So we made our first offer...

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Our broker called to let us know last friday that someone else (3rd party) was making an offer on the inn we are trying to buy, so we got our offer in on the same day as well. When he saw the $$ of our offer, he told us (without feeling he was being unethical) that our offer was appropriate and reasonable, the other was a joke in comparison. 

Unfortunately, the counter offer came back pretty quickly with only a very little off the original asking price.

So we are re-grouping to make our 2nd offer next week, as per our financial guy to go silent until then.

Right now it just feels like everything is up in the air and that it might not ever happen for us. 

Any positive vibes and advice you guys could send my way to encourage to persevere? Thanks all! Smiling

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duplicate entry for some reason. It also won’t let me post my entire entry, now what I typed is lost. Oh well.

I’ll post again later. Wish us luck and thanks for all the great advice!

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Promising update: We signed contracts yesterday with a closing date of Jan 8th! Woo Hoo! My wife and I are excited and scared to death

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Update: I withdrew our offer yesterday after discovering from multiple banking entities that we could not achieve financing. We, needless to say, were upset and disappointed.

Today started with the broker calling me to tell me that the sellers will do owner financing, contract for deed until we can get financed, which should be mid next year when a law suit is closed (my wife is a doctor and tied in with a suit that has nothing to do with her but that the way it is these days!).

So starting next week, we will proceed with the transaction and keep moving forward! WHOA, the ups and downs of all this is driving me insane. I can't wait to be busy with an inn and forget all of this part!

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Sounds like they want this to work.  Your attorney has no doubt had a look at the contract.  

What a ride!  Please keep us posted. 

heart

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I'm not familiar with the term "contract for deed", but I think every home and business I've bought during my life have been at least partially owner financed, often the terms were simpler than had I gone through a bank, however please carefully look at the terms.

What I wouldn't want is to be locked into too short a term where I would lose everything "if" I couldn't finance a balance at that time. When we purchased the motel I think I had 12 years to pay off the original owner, but only 2 years to sell a piece of property and pay off the most recent owner, sort of sweated getting that part paid.

Be sure you are protected

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UPDATE: 

We are still struggling with the business plan and trying to get financials from the sellers, ugh. We have a few banks lined up and a company to help us get our ROBS/401K/C Corp set up. Now we wait for the brokers to rewrite the contracts after my lawyer chewed it up and spit it back! 

BUT the BEST NEWS is that our house is now under contract for full listing price! That is a huge burden off of us, except that we are going to be homeless until we get the inn. It's amazing though, our house was on the market for 9 days and sold for more than we were willing to take! Other houses in the area have been on market for 130+ days but we think they were overpriced, so YAY us!

We hope by the end of the year to be joining the ranks of fellow innkeepers!

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No more offers until you have financial info! How can you make an offer if you don't know what the property is worth?

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Morticia wrote:

No more offers until you have financial info! How can you make an offer if you don't know what the property is worth?

Our accountant has already taken a look at their valuation and it shows that it has been in the black for the past 3 years. We now have seen their tax returns as well and it coroborates that as well. We just haven’t finished putting our business plan together. 

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I appreciate the advice, but it makes me wonder, do people actually make those kinds of errors when purchasing a expensive business property? Those are the first things we considered before ever putting an offer in! 

Our budget allows an entire year of mortgage payments along with other expenses.

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flyingace71 wrote:

I appreciate the advice, but it makes me wonder, do people actually make those kinds of errors when purchasing a expensive business property? 

Yes, honest, some of us were that dumb and that's why we offer those suggestions. I had photo copies of the prior year guest register and very little else, just followed a dream. Expensive, well very expensive to me at the time, but the only place in my chosen area cheap enough for me to get my foot in the door. 27 years at this point, still having fun.

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I, of course, meant no offense in my comments to those that have come before me, fought hard through adversity and are still here to give dopes like me good advice. I really appreciate the advice and after your comment about the mortgage, my wife and I DID go back and make sure that we had calculated that property. With the stock market taking a dive recently, our IRAs that we’re having converted to ROBS/401k for funding have lost some of our funding and it was good to revisit those numbers to make sure we are going to stay afloat. Without her job in medicine in the area, it wouldn’t be possible to do this but we hope to grow the business over time to allow her to come on board full time.

Again, thanks for the real and helpful comments! Keep me coming!

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My friend no offense taken on my part, I enjoy what we do and wish others the best. I was chasing a dream, figured I had to live somewhere and wanted it to be in the mountains. Somewhat the reverse of your plans I expected I'd need to work somewhere else also and be the night and weekend helper at the business. My jobs were simple stuff, fast food, paper boy, bus driver and eventually a decent job that I held some years past retirement age, but they allowed me to live my dream. If you pass through enjoying your work it's a good life.

