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Robin LarsenBusiness Plan for Kindred Spirit WestBellevue UniversityMSM 520 - Final PaperAugust 8, 2019 IntroductionFor many years, my family has enjoyed a staycation at Emerald Isle Beach, North Carolina every summer. We pack our cars with beach chairs, towels, surf boards, fishing rods and suitcases stuffed with favorite bathing suits and t-shirts and rumpled shorts. Left behind are the dress clothes and rigid work and meeting schedules. We have rented many vacation homes and have discussed how much it would benefit us to purchase a beach rental home. We are ten years from retiring and have always had a goal to add a rental house to our retirement portfolio. After years of discussing a beach rental purchase, we have finally found a house that will suit the needs of our family and rental income. We all agree we are at a point in our lives to make this investment decision.Executive SummaryWe have searched for the perfect beach rental and found a condo named Kindred Spirit West that will suit our needs. In order to start this process, we established a Limited Liability Corporation (LLC) as RAKE Investment Group – Robin, Amy, Ken, Ed. Ken is my spouse, Amy is my sister and Ed is my brother-in-law. The LLC is authorized to operate as a business rental under the North Carolina State Law. One of the main benefits of the LLC is that all of the owners have a limited personal liability for the debts of the business. Our personal assets (homes, cars, personal bank accounts, etc.) are not subject to attachment to pay business debts, including for lawsuits against the business. RAKE is wholly owned by us for the purpose of purchasing a rental that produces income for the condo. The mission statement – Kindred Spirit West is located at 10522 Wyndtree Drive, Emerald Isle Beach, North Carolina. This affordable ocean view duplex is a memory creation. See the ocean and waves crashing from the covered and open decks; relax and enjoy priceless sunsets after a day at the beach while watching the children play in the pool. Porch rockers, charcoal grill, outside shower, beach cart and beach chairs are provided. The vision is to be a highly respected rental unit providing memorable experiences to our renters.RAKE’s Core Values drive how our company interacts with our renters and each other. Respect – We will respect all renters and treat them with dignity. Integrity – We will demonstrate our values and conduct business in a manner that is honest and forthright. We will consider all relevant risks and make decisions based on our company’s long-term best interest, using strong business management skills to balance safety and soundness with customer value.Service – We will continually provide quality service to our customers and internal staff. Excellence – We will provide a professional environment based on our company performance and accountability. We have been approved for a mortgage of $340,000.00 to start this process. Our financial outlook to accomplish this will involve twenty percent down to avoid primary mortgage insurance. The past history of this property reflects ninety days of rental income yearly. We have secured insurance for property, wind/hail and flood. We will achieve our goals by ensuring the property is well-maintained. In order to accomplish this, we will hire a management company to take care of the reservations, maintenance issues, linen service, marketing on-line and in the Emerald Isle Realty annual vacation catalog. We look forward to this new venture and have learned a lot at this point in the process on the importance of having a detailed business prehensive Business PlanMarket Assessment The Southern Outer Banks of North Carolina is home to the most gorgeous beaches on the east coast. Emerald Isle is one such place with over thirteen miles of white sandy beaches and pristine ocean waters. Seventy-five public beach accesses dot the shores for the nearly forty thousand summer residents who visit annually. After seventeen years of renting beach houses, we have decided to purchase a beach house. This will alleviate the yearly pain to find a beach rental and diversify our retirement portfolio in the process. Retirement homes are best chosen five years or so before you actually retire. If you really will vacation and retire there, it's great to get renters to help with the mortgage (Quinn, 2000). We have evaluated the Emerald Isle beach neighborhood through rental market forecasts to ensure it is a great opportunity. Important factors that we considered in determining the location were: ease of access to the beach, a pool, trails, nearby amenities/attractions and easy access to dining and shopping. The great majority of visitors to the Outer Banks stay in a vacation rental. Past guests are mostly from New York, Washington, DC, Pennsylvania and various states across the United States.In the last four years, this home has increased in value by thirty-two percent. Our objectives for this rental property will be: increase overall rentals, increase occupancy rate, increase revenue and profitability, increase market share, increase number of re-bookings from past guests, increase number of referrals and increase number of new visitors. Buying a beach house can bring an excellent return on investment, a reliable income stream and