To B&B or not to B&B?

After the let down that was Steamboat Springs, CO. (see previous post). I jumped right back to work and life with two wild kids. In my minimal downtime, I decided to keep frantically searching for the next new and improved B&B.  There was no time to waste and even though I was pretty let down about Steamboat, I knew something else would come our way. There were several properties we pondered over. Some were ridiculously expensive or within reason on price, but were not located close to anywhere we wanted to be. 

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Ryan had found one while I was away in Steamboat. It was called Good Medicine Lodge. He sent me the price tag and some details. It seemed like a long shot. So I didn’t really take it seriously at first. The price was way over our budget at $2.1 Million.  It had 9 rooms, three of which were suites, a great room, a cozy dining room, commercial kitchen, ski boot drying room, 6 fireplaces and so much more.  I looked at the listing over and over, not convinced we could ever afford a place like this.   What was odd was that it wasn’t on the typical websites where we found Inns for sale.  (This might have been the only reason we had luck on our side for this one). Also, I didn’t know anything about the area. 

Once I dug into it more, I realized this place was incredible. I learned there was an amazing ski resort just minutes away from the B&B called Whitefish Mountain Resort (aka Big Mountain). There was a ski shuttle that stopped at this particular B&B daily, in fact. I was intrigued! We had been mostly looking at states like Colorado, Oregon, Idaho and Vermont up to this point, so Montana was a bit of a surprise to me.  As far as inventory, there only seemed to be one other B&B for sale in Montana at the time and I wasn’t so sure we could make money there. I realize now how ridiculous that sounds. I just didn’t know anything about Montana. I assumed it was a desolate place like Alaska, very remote and you know, “off the grid?”  But to my surprise, this B&B was situated in a good sized quaint ski town called Whitefish. Apparently, it was sort of a hidden secret hot spot. I saw a lot of online buzz through YouTube videos, moslty of people’s ski trips, but still….this place looked cool and worth checking out. There were articles that popped up describing it as having a well-established food scene, several cool local bars and a lot of lakes, rivers, and activities.  The biggest crowd pleaser of course: Glacier National Park, which is only minutes away. But most of what I researched was the skiing. 

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The information shocked me.  Several videos I watched described the deep snow and the immense terrain that covered over 3000 skiable acres. You could ski 360 degrees around the mountain and they had these things called snow ghosts.  People mistake these snow ghosts for large dense snow covered trees along the ski runs. But they are actually these cloud formations that freeze and form these hauntingly fascinating snow formations. I soon learned that Whitefish Mountain Resort was recently ranked one of the top ten ski resorts in the country by SKI magazine.  I wondered how I had never heard of this place before! 

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After digging into this town a lot more and after receiving additional photos of the B&B, we decided to take the next step and move forward on this place.  It’s owner’s quarters (which is where our family would live), had two bedrooms, two bathrooms and had a living, kitchen and dining area all in open format.  It was still larger than our house back in Oakland, offering around 2000 square feet.  It was quite beautiful with exposed beamed ceilings, huge windows and a lot of hard wood craftsmanship.  At this point, we did not have other properties insight, so this was more of an attempt at throwing something, anything at the wall in hopes that it would stick!  This was all taking place in February or March 2019, but we originally started this search back in November 2018 and perhaps mentally even sooner.  So we were feeling like we needed to push something forward.  The summer was lurking around the corner and once June hit we knew game would be on to find something.  It typically takes 3 months for the overall process, so if we didn’t find something by June chances were our next option would be a much more difficult route. Dylan (our 6 year old) would be starting up school again.  We didn’t want to have to pull him out midyear, if at all possible. 

We spoke with Eben about this property and wanted to determine if we could even afford this place. It was beyond our initial budget but once we understood the typical down payment and reserves needed to have the SBA and bank approve us, it looked as though we had a real shot.  We had what it took in terms of assets and future profitability to make a go at this.  As long as the seller’s would take us up on our lesser offer.  So Eben and Ryan want out to visit and they had a blast.  They loved the lodge and couldn’t stop bragging about how well maintained the facility was.  Every inch of the place looked as though tedious care was taken over the years by the current innkeepers.   Not only that but there was an impressive backyard with edible garden, several private balconies that our guests could enjoy, beautiful local artwork was installed throughout and the rooms were really comfortable. 

Not long after they returned from their trip, we made a solid offer. The seller’s countered, adding $100K and we accepted the deal. I could hardly believe it!! We were one step closer to owning our very own B&B!

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There was one major hurdle during all of this, that is worth mentioning because the moment I realized we had a problem, my heart sank.  The funny part about this story is that I was having my blood pressure tested just moment’s after finding out about this heart dropping issue. It was one of those at-home blood draw tests for a new life insurance policy.  Literally, as the nurse is walking up our driveway, I am talking with my 401K planner when I just learn that my 401K plan is not available to me until January/February of the following year (2020.) This was a huge problem!!! No 401K rollover, meant no B&B or at the very least, we would need to lean on the seller’s for a large loan. It didn’t sound promising.

Ryan had researched this option to finance your Bed & Breakfast with this 401K ROBS program that only specialists in this type of financing really know about.  It was a program rolled out by the government in the seventies. The funds you take from your 401K would be rolled over into a bank account that basically became a profit sharing corporation, that I could invest my 401K monies into. This type of rollover can only happen in rare business ventures, the Bed and Breakfast industry being one of them.  I had already initiated a group called Guidant, who was helping me along with the process. This program has several gray areas, so having a specialist who can keep you out of legal trouble with the IRS, is essential.  The crazy thing was that the senior level rep I was working with at the time, said that he had only heard of this rare case before one time in all his years.  But need not worry. I took a deep breath and the nurse said to me, “your blood pressure is totally normal.” Well, I do work well under pressure, so if there is a will there is a way!!!

Plan B set in, Eben knew just what to do.  He communicated that we would be required to ask for some owner financing regardless of our 401K situation.  Since I couldn’t use about $235K to finance it on my own, the owner’s would now be asked to help.  To say we were nervous about the reply would be a total understatement.  We spent countless hours waiting on pins and needles wondering what would happen next.  Would the seller’s bow out, would they simply just say no, or would they agree?  We had to wait.  But something really great was about to happen and just in the knick of time.  My old employer had caught wind of my 401K situation and decided he would work with his account reps to allow me to pull the total amount of my 401K out of the account, as soon as August 2019.  This was perfect timing for the funds to come through, just before we needed to lock in the financial terms.  I was so relieved!!!  I mean this could’ve potentially been the end of this B&B for us.  And it is key to point out, that at this point of the venture we had already given notices to our employers, committed to put our house on the market and were packing our bags. The stakes were high! Now I would be able to pay the 401K funds towards the loan per original plan and we would only need to ask for the $100K, which seemed a reasonable amount to ask the seller’s to help us with.  So we moved forward with the purchase and it was time to pack up to head out in search of Good Medicine in beautiful northern Montana!!

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