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It's good to know we're not alone chasing this dream. It seems much like the mythical tale of Sisyphus. It's also like trying to run in quicksand waiting around for banks, lawyers, accountants and brokers... all while watching our IRAs/401Ks shrinking in this terrible market plunge as of late! My wife is actively searching for another job in medicine. We're running down a few family doctor positions actually available in the town we're buying in. We were courted by one back in September and thought it was a lock, but they got squirrely. thankfully there is another better opportunity in town, hopefully! I plan to continue doing my design business, since it's very portable thanks to the internet and reasonable clients. I've been in advertising for 25 years and still have so much I can do to help other businesses no matter what town I live/work in. This one in particular, a resort town, is in dire need of a reliable graphic/web/logo design person with professional photography skills.

Thankfully our house is under contract and closing Nov. 30th, so just in time to help pay for everything! ha ha.

That's our plan to ENJOY what we do, and we think the pride of curating, care taking and owning an inn sounds like a great way to do that!

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It's a stressful time trying to coordinate everyone and make sure everything happens when it should.

We had a nightmare because in England the exchange of legal documents to say you're going to purchase doesn't happen until a week before the sale, in Scotland it happens a week or two after the purchase is agreed. So we were legally tied into the purchase of this place but our buyers were messing us about. I spent a week desperately trying to arrange a bridging loan which in the end we didn't need thank heavens. We were literally on the road heading north with all our belongings in the van before we got the phone call to say we'd exchanged contracts and completed the sale at the same time.

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flyingace71 wrote:

I appreciate the advice, but it makes me wonder, do people actually make those kinds of errors when purchasing a expensive business property? Those are the first things we considered before ever putting an offer in! 

Our budget allows an entire year of mortgage payments along with other expenses.

I know people who bought a property without seeing tax returns to validate the P&L statements. The sellers had multiple businesses and were not going to show anyone their income.

We looked at a place where the owners refused to give us any info. They said they would give us a copy of their checkbook and we could figure it out on our own.

We got 20 single spaced sheets with expenses. Almost impossible to figure it out.

It's pretty amazing what some people think is ok when selling a property. That place was still for sale 7 years after we bought the place we have now.

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I agree, it's pretty scary what other people consider good books. These folks are nice people but they are no bookkeepers for sure! But I trust my accountant and attorney and they like what they see so far. They also know that we're the kind of people that can and will make things better. 

Still, it's a scary proposition getting into this kind of business, its more about our lifestyle than a money making proposition, so it seems that some innkeepers keep some pretty loose books.

We'll see where it goes, wish us luck and I'll keep this thread updated as we go along. Thanks for all the great advice!

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I'd say we fit in the category of 'loose bookkeeping/accounting.' Nothing is fake or over- or under-stated. We're just not accountants.

Here's a tip - start off correctly tracking your mileage! We didn't, and now it's too late. 

And, yes, it's a lifestyle. And a nice house. And a great little town. And it's kept us in Twinkies for 14 years now. Eye-wink

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Just a dumb comment since your accountant has already looked over the figures, but as you consider income and expenses be sure you consider the cost of your purchase loan which may be different from what shows in the current owners books.

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JimBoone wrote:

Just a dumb comment since your accountant has already looked over the figures, but as you consider income and expenses be sure you consider the cost of your purchase loan which may be different from what shows in the current owners books.

The current owners don't have to show things like the cost of their mortgage. 

We were told because we would do things differently we would not get details about food costs, employee costs, anything that was not required like property taxes, utilities.

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Morticia wrote:

The current owners don't have to show things like the cost of their mortgage. 

Was thinking from the angle that while the purchaser wouldn't care about the seller's mortgage, he/she would need to consider the expense of their own mortgage when looking at potential income after expenses.

Remember I'm just the guy that followed a dream, most of my lessons were learned the hard way.

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Sorry, I thought you meant take a look at how their mortgage expenses were calculated in. You definitely have to figure in your own! 

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Morticia I was thinking more of the real estate and business advertisments that promote what a great cash flow a property has and how much one could expect to pocket from a purchase, they all sound great on paper "if I could write a check for the property". I've always enjoyed reading the ads, yet I feel many are written to get the prospective purchaser excited and perhaps overlook the cost of financing.

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Don't forget if you move in towards the end of the busy season you're going to need enough money to see you through the quiet period.  Seen a couple of places struggle with that.

