07 - From Offer to Owner to Business Operator

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 A Balancing Act Must Begin:
Before owning a cabin, we had to navigate through what was likely the most stressful part of purchasing a home. We had managed the offer acceptance with the owners, but then came the Contingency Period.
The contingency period of buying a house encompasses a chaotic barrage of paperwork, inspections, approvals, background checks, phone calls, financial analysis, amendments, and therapy sessions. This phase typically lasts between 30 and 45 days, designed to benefit both parties involved in the home sale. All parties are bound to make the best efforts to fulfill the financial and legal requirements within a specific timeframe. If either party fails to meet the requirements, the other has the legal power to terminate the agreement.
The first 7 days of this contingency period are known as the Inspection Contingency and are possibly the most volatile. Despite being based on the outcome of a professional home inspector, it allows flexibility for either party to back out of the deal. Calculating our Return on Investment (ROI) was the most critical decision we had to make during this window.
"Return on Investment (ROI) is a simple yet powerful formula. Here's the gist:
ROI = (Net Profit / Cost of Investment) x 100
1. **ROI (Return on Investment)**: This serves as your financial "scorecard," indicating how much money you're making relative to your initial investment. Expressed as a percentage, it simplifies assessing the success of your investment.
2. **Net Profit**: This refers to the money generated from your rental property, encompassing the rent you receive from tenants minus all costs involved in property maintenance. It represents the amount left in your pocket after all expenses are paid.
3. **Cost of Investment**: This entails the total amount spent on purchasing the property, including the purchase price, closing costs, taxes, and any renovations undertaken."
When these numbers are plugged into the formula, the resulting percentage indicates how well your property is performing. A higher percentage implies better investment performance, reflecting the profit relative to the initial investment.
To acquire this information, we contacted utility and service providers, tax specialists, and county representatives to determine the average monthly costs associated with the property. With a lengthy list of expenses to consider, we combined these costs with an analysis of potential property cash intake. We also factored in our financial reserves and explored various loan options provided by our mortgage broker, Parker Borofsky. We delved into VA Loans, FHA Loans, Adjustable Rate Mortgages, Traditional Loans, Jumbo Loans, and more. Each loan came with intricate details and qualification requirements that could influence our financial strategy.
Within the first seven days, we had to consider all this information, hoping the home inspection would meet the criteria for the sale. Fortunately, everything went smoothly, and we were ready to move into the next phase: the appraisal contingency. This phase was less stressful but still involved a mountain of details to sort through and organize. While arranging the financials to meet the loan requirements, we awaited the appraisal. If we adhered to the process correctly, we would own the home within thirty days from the initial agreement.
Moreover, we faced the daunting task of establishing a short-term rental business. We aimed to list the home immediately after taking possession, necessitating the acquisition of a business license, creation of websites, payment methods, integration of calendars, and automation of messages. We formulated a pricing plan and occupancy rates, conducted interviews with cleaners and maintenance teams, and weighed the options of managing the property ourselves versus utilizing one of the many property management agencies. This overwhelming task consumed nearly every waking moment between the inspection, appraisal, and final loan approval.
Then, about 10 days before closing, we encountered our first challenge as business owners. The current owners had been exceedingly helpful thus far, sharing the listing photographs they were currently using and coaching us through their methods of success. We reached out to them and requested an interview with their current cleaner. During our conversation with the cleaners, we discovered nearly a dozen existing bookings on her calendar scheduled for our home. These guests were at risk of losing their reservations due to the change in ownership, with one group set to check in just two days after our scheduled closing.
Swift action was imperative. We immediately contacted the previous owners to discuss securing the existing reservations with us. They stepped up and provided contact details for everyone on their current calendar. Before reaching out, we faced a critical decision, presenting a dual crisis. We had to decide whether to enable the listing sites prematurely, risking falling in search algorithms due to poor listings, or risk losing tens of thousands of guaranteed revenue on day one. Working tirelessly around the clock, we spruced up the listings, enabled the listing sites, and began contacting the guests to explain the situation.
In the end, we successfully rebooked 13 of the 15 existing reservations, securing more than $18,000 in income on the books for the first day of ownership. This triumph bolstered our confidence in our decision.
It is crucial to remember that there is an art to making money when you close on an investment home. Through careful loan strategizing, proper financial planning, meticulous accounting, negotiation for a lower price, securing immediate revenue for the business, and getting the listing agent to cover closing costs, we achieved just that.
In a short 34 days, from the moment we pulled into the driveway and chased off a bear to the day we officially owned the home, we unearthed a world of information and responsibility. We welcomed a new member into the family that will grow and mature with us over time. We transformed a home into a short-term rental company and embarked on the path of small business ownership.
Balancing this demanding venture with our daughter's school, her competitive gymnastics, and two full-time jobs pushed us to the edge. In the end, Jesse made three trips to Tennessee to secure different aspects of the closing. We tirelessly juggled this process alongside our W-2 jobs. Ultimately, we officially launched Peak of Joy Lodge and gave life to the idea of what would become J.A.C. Rentals.
Join us next time as we face the culmination of anxiety and stress, welcoming our first guests to Peak of Joy Lodge.
And please remember, we're not financial advisors; we're simply sharing what has worked for us! Feel free to reach out to discuss our experiences in more detail. We're happy to share and would love to contribute to your success.

#PeakOfJoyLodge #J.A.C.Rentals #ShortTermRentalJourney #SeviervilleShortTermRentals


Jesse and Angie Ferguson

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