 35.6 for the state [2]. The county has 709.25 square miles of land and 16.0 people per square mile [1]; the 2020 Census counted it as 0.00% urban [5]. Johnson City itself had 1,627 residents in 2020 and about 2,200 by the city's 2026 estimate, and the city calls itself "mainly a tourist center" [7]. Its net taxable value rose from $155.19 million in 2017 to $433.00 million in 2026 [7].

Local residents do not fill cabins, so these figures matter for staffing and for the event business, not for room nights. The county had 5.62 thousand employed residents in 2024, led by construction (809), professional and technical services (595) and manufacturing (553) [4]. Housekeeping and event staff will be hard to hire in a county that size, which is why the model holds payroll as a fixed cost.

Blanco County lies just west of the Austin metro, not inside it. Its guests come from Austin, San Antonio and Houston, and its competitors include Austin-area retreats. Our Austin metro page covers the region the guests drive from, and the Texas market page places the Hill Country in the state picture.

No series measures the corridor's lodging demand directly. The city publishes annual hotel tax reports for 2021 to 2024, but the research did not extract the values, and no festival attendance, wine-trail visitor count or traffic count was found. Those gaps are lender conditions. Without them, the strongest evidence is pricing: operators that can charge more than twice as much on Saturday as on Wednesday are selling a scarce weekend and a surplus weekday.

The hypothetical site is about 15 acres of rural land on the US 290 wine corridor near Johnson City. The site is hypothetical, and so are its size, its jurisdiction, its utilities and its land cost: each is an assumption. The research holds one corridor land ask the study can use as a benchmark: 26 acres with a 2,280 square foot building built in 2019 and more than 500 feet of frontage, asking $3,198,000 when posted December 10, 2024 [6], about $123,000 an acre with the building included. One improved ask is not a range, so the land line is an allowance of $95,000 an acre, set below that ask because the subject buys raw land with no building, well or drive. A smaller tract often prices higher per acre than a large one, so the appraisal may come in above the model as easily as below it; until a contract and an appraisal exist, land is the least certain cost in the budget.

Zoning. The study assumes the site lies outside the city limits, where the city's zoning schedule does not apply unless the land is annexed; that assumption is a lender condition, and annexed land is temporarily zoned single-family [8]. The city rewrote its zoning in full with Ordinance 25-0402 on April 15, 2025 [8]. If the site is in the city, highway frontage falls in the Highway Commercial Corridor district, which allows 3 stories or 42 feet, 80% lot coverage on a minimum 6,000 square foot lot, and requires a 30-foot buffer and 8-foot fence next to residential land [8]. Conditional uses go through the Planning and Zoning Commission and City Council; a three-fourths council vote (4 of 5) is needed if the commission recommends denial or a 20% protest is filed, and a conditional use permit lapses if the use does not start within one year [8]. Whether lodging is permitted by right was not found; the schedule of uses was not retrieved. The city held joint hearings on August 18, 2026 on a downtown conditional use amendment and a rezoning request whose use was not stated [14].

Utilities. Service is an assumption too. No water or sewer provider was found for any corridor parcel, so the model budgets a well, a septic system and an electric line extension, the service rural acreage off a city system usually needs, and each one is a lender condition. The Blanco-Pedernales Groundwater Conservation District levies $0.016176 per $100 [7], and a lodging well will need its permit. Pedernales Electric Cooperative, the city's largest taxpayer at $40,267,365 of assessed value in 2025, is headquartered in Johnson City [7]; the provider for the parcel was not confirmed. Gas service was not found.

Traffic. Johnson City sits at the junction of US 281 and US 290, with no interstate in the county [7]. TxDOT's public count layer was updated January 6, 2025 [35], but no count for the site's segment was extracted.

Flood. The Hill Country flooded on July 4 to 5, 2025, with outages and local flooding across the cooperative's area [33]. On July 16, 2026 the Pedernales reached its highest level since 1979, with a forecast crest near 21 feet at Johnson City and flow of 89,000 cubic feet per second [34]. The site's FEMA zone was not found. Any parcel with creek or river exposure needs a flood determination and an insurance quote before the lender commits.

Taxes. The 2025 rates per $100 are $0.332300 for the city, $0.375232 for Blanco County, $0.860800 for Johnson City ISD, $0.100000 for the North Blanco ESD and $0.016176 for the groundwater district, $1.684508 in all inside the city [7]. The city held its rate at $0.3323 for 2026-27 [7]. The appraisal district's last published out-of-city combined rate was 1.347471 for 2024 [13]; the 2025 out-of-city total was not published in the record, so the model applies the 2025 county, ISD, ESD and groundwater rates. Guests pay the state's 6% hotel tax on rooms of $15 a day or more, including meeting and banquet rooms [11], plus the city's 7% inside the city, which also taxes cleaning and pet fees [9], or Blanco County's 7% outside the city and its extraterritorial jurisdiction [10]. Combined state and local hotel tax cannot exceed 17% [12], although the city's budget table adds its columns to 20.00% [7]; the table sums rates that do not all apply to one property. The city lists sales tax components of 6.25% state, 1.50% city, 1.00% ESD, 0.50% library district and 0.50% county against a stated total of 8.25% [7]. The listed components exceed the total, so at least one does not apply everywhere; the lender's accountant should confirm the rate for the site.