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Our house sold in under a day for more than asking. That was after I told the realtor she wasn't asking enough. She thought we were crazy but out the house out there for what we wanted. Bingo! We were homeless for 6 weeks while we waited for all the inspections to be done.

It all worked out.

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Morticia wrote:

Our house sold in under a day for more than asking. That was after I told the realtor she wasn't asking enough. She thought we were crazy but out the house out there for what we wanted. Bingo! We were homeless for 6 weeks while we waited for all the inspections to be done.

It all worked out.

Thanks, that's good to hear!

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Thanks all for your well wishing and funny responses. I read them to my wife this morning over breakfast and we had a good laugh... while saying “YIPE” inside thinking about all the things that are about to happen. In the meantime, we are working to get our house completed for the realty photos tomorrow and on the market Tuesday. We hope for a quick sale and that we can get on with our new life soon!

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  Congratulations and welcome to the world of innkeeping!

   Being an innkeeper is like being a new parent.  In the next few weeks while you wait tor the closing and arrival of your "new child", take a vacation, visit friends, spend time with family and friends, etc for once you have it, you won't get time away without a babysitter (AKA innsitter).  But the nice news is you can block all your rooms and leave it be for a little time which you can't with a baby.  And when the time comes to part, you get all the money not the college! cool

   You are in for the story of your life.  A totally new life is opening up to you.  You will probably meet people from all over the world.  You will learn new ways to clean, cook, and how to graciously end a conversion.  I have served and slaved for two B&Bs so far.  The House will became your best friend and worst enemy.

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Thanks all! We made our second offer and went for broke at the top end of our budget but still $20K under their asking price and they accepted. Now we’re really scared! Ha ha! Smiling

Seriously, now it all comes down to the lawyers and accountants to sort out the financial and contract side of things. We are going to protect ourselves legally but we are hopeful for the best possible outcome.

This is an established and older Inn, so we knew going in that we’d be putting in a lot of sweat equity to bring it to the level we think it can excel. 

So... onward and upward!

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Congrats!

Word to the wise from the previously wised up - do not depend on lawyers and accountants to find all the details.

Now is when you have to get all the background you need:

  • Are there any liens on the property?
  • Do they sell gift certificates? How much money is outstanding?
  • Do they take deposits? How much is outstanding?
  • Are there donated gift certificates outstanding? (Your lawyer should request they stop donating free nights.)
  • Do they have employees? Will they stay on?
  • Do they have outstanding unemployment benefits you have to pay back to the state?
  • Who owns the domain name and the website?
  • How will you tell the repeat guests about the changeover?
  • Will you have a training period? How long?
  • Do you have a list of everything that conveys with the sale?
  • Will they continue to take reservations at full price?

I could go on.

Tom
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As always. Mort's advice is dead on.  There can be a significant liability in all of the above, particularly the gift certificates (which never expire) and the freebies, which you should be able to cut off, soon.  In principle, any liabilities should be in their books as monies received.  They should open this up to you.  See if you can hold back a piece of final payment for a year, for their past accounts to make good.  Can be in escrow. I sold a business and had $$ held out and I had to carry liability insurance for a few years as well.

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Great list Morticia! Some of these we have already addressed but you bring up even more good ones. Thanks!

Morticia wrote:

Congrats!

Word to the wise from the previously wised up - do not depend on lawyers and accountants to find all the details.

Now is when you have to get all the background you need:

  • Are there any liens on the property?
  • Do they sell gift certificates? How much money is outstanding?
  • Do they take deposits? How much is outstanding?
  • Are there donated gift certificates outstanding? (Your lawyer should request they stop donating free nights.)
  • Do they have employees? Will they stay on?
  • Do they have outstanding unemployment benefits you have to pay back to the state?
  • Who owns the domain name and the website?
  • How will you tell the repeat guests about the changeover?
  • Will you have a training period? How long?
  • Do you have a list of everything that conveys with the sale?
  • Will they continue to take reservations at full price?

I could go on.

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Maybe add to that:

Where are their advertising dollars spent (so you don't miss being in the upcoming: publications/print or online ads, chamber of commerce membership, etc...)

Is there a documented list of menu items they normally offer? (with recipes)

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Northern Dreamer wrote:

Maybe add to that:

Where are their advertising dollars spent (so you don't miss being in the upcoming: publications/print or online ads, chamber of commerce membership, etc...)

Is there a documented list of menu items they normally offer? (with recipes)

Good ones! Our sellers let everything lapse. They kept telling us WE should pay for everything 3 months before the closing. What? Why are we paying for their advertising? What if the sale fell thru?