access to a delightful vacation spot. Many beach house investors purchase homes to rent out during peak tourism times. We have researched numerous rental properties, the cost of insurance for the property along with flood, wind and hail insurance to ensure we know what to expect for this type of rental. As with any investment, it’s better to be well-versed before diving in with thousands of dollars. It is vital to pay down any debts first, ensure you have at least twenty percent down payment, research interest rates, calculate operating expenses, determine your return, find the right location, create a Limited Liability Corporation for your business, write a business plan and weigh the rewards and risks.What problem will my company solve?It is important to conduct a rental market analysis to help me assess the rental potential of this new investment. In order to do this, we have figured out the adjusted price per square foot of comps and then multiply by the square feet of properties for sale. The average rent is higher than the average price of available properties so this rental property is positive. We have determined that our rental income for peak seasons will help to cover expenses effectively. One of the most important steps to take in implementing an effective and efficient marketing strategy is to develop a written marketing plan. Questions to consider are: where are we now and where do we want to go? What tactics do we use to get there? How will we monitor and measure the results?Rental IncomeThe rental income will be collected from the property management company and deposited to our Limited Liability Corporate (LLC) account. The funds will be saved to use for property repairs and maintenance. The average weekly rental income is $2,900.00. The peak rental season is June through September. The proforma of this property reflects several repeat renters that selected various weeks to rent this property outside of the peak season. Property ManagementIt is important to consider who will take care of property housekeeping maintenance, building repairs, grounds and updates. Since we live in Nebraska and the property is located in North Carolina, we realize we have to hire a property management company. This allows us a piece of mind to have someone on-site to manage our unit. The management company takes care of the rentals, questions from the renters and calls regarding any issues that may arise. If you are going to buy homes or rental units as vacation rentals, having people available to take care of the unit or home when you are not around is crucial. They will be the people who make your vacation rental business a success (Alvis, 2007).The property management company focuses on upstream marketing this unit in the form advertising the house on their website, social media, number of click rates on the website and the annual Emerald Isle Vacation guide. Their commitment to us is to help us uncover marketing opportunities through effective email campaigns, advertising off-season discounts and offering a ten percent military discount.As we go through this journey, it is important to keep our expectations realistic. As with any investment, a rental property isn’t going to produce a large monthly paycheck for a while. We are excited about this opportunity but realize there will be unexpected costs but feel now is the time for us as prices are at a five-year low.Market StrategyIt is important to identify our target audience. Renters searching for a property look for specific details such as the property’s location, price, amenities and more. Marketing to a specific audience allows us to highlight the best features to the best renter. We realize not all our target customers are on social media platforms. A successful strategy will get our followers on Twitter to read our o?cial blog, which will inspire them to join our Facebook page, which will prompt them to browse our youTube videos, which they’ll share with their friends. Good marketing campaigns actually convert social networking and sharing among customers into sales. They’re even more successful when customers see you online, go to purchase the product, and then tweet about their experience or share it on Facebook (Isenberg, Herzig, Yang & Wilson, 2010). Initial Market TargetsIdentifying and understanding what the property offers and considering the types of travelers who will stay at the rental house is an important step. The properties potential renter is the first broad step in identifying the target audience. Families, pet owners, military members, couples, previous renters, millennials and retired travelers are the initial markets for this rental unit. StrengthsPricing impacts the type of renters we market to and need to match the property. We have researched numerous houses comparable to this rental property to ensure we have set the right price. Too high rates can isolate our target audience. Too low rates make the renters suspicious. Strengths of our marketing efforts will include the following offers for this rental: 1. Offer a 10% military rental discounts to active duty and retirees. 2. Offer a 10% discount for guests that book a year early. 