... that would probably be the headline, if a news station were to feature our story.
It's not true, of course.
But to the outside world,
two weeks ago,
our net worth changed by $3 million in about 3 minutes.
Here's what happened:
**********
As most of you know, we're in the "B&B" business. We purchased a 10 room B&B in 2003, and over the past few years have upgraded it substantially.
We use the excess cash it generates to fund other projects (thank you, Robt Kiyosaki).
But on to the $3 million story:
In 2004, we found a building a block away from our current B&B that was an excellent candidate for conversion.
It was a run down 10 unit apt building. Built back in the 1880s as an exclusive women's dormitory for Napa College, it has 10-12' ceilings thouroughout and beautiful historic architecture.
It also had electrical, HVAC, and plumbing systems that were 40-60 years old. The water ran orange, the knob and tube wiring overheated (and had caught fire in the past), and some of the room gas furnaces were potential fire hazards.
So we asked all of the tenants to move out, for their own safety, as we replaced the systems.
During that time, we removed most of the kitchens and converted the building into a single family residence.
We are still at work on this building-- restoring the redwood wainscoting, removing all of the old pipe and wire (actually got money for the copper and brass in salvage/recyling!), and reconfiguring the building to function as a very large house w/lots of bedrooms and bathrooms (13 bedrooms, 14 bathrooms).
Total building is about 10,000 square feet: 7500 ft2 for the 1st and 2nd floors, about 1400 ft2 for the finished attic, and another 1200 ft2 for the basement.
************
I had originally laid out the building to be 12 rooms (11 guest rooms and 1 innkeeper's quarters), but as the months went by (and we were working on some other projects), I figured out how to re-jigger the layout to provide more guest rooms, and larger guest rooms, in just the 1st and 2nd floors]. Much of this was accomplished by taking space out of hallways and making it part of a new room/suite. Other times it was doing something creative, like taking one bedroom, and splitting it into a new bathroom, and stairway to the 3rd floor (required for egress, by law).
We saved some money by making all of the guest rooms on the 1st and 2nd floors-- this leaves the attic area for future conversion/use as a spa, conference center, or additional guest rooms. And it cut the cost of the electrical, plumbing, and HVAC systems we're putting in now.
We had originally planned on just converting this building into a B&B when we bought it in 2005, but by the end of 2006, it was obvious that the restoration/conversion was taking longer than anticipated. It should be mentioned that when converting to a B&B (commercial use), the City of Napa required things like sprinkler systems, updated electrical, commercial grade plumbing, etc. These items all added to the cost, and the time, required for conversion.
*******
So we bought another building, in Dec of 2006.
A 3 bedroom house with a backyard that backed up against the larger 10,000 square foot property. This 3BR house was also a historic building (built around 1906), and was in excellent condition, considering it was a rental. It also had about 1200 square feet of 6' tall crawl space storage, something we desperately needed for the other construction project.
Our plan? Convert this monthly 3BR rental into a Vacation Rental as quickly as possible, and use it for overflow from our current 9 BR B&B, across the street.
We completely renovated the 3BR house, replacing all of the electrical, plumbing, and HVAC, as well as installing new stone floors, Venetian plaster walls, and high-end historically accurate subway and hex tile in the bathrooms. We also added a bathroom, making the entire layout an entrance hub that led to 3 separate bedrooms/bathrooms.
We finished this in August of 2007 (again, longer than expected), and rented it out for the harvest season. We generated $35K in gross receipts by the end of the year (for just 4 mos, Sept-Dec), which justified our added time/money.
It's looking like that property will bring in about $165K gross this year (Jan-Dec)
**********
About the time we were finishing the 3BR house, the man who owned the house *next* to this home asked us if we'd like to buy his house as well. He'd seen what we'd been doing, and was impressed.
The building he owned was a duplex-- actually a twin of the 3BR house we'd been working on. But instead of a 6' crawl space, the downstairs part had a laundry room and small apartment with 7' ceilings.
This duplex was in much worse condition than the 3BR house we'd been working on. It had termite damage, extensive dry rot, and much of the interior was trashed-- cracked plaster, broken windows, etc. It also needed new electrical, plumbing, and HVAC.
This duplex was right next to our latest fix-up, and since it was, without question, the neighborhood eyesore (the tenants had close to a dozen cats that roamed the neighborhood and used the backyard as their litterbox-- really, really stunk things up), it made sense to buy it, if only to spruce it up and improve the property values of every other house on the street!
So that's what we did.
We went over the house meticulously, removing all of the old electrical and plumbing, installing another bathroom and fireplaces in all of the bedrooms and lower apartment, and upgrading all of the fixtures/surfaces. Stone and tile floors, spa bathtubs, Venetian plaster walls, and new redwood door casings and moldings.
Not cheap.
At first glance, it looked like we were over improving the house.
But we were actually taking a calculated risk.
When we bought the duplex, I was at the City building/planning department. And I asked the City Planner if it would be possible to convert not just the 10,000 square foot building into a B&B, but the 3BR house and the duplex as well. The back yards of the two houses backed up to the larger building, so there was a nice "flow" to the layout, as a large B&B building with 2 outlying "cottages".
