Author Topic: Stumbled on a successful business. How do I make it grow?  (Read 1675 times)

ChiStache

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Stumbled on a successful business. How do I make it grow?
« on: January 30, 2014, 08:47:32 AM »
Dear, wise Mustachians:

About 18 months ago, in a time of financial desperation, my husband and I renovated and started renting out a tiny, basement "suite" in our home on AirBNB. I posted our listing on a June evening before going to bed, and woke up to an email inbox FULL of reservation requests. I literally screamed, it was so shocking.

The little business has been successful ever since. We enjoy pretty much 100% occupancy all year round (even the frigid winter months), have gotten almost 100 reviews (all positive), and are now one of the most successful AirBNBs in Chicago. This is all while holding down full time jobs. In a way, I feel like I've found a calling: I'm good at hosting people, making them feel comfortable and welcome. I've also enjoyed the logistics and reservation management aspects of the business too.

Our dream is to start a hostel or guest house here in Chicago (I'm researching the zoning/regulation issues now). I know there is a need for it, and I know we could run it effectively. Here's my question: how to I efficiently turn the earnings from our AirBNB (about 20K per year) into the capital we would need for a larger venture? Is there a way to guard the $ from annual taxation as we save it? Should I just be dumping it into a taxable account at Vanguard until we have enough to purchase/renovate another property?

Thank you so, so much for any thoughts you can offer.

Edited with some very rough info about projected capital needs for expansion:

I expect a new building would be in the 400K range, and that we would need to put 25% down. I would also love to amass around 100K for renovation and furnishing. So, "back of the napkin" calculation, we'd need 200K to get a good start. If we can save 20K per year with our current AirBNB earnings, and then match that with 20K of savings from other sources, it would take 5 years. 
« Last Edit: January 30, 2014, 09:21:34 AM by ChiStache »

SunshineGirl

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Re: Stumbled on a successful business. How do I make it grow?
« Reply #1 on: January 30, 2014, 09:01:06 AM »
This is so exciting to hear! I don't have any advice, especially since you didn't post any numbers (i.e. we don't know what's available that you could tap into and we don't know what the price of a new property would be), except to say make very, very sure you're collecting whatever tax you need to collect. Even if you don't call it a tax in your posting, if your city has a hotel tax, set it aside in expectation of paying it later. I suspect people are going to be forced to pay retroactively for Air BnB-type rentals.

And good that you're following zoning. That's another thing I think people will pay for later, as in one upset neighbor could ruin your whole business if it's not zoned right. I know in my town, at least this used to be true, you could get a B&B license on your permanent residence no matter what it was zoned as long as only a certain percentage was used for the B&B. I think it was 25%. If that's true in your city, you could buy a new owner-occupied residence and use the income to pay off the mortgage.

An hour with an accountant would probably be a very good investment for you.

I'd love to follow your journey, would you be up for keeping a journal? I know a guy who manages a hostel and done well, it can be very lucrative.
« Last Edit: January 30, 2014, 09:12:44 AM by SunshineGirl »

ChiStache

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Re: Stumbled on a successful business. How do I make it grow?
« Reply #2 on: January 30, 2014, 09:08:40 AM »
Thanks, SunshineGirl! Good point about posting some info re projected costs for a new building; I'll edit my post to add that now.