Operating costs are $730,753 in Year 3, leaving $307,055 of net operating income, a 29.6% margin. That is lower than the glamping survey's self-reported average and close to what a small full-time lodging business carries once a manager, housekeepers and an event coordinator are on payroll.

Payroll is $240,000 in Year 1, fixed and growing 3.0% a year, because a retreat needs a manager and cleaning staff whether the cabins are full or not. Laundry and guest supplies are $22 per occupied night. Booking commissions and marketing run at 10.0% of cabin revenue; a retreat that books most groups directly can beat that, and one that depends on online agencies will not. Direct event costs are 30.0% of event revenue. Utilities, repairs and grounds, administration and a replacement reserve run as shares of revenue; hot tubs, decks and furnishings wear quickly on small cabins.

Insurance starts at $36,000 and grows 5.0% a year. That is an allowance; the site's flood and wildfire conditions were not found, and the 2025 and 2026 Pedernales floods make a quote essential. Property tax applies the 2025 county, school, ESD and groundwater district rates to land and improvements at cost, growing 2.0% a year.

No management fee is charged, because the plan is owner-operated. That is a credit choice as much as a cost one: SBA's operating procedure bars passive businesses and directs lenders to review management agreements outside a listed franchise to decide whether they make the borrower passive [48]. A retreat run by its owner with its own staff is an operating business. Cabins handed to a vacation rental manager on a percentage-of-revenue fee may not be.

Under SOP 50 10 8.1 with Technical Policy Updates, effective October 1, 2026, a 7(a) start-up must inject at least 10% equity and reach coverage of 1.15x, on the basis that historical and/or projected, with 1:1 global coverage; start-ups reach 1.15x within two years [41]. The model therefore tests Year 2. The loan cannot exceed $5 million [41]; the sponsor's request was below that, so the cap did not bind. SBA guarantees 75% of a loan between $350,001 and $5 million [44]. Because real estate is most of the project, the loan runs 25 years.

The rate is an assumption at 9.50%. Prime was 7.00% on October 9, 2026 [43], and SBA caps the spread a lender may charge over Prime for a loan of this size [41]. Bed-and-breakfast 7(a) loans averaged 9.49% across 26 loans and $35.1 million in 2025 [45]. The model carries Prime plus 2.5 points, and the lender sets the rate at pricing. The fiscal 2027 upfront guaranty fee applies to the guaranteed share under the notice in force [42].

The lodging rule. A lodging borrower must show more than 50% of the prior year's revenue from transients who stay 30 days or less at a time; a start-up shows it in projections [41]. A retreat whose guests stay two or three nights passes easily, and its projection should say so in a line of its own. The test bites only if the sponsor later leases cabins by the month to workers or long-stay tenants.

Ownership. Since March 1, 2026, every direct and indirect owner and every SBA-required guarantor must be a U.S. citizen or national; Policy Notice 5000-876441 rescinded the earlier notice that had allowed a small foreign-owned share, and lawful permanent residents no longer qualify [47]. The sponsor's ownership documents should be checked before any credit work.

Why not a 504. A 504 would split the project between a bank lien and a fixed-rate debenture. For a new business in a lodging property, which SBA treats as special purpose, the 504 contribution is 20% [41]. The 504's lower blended rate would lift coverage, but the restructured equity here is far above either program's minimum, so the binding constraint is the market, not the program. Our SBA 7(a) and 504 practice page compares the two. On the study itself: 13 CFR 120.160(b): SBA may require professional appraisals, a survey, or a feasibility study [46]. For a start-up lodging project with no history, the lender will usually want one.

As proposed, the sponsor put in 10.0% ($508,358) and asked for $4,575,220. The equity meets the start-up rule and the loan is within the 7(a) limit, but coverage is 0.49x in Year 2 and 0.64x in Year 3. The retreat cannot carry that loan.

As restructured, the loan falls to $1,974,106 with annual debt service of $206,972, and equity rises to 60.6% ($3,036,316). Coverage is 1.15x in Year 2, 1.48x in Year 3 and 1.65x in Year 5.

The Year 3 coverage shows that a stabilized retreat could carry more debt than the Year 2 test allows. The sponsor's options follow from that. A lower land basis, set by appraisal or by buying a smaller tract, cuts cost directly. A phased build of fewer cabins first lowers the loan and lets the event business prove itself before the second phase. Pre-sold group bookings for Year 1 and Year 2, documented before closing, would let the lender accept a faster ramp. Cash equity is the last of these, not the first.

The Townsend, Tennessee cabin resort case tests a larger cabin project near a national park through SBA 504 and reaches a similar conclusion for a different reason, a disagreement between data vendors. The Bastrop hotel case runs a Texas lodging project through 504 and finds its constraint in a hotel pipeline rather than in weekday demand.

The matrix moves cabin occupancy and rate together. Coverage in Year 3 runs from 0.59x to 2.55x. The retreat is more sensitive to rate than a hotel of the same size, because its payroll is a larger share of revenue and does not fall when the rate does.

The rate risk is real. The next-ring luxury openings will discount to fill their first seasons, and a guest choosing between a new resort with a spa and a cabin at a similar weekend price will often choose the resort. The retreat's defense is the whole-property group booking, which the large resorts cannot match.