The planner studied the map, and said, "Y'know, since all of these buildings are historic, I don't think there would be a problem converting them all into one large B&B".
It was at that point that we started upgrading the fixtures in our remodel of the duplex.
And we made the lower apartment a very luxurious suite-- complete with a walk-through closet and a large bath with a huge spa tub. Stone and tile floors, etc etc.
*************
As we were remodeling/restoring the duplex and the 10,000 square foot building, we applied for a formal use permit to convert the 3 buildings into a B&B. With 3 BRs in one building, another 3BRs in the duplex, plus a lower suite, and 13 rooms in the large building, we had a total of 20 rooms-- 19 guest rooms, and 1 (required) innkeeper's quarters.
Over this past year, we've talked to our neighbors and gotten their signatures on petitions and letters saying they had no objections to these 3 buildings being converted into a B&B.
Which all led to our night in front of the City Planning Commission, 2 weeks ago.
Most every B&B in town is 10 rooms or less. In fact, the B&B ordinance actually specifies 10 rooms as an appropriate maximum.
But since we were using 3 buldings, and since we had the written support of all of our neighbors (every single one bordering the proposed B&B's property), we did not have to go through a lengthly approval process w/the planning commission. We were put on something called "the consent agenda".
Before the planning commission meeting, a notice of the proposed B&B went out to all property owners within a 300 foot radius of the corners of the properties. Since the planning meeting was 2 days after the presidential election, these notices went out the week before the election-- when everyone was getting huge amounts of political junk mail.
No one showed up to challenge or even question our project.
So we showed up at 7 pm to the meeting, and it was called to order at 7:03.
Our B&B project was the first thing on the agenda, and it was brought up at 7:05.
The use permit passed unanimously, without questions or any additional restrictions.
By 7:08 we were walking out to our car.
In all honesty, I was a bit in shock.
Literally years of work had all come down to that 3 minutes.
We had done everything we could think of to make it sail through.
And it did.
*********
In those 3 minutes, the planners changed the allowable use of those 3 properties from residential to B&B.
As homes, these buildings had cost us:
$1,500K + $505K + $517K = $2,522,000.00
The going rate for ANY Napa B&B is AT MINIMUM $320K per room.
So,
$320K/room x 19 rooms = $6.080,000
Subtract the $2.522,000 we have into purchasing these properties, and you get:
$3,558,000.00
That's what those 3 minutes meant to us. :banana::banana::banana:
-Russ H.
PS Prior to this meeting, our net worth was in the neighborhood of about $2 million. I'll post the whole story soon, probably in a few parts.
It's not true, of course.
But to the outside world,
two weeks ago,
our net worth changed by $3 million in about 3 minutes.
Here's what happened:
**********
As most of you know, we're in the "B&B" business. We purchased a 10 room B&B in 2003, and over the past few years have upgraded it substantially.
We use the excess cash it generates to fund other projects (thank you, Robt Kiyosaki).
But on to the $3 million story:
In 2004, we found a building a block away from our current B&B that was an excellent candidate for conversion.
It was a run down 10 unit apt building. Built back in the 1880s as an exclusive women's dormitory for Napa College, it has 10-12' ceilings thouroughout and beautiful historic architecture.
It also had electrical, HVAC, and plumbing systems that were 40-60 years old. The water ran orange, the knob and tube wiring overheated (and had caught fire in the past), and some of the room gas furnaces were potential fire hazards.
So we asked all of the tenants to move out, for their own safety, as we replaced the systems.
During that time, we removed most of the kitchens and converted the building into a single family residence.
We are still at work on this building-- restoring the redwood wainscoting, removing all of the old pipe and wire (actually got money for the copper and brass in salvage/recyling!), and reconfiguring the building to function as a very large house w/lots of bedrooms and bathrooms (13 bedrooms, 14 bathrooms).
Total building is about 10,000 square feet: 7500 ft2 for the 1st and 2nd floors, about 1400 ft2 for the finished attic, and another 1200 ft2 for the basement.
************
I had originally laid out the building to be 12 rooms (11 guest rooms and 1 innkeeper's quarters), but as the months went by (and we were working on some other projects), I figured out how to re-jigger the layout to provide more guest rooms, and larger guest rooms, in just the 1st and 2nd floors]. Much of this was accomplished by taking space out of hallways and making it part of a new room/suite. Other times it was doing something creative, like taking one bedroom, and splitting it into a new bathroom, and stairway to the 3rd floor (required for egress, by law).
We saved some money by making all of the guest rooms on the 1st and 2nd floors-- this leaves the attic area for future conversion/use as a spa, conference center, or additional guest rooms. And it cut the cost of the electrical, plumbing, and HVAC systems we're putting in now.
We had originally planned on just converting this building into a B&B when we bought it in 2005, but by the end of 2006, it was obvious that the restoration/conversion was taking longer than anticipated. It should be mentioned that when converting to a B&B (commercial use), the City of Napa required things like sprinkler systems, updated electrical, commercial grade plumbing, etc. These items all added to the cost, and the time, required for conversion.
*******
So we bought another building, in Dec of 2006.
A 3 bedroom house with a backyard that backed up against the larger 10,000 square foot property. This 3BR house was also a historic building (built around 1906), and was in excellent condition, considering it was a rental. It also had about 1200 square feet of 6' tall crawl space storage, something we desperately needed for the other construction project.
Our plan? Convert this monthly 3BR rental into a Vacation Rental as quickly as possible, and use it for overflow from our current 9 BR B&B, across the street.
We completely renovated the 3BR house, replacing all of the electrical, plumbing, and HVAC, as well as installing new stone floors, Venetian plaster walls, and high-end historically accurate subway and hex tile in the bathrooms. We also added a bathroom, making the entire layout an entrance hub that led to 3 separate bedrooms/bathrooms.
We finished this in August of 2007 (again, longer than expected), and rented it out for the harvest season. We generated $35K in gross receipts by the end of the year (for just 4 mos, Sept-Dec), which justified our added time/money.
It's looking like that property will bring in about $165K gross this year (Jan-Dec)
**********
About the time we were finishing the 3BR house, the man who owned the house *next* to this home asked us if we'd like to buy his house as well. He'd seen what we'd been doing, and was impressed.
The building he owned was a duplex-- actually a twin of the 3BR house we'd been working on. But instead of a 6' crawl space, the downstairs part had a laundry room and small apartment with 7' ceilings.
This duplex was in much worse condition than the 3BR house we'd been working on. It had termite damage, extensive dry rot, and much of the interior was trashed-- cracked plaster, broken windows, etc. It also needed new electrical, plumbing, and HVAC.
This duplex was right next to our latest fix-up, and since it was, without question, the neighborhood eyesore (the tenants had close to a dozen cats that roamed the neighborhood and used the backyard as their litterbox-- really, really stunk things up), it made sense to buy it, if only to spruce it up and improve the property values of every other house on the street!
So that's what we did.
We went over the house meticulously, removing all of the old electrical and plumbing, installing another bathroom and fireplaces in all of the bedrooms and lower apartment, and upgrading all of the fixtures/surfaces. Stone and tile floors, spa bathtubs, Venetian plaster walls, and new redwood door casings and moldings.
Not cheap.
At first glance, it looked like we were over improving the house.
But we were actually taking a calculated risk.
When we bought the duplex, I was at the City building/planning department. And I asked the City Planner if it would be possible to convert not just the 10,000 square foot building into a B&B, but the 3BR house and the duplex as well. The back yards of the two houses backed up to the larger building, so there was a nice "flow" to the layout, as a large B&B building with 2 outlying "cottages".
The planner studied the map, and said, "Y'know, since all of these buildings are historic, I don't think there would be a problem converting them all into one large B&B".
It was at that point that we started upgrading the fixtures in our remodel of the duplex.
And we made the lower apartment a very luxurious suite-- complete with a walk-through closet and a large bath with a huge spa tub. Stone and tile floors, etc etc.
*************
As we were remodeling/restoring the duplex and the 10,000 square foot building, we applied for a formal use permit to convert the 3 buildings into a B&B. With 3 BRs in one building, another 3BRs in the duplex, plus a lower suite, and 13 rooms in the large building, we had a total of 20 rooms-- 19 guest rooms, and 1 (required) innkeeper's quarters.
Over this past year, we've talked to our neighbors and gotten their signatures on petitions and letters saying they had no objections to these 3 buildings being converted into a B&B.
Which all led to our night in front of the City Planning Commission, 2 weeks ago.
Most every B&B in town is 10 rooms or less. In fact, the B&B ordinance actually specifies 10 rooms as an appropriate maximum.
But since we were using 3 buldings, and since we had the written support of all of our neighbors (every single one bordering the proposed B&B's property), we did not have to go through a lengthly approval process w/the planning commission. We were put on something called "the consent agenda".
Before the planning commission meeting, a notice of the proposed B&B went out to all property owners within a 300 foot radius of the corners of the properties. Since the planning meeting was 2 days after the presidential election, these notices went out the week before the election-- when everyone was getting huge amounts of political junk mail.
No one showed up to challenge or even question our project.
So we showed up at 7 pm to the meeting, and it was called to order at 7:03.
Our B&B project was the first thing on the agenda, and it was brought up at 7:05.
The use permit passed unanimously, without questions or any additional restrictions.
By 7:08 we were walking out to our car.
In all honesty, I was a bit in shock.
Literally years of work had all come down to that 3 minutes.
We had done everything we could think of to make it sail through.
And it did.
*********
In those 3 minutes, the planners changed the allowable use of those 3 properties from residential to B&B.
As homes, these buildings had cost us:
$1,500K + $505K + $517K = $2,522,000.00
The going rate for ANY Napa B&B is AT MINIMUM $320K per room.
So,
$320K/room x 19 rooms = $6.080,000
Subtract the $2.522,000 we have into purchasing these properties, and you get:
$3,558,000.00
That's what those 3 minutes meant to us. :banana::banana::banana:
-Russ H.
PS Prior to this meeting, our net worth was in the neighborhood of about $2 million. I'll post the whole story soon, probably in a few parts.
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