Documenting the journey

[yveskleinsky]

I have decided to post the good, bad and ugly about my journey into the vacation rental business. Since I have already started the trip, I will catch you guys up to speed.

Here is the rundown: I currently own 2 vacation rentals and manage one for a lady. I just started this business in April of '07. So far the learning curve has been a wild ride (isn't it always!). As of today I have about $13k in the bank, ($8k of which is a loan from my dad (interest free until I use it) and I am making around $500/month from the cabins- maybe more- I need to get my financials in better order.

Here is where I want to be: I want to be financially free by 35 (I just turned 30 last month). I want a passive income of at least $10k a month, and I want to be able to continuously develop my ideas/thoughts into real things that make money. I want a net worth of at least $1 million in the next 5 years. ...The first thought/idea is to grow this cabin operation (called Quality Time Cabins). After QTC stands on its own two feet, I would like to develop a website (can't go into too much detail here yet). After that I want to develop a camp for at-risk/ juvenile hall kids.

Here is the plan for Quality Time Cabins for September:
1. Get finances in order so I can see what is really going on.
2. Research, research, research commercial property and see if it is doable for me to make the jump to a larger cabin operation.
3. Get a cleaning checklist done, a FAQ for each cabin done, and the website as automated as we know how...or figure out a way to afford to pay someone else to do it.
4. Develop a marketing strategy for the slow seasons.

Any and all insight, feedback and/or constructive criticism is warmly welcomed!

 

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[Yankees338]

I like the idea of the plan! Good luck in the execution!

Just outta curiosity, where are these vacation cabins?

 

[yveskleinsky]

Our cabins are in Cloudcroft and Ruidoso, NM.

Here is insight #2 gained last night talking with WildAmbitions:

Challenge: Cabin operation I like is $550k. I have $13k in the bank. How to make it work?

Potential solutions:
1. Have the owner carry 25% down?
2. If he won't do that, have the owner carry 15% down, and refi the othert 10% ($55k) out of my house? (all my equity- if I even have that much...may be closer to $40k).
3. If the owner carries 15%, offer to let him stay in his home for 3 years (which is what he'll probably want to do) rent free in lieu of him carrying the down?- should be close to being a wash!
4. Get investors in on the deal for part of the down?

There are 9 cabins in all on this property with the owner's quarters- so 10 in all. I need to write out a business plan for this- even if it doesn't work out right now. (Seller is kind of a dick and not terribly motivated to sell) I would rent out 1 of the duplexes as a long term rental, and with minor renovations turn the owners quarters into a game room/ laundry room/ vending machine/snack bar...complete with an ATM. I am going to go talk with the owner in more depth on Tuesday.

Any other creative financing ideas? ...How much did you guys have in the bank when you did your first multi-family/commercial property? Am I under funded?

 

[biophase]

Maybe you should think about starting a blog to document it.

 

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[andviv]

I remember you posted something about these cabins taking years to sell. Do not hurry into a deal, let the time play in your favor. You said it yourself, seller is not motivated enough to entertain your offer. My suggestion? Work on your business plan, Make him an offer that works for you, and wait for his answer. Do not call him or follow up at all, let your agent to do that for you. If he rejects the offer --as you are assuming he will, wish him well and ask him to please call you if he reconsiders your offer. And then spend your valuable time putting together another deal and see how to finance that one.

I also agree with Bio, maybe time to start your own blog. You are a good writer and have an ability to explain situations and feelings, so you can count me in as one of your readers.

 

[yveskleinsky]

Thanks guys- I will start this "blog" that you speak of. ...I'll have to figure it out first- so gimmie about a week or so to get up and running. ...Good advice about submitting an offer and waiting. I am not pinning all my hopes and dreams on this deal- I am always on the lookout for others. ...I heard a great saying the other day, "The deal of a lifetime comes along once a week." That is often so trun in real estate!

 

[Russ H]

I just started this business in April of '07.

I don't want to poop on your parade, yveskleinsky, but overnight rentals is what we do (we run a B&B in the Napa Valley).

All of our mentors told us it would take 18 months-- MINIMUM-- to really understand this business.

We didn't believe them.

After all, we both ran successful businesses (and had, for years). We'd read more than 20 books on B&B operation and mgt.

We took classes. We interviewed owners and innkeepers.

Sharon apprenticed at a B&B for a year.

We even had the SBA saying our business plan was more advanced than anything they'd ever seen.

Guess what?

We needed 18 months to really understand what was going on (!).

And we needed another year to actually implement this understanding.

So here's my advice:

Unless you want to quit your job and run cabins as soon as you close this 9 cabin deal, consider doing this instead:

1. Get at least 1 full year under your belt. See how bookings change with the seasons.

2. Get your financials REALLY in order. Know your expenses like you know your own name.

3. After 18 months, look at what you've got, where you've been, and how you're going to take it to the next level. Make a detailed step by step plan.

Seriously, you don't have to do any of this.

Just buy the cabins and plan on quitting your business.

That's what I had to do (my previous biz was netting me hundreds of thousands of $$$ a year).

But I had to shut it down, or get out of the B&B biz.

The B&B took SO much work, that I needed to focus.

BTW, our B&B only has 9 rooms.

I know that cabins for weekly rentals are less maintenance than a B&B.

But unless you already have an experienced team in place to run things, I would strongly suggest that you might want to consider looking at the ebb and flow of the seasons in this biz, and see how it affects your financials.

Just my .02

-Russ H.

PS I saw your cut and paste on RD, and haven't had time to get to it-- but I will! :smx4:

 

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[Z5 FILMS]

Thanks guys- I will start this "blog" that you speak of. ...I'll have to figure it out first- so gimmie about a week or so to get up and running. ...Good advice about submitting an offer and waiting. I am not pinning all my hopes and dreams on this deal- I am always on the lookout for others. ...I heard a great saying the other day, "The deal of a lifetime comes along once a week." That is often so trun in real estate!

I would not blog. You will be telling your experience for free and everyone will be copy/pasting your journey into thier blog. Within a year, thousands of people will have ripped off your blog.

I keep a journal, then write a simple book.

 

[yveskleinsky]

The level of quality advice on this forum continues to blow my mind. Everytime I log in, I learn something new.

Russ- great insight to the world of nightly rentals. I agree that making a jump to add 9 more cabins would mean that I would need to quit my day job. I do want a solid foundation in place before we progress, as I don't want to get in over my head.

Z- interesting info about blogs. I don't know anything about them, or things to look out for. New terrritory for me. I like your idea of journaling for a book.

Thanks guys!