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Have they kept records of previous guests? (for promos, specific marketing, etc...)

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That's an interesting list because.....DH and I are starting to think about moving on and I've been thinking about the mechanics of passing the business on to someone else. We've done B&B for 15 years now, DH is fed up with it and I'm getting there, plus he's 60 now and I'm not far behind and we don't want to do this the rest of our lives. Someone recently described B&B as a jail sentence and that struck a cord with me.

The only thing we haven't worked out is where do we go and what do we do. We both want a large garden (this one is too hilly to do much with) but I don't want to retire, I'd go batty being at home all day.

 

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Ah yes. Kilohana turned 60 this year.

Do you imagine staying in the area you are now? We thought it was nice there. Somewhere warmer? 

We have been ruminating on those questions for a couple of years now. I think we will likely stay in our area at least part of the year and we both now have a couple of things we would like to do once our innkeeping days end.

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We too have been ruminating about a move for the past couple of years.

At the moment we're looking at properties down the South of England. The Scottish Highlands are beautiful but the summers are short and the winters long and wet.

Morticia's picture
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Put together a book. All the phone numbers of all the trades you work with, what organizations you work with, who shows up at the door for inspections and when they usually show up.

Morticia's picture
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Sorry, duplicate.

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Fantastic. Welcome to the hardest job you will ever love. May you be as busy as you want to be.

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flyingace71 wrote:

Now we’re really scared! Ha ha! Smiling

Wishing you the best, starting out is scary, but looking back it was an exciting adventure as well. Several weeks into our adventure we had only rented 4 or 5 rooms, yeah scary, wondered what I had stepped into, but after putting sweat into the place for over 25 years now we still love what we do and enjoy the guests.

Don't know how your payments will be set up (don't need to know), but we were fortunate that ours were set up for an annual payment since we began at a dead time of the year, it took the pressure off the quiet times and allowed us to make our payment at the end of the busier season before it was actually due.

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Congrats and good luck.

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Highlands John's picture
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Congrats, I hope it goes smoothly.

I remember that feeling of terror so well when I received the phone call to say our offer had been accepted. We'd talked about B&B for many years, spent 2 years looking for a property and all of a sudden it was real!!

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Definitely "hold your water". Silence can be golden. My brother thought I was nuts when I refused to drop the price on out Illinois house by $1000 - especially when I told him it was the only offer. But I was not desparate to sell (I got the $1000).

We made an offer on a house  that was rejected-THANK GOODNESS! IF this falls through (and if it is what you really want, may all go well - IF it works for you counter with another grand or two). But know this, there truly is a reason for everything and everything has a reason.

A  few months after the first rejection, this house, which was not even on the market when we offered on the first one, came up on our last trip for the year. I walked in and the house said- stop looking, I am yours. It was October, they were facing a winter of heating bills, and we had everything ready to go (no have to sell before I can buy). They took our first offer - about $5000 less than they were asking. A year later we opened a start-up B & B. 

Had the first offer been accepted, we would not have been as happy as we were here. Here we met the people that made this a wonderful place for Himself to be, with all his interests met. Would not have happened in the other city - totally different culture area.

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We made our offer just a few weeks after the sellers had made a significant reduction in their asking price. We offered full price. In retrospect, I suppose we should have come in just a little under it, but we thought it was a good value at the asking price.

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flyingace71 wrote:

Right now it just feels like everything is up in the air and that it might not ever happen for us. 

Don't know how positive my thoughts are, but my two cents worth anyway and a wish of good luck.

So much depends on your own position and the position of the seller.

When we purchased it never occurred to me to offer less than what was asked and offers on property we were selling ranged from low to laughable. It wasn't so much that I wouldn't negotiate, but was just a working guy, I had to pay off what I still owed and walk away with the needed down payment on the place we wanted to purchase.

I had no choice as I couldn't sell below a certain number and move forward with my plan.  Eventually we borrowed against our property, rented it out, and that paid the loan on what we had borrowed. Lucky that the gamble worked. Only you know how badly you desire this specific property and if it is possible within your budget.

Do a better job than I did of checking out the income of the proposed purchase, we succeeded, but looking back a lot of luck was involved.

 

Highlands John's picture
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Staying silent for a bit sounds like a good ploy, don't be tempted to over-step your budget/business plan though. I've seen too many people over-stretch themselves desperate for that "idyllic" lifestyle,  it's tiring, relentless work and the added pressure of not meeting your mortgage payments can be unbearable.

Good luck.

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