3. Offer a 10% discount for last minute rentals. These offers will allow us to capture the highest possible occupancy and revenue for us. We will also be a pet friendly unit for an additional cost. We realize and have experienced the hardship for people to leave their pets and having to board their loved animal in a kennel. This will appeal to that group of potential renters.WeaknessesWe need to be mindful of the strategies we have selected as this will cut into the profit of the unit. A 10% discount results in a decrease of $300.00 a week. This will impact the weekly rental rates and result in our loss of income. Advertising as a pet friendly unit will result in some damage. We also need to be prepared for family and friends to expect a discount.Products and Service for this RentalFocusing on what makes our property unique and providing a theme will be a consideration for this rental unit. Highlighting family reunions, weddings, graduation celebrations or holiday get-togethers will be considered. Listing amenities that make our property better than others in the area will be a focus. Some of the most popular amenities are: fully stocked kitchen, free and fast internet, climate control, pet-friendly, washer and dryer, entertainment system, outdoor space that includes front porch with beach view, deck, balconies, pool, outside shower, hot tub, nearby park, access to hiking trails and private beach access.When will you achieve them?We want to make sure we cover expenses, update this rental and receive bookings. We will review comments from previous guests for additional insight. We will get to know the renters by providing a book at the unit requesting for their name and address, recommendations and suggestions to make their stay even better. Answers that we will pay attention to and be on the lookout for are: are there complaints on the beds, comments on the décor, air conditioning, housekeeping, etc. We will evaluate the guests that stay in our unit and look for trends if they are repeat renters. We want to ensure they rent from us for years to come. The property management company will provide us the additional feedback and maintain contact with prior renters to ensure they reach out to them.By drawing in this target audience, we create the opportunity for increased bookings. Understanding the other vacation rentals and hotels around us helps determine our target audience. It also assists with marketing our property. Standing out in the market attracts attention and bookings. Positive guest experiences justify a potential to raise the rates. If you’re entering a new market, you have to have something that differentiates you from the competition—especially in beach towns where tourists return for generations. There’s often built-in loyalty there. Whether it’s your level of experience, a convenience the others don’t offer, or a technological upgrade, identifying and promoting this X factor is central to your marketing plan (Marcoux, 2018). Marketing PlanCreating a viable marketing plan includes strategies that we have decided will be best to use when targeting the key markets to achieve bookings. The marketing plan is how we will advertise our business to customers and how we will get to know the websites they use and what type of marketing will be suitable for them. It is important that our marketing strategy is diverse and varied. Market Needs & TrendsRental property investing is a perfect part-time business because real estate is a business where the assets appreciate and cash flow is generated even when you are absent (Clark, 2008). We need to know the vacation rental market as a whole. Questions we have considered are: What has changed in the market in the past year? 5 years? We have researched the trends on the number of visitors, demographics of visitors, new construction in the area, sharp increases or decreases in property values, significant increases in property taxes and realize the importance of staying on top of any new or proposed ordinances regarding short-term rentals. We need to have something that differentiates our condo from the competition—especially in beach towns where tourists return for generations. There’s often built-in loyalty there. Whether it’s your level of experience, a convenience the others don’t offer, or a technological upgrade, identifying and promoting this X factor is central to your marketing plan (Marcoux, 2018). The main question for our 2019 vacation rental marketing plan should revolve around how to solve the renter’s questions and needs from a lodging perspective. Using industry insights will provide us a better understanding of a need to change our marketing strategies in order to grow our vacation rental business.Determine What’s Already WorkingOnline Marketing – The condo we purchased currently has the following marketing strategies: listings on several websites (local realtors, HomeAway, Airbnb, Vacation Rentals By Owner (VRBO) and . Including various channels into my marketing plan increases traffic and booking numbers. In addition, there are Google ads on my property listing on different websites. The rental page will be updated after we make a few decorating improvements. We will utilize: search engine optimization (SEO), search engine marketing (SEM) and branding strategies. We will review traffic and conversion analysis; content marketing/blog; website content and design. We will offer online payment plugins. Reviewing the competition analysis frequently will allow us to stay on top of the competition. We will conduct email marketing and social media campaigns.Offline Marketing – We will utilize print media in magazines and word of mouth (WOM) advertising to our family, friends and coworkers.The Marketing Plan includes that we target to the right renters, align with the market trends and maximize the financial potential of our home. Marketing is what we will do to ensure travelers can find our property, fall in love with it, and book it! Operational Structure for Kindred Spirit West – RAKE Investment Group, L.L.C.Investing in vacation rental property isn’t a decision that’s made overnight. We have been saving and thinking about this for fifteen years! There are many factors taken into account which helped us influence our final decision on whether to start a business in this growing industry. There are well over a dozen popular beach towns in North Carolina, but among the most popular, and the ones that command the highest rental rates for beach homes, are Emerald Isle, Wrightsville Beach and Topsail Beach (Maverick, 2018).The four-bedroom, three plus two half-bath duplex is located on the middle row in Emerald Isle Beach, North Carolina. There is a 14’ x 30’ swimming pool, dishwasher, washer/dryer, stereo system, secured wireless high-speed internet access, ceiling fans, fully stocked kitchen and hot tub.ImprovementsOur plans are to paint, add granite countertops and remodel the bathrooms during the off-season. We will do this work on our own and plan to finish the projects this year. RevenueThis rental property has twelve reservations for 2019. Our goal for 2020 is to increase the rentals by adding additional marketing opportunities. We have requested the property management company to reach out to previous renters of this property to let them know of our upgrades. We realize we need to depend on professional expertise in order to be successful. They will provide more precise and faster information for business decisions, particularly in execution processes (McCreary, 2009). In addition to using a property management company, we are currently using word of mouth advertising about the property. We have five additional families interested in renting in 2020. The property management company utilizes a sophisticated web collaboration that will impact our business on multiple levels in terms of execution and innovation. Web collaboration is shortening cycles, creating better products, improving decisions and most importantly creating a new dimension for competition in business (McCreary, 2009).Cash FlowMonitoring the projected cash flow will help us keep a pulse on the rental. In addition, we will consider setting milestones or benchmarks for where we should be when. If we hit a milestone and determine that we are not on course, then it’s time to implement a contingency plan.Sales ForecastThe peak season rental months are June 2nd – September 3rd. ExpensesWe have determined when we will have money coming out of pocket including expenses that occur monthly. The property management company will take care of the reservations and maintenance. The fee for the property management is 10% of the rental. With a vacation rental, we realize we will get out what we put in. We purchased this property fifty thousand less than the appraised value. We are committed to investing time, money and effort into our business and our hopes are to reap the rewards financially and personally. So many businesses out there today in the tourism industry simply put the bare minimum to keep things running.?Growth Budget for RAKE Investment Group, L.L.C.Elements & PurposeWhen we invested in a vacation rental, we focused on the impressive profit we were going to earn. We realized early on in the process it is important to development a growth budget that discloses hidden expenses that we can potentially accrue. Having a business budget in place enables you to plan ahead, prioritize your allocation of funds and gauge whether your financial predictions are being met. It will also enable you to make educated decisions to enhance your business operations with added clarity and efficiency (Benoit, 2009).Barriers to DevelopmentPeople who invest a lot of money in a business to start with often seem to be trying to?make up for their lack of business skill by throwing money at the problem. However, this approach is often counterproductive. Most small businesses go through an inevitable (and healthy) learning stage in which a number of business assumptions must be modified. If a business is overcapitalized, this can be difficult to do for several reasons, including the fact that the money may have already been spent in the wrong place. Put another way, it’s fairly easy to recover from small, cheap mistakes, but can be impossible to climb out of a hole dug by spending large amounts on nonessential equipment, salaries, buildings, leases, or promotion (Clifford & Warner, 2017).Past Growth for Kindred SpiritBeach rentals are seasonal so comparing month over month is not practical. It takes time, at least a year or two, to be able to see real numbers. The trend for repeat guests reflects consistent weekly rentals from June 1st through September 30th. As we get more repeat guests and build our subscriber list, likes and followers, our audience conversion category will increase.Start-up Costs for Kindred SpiritCash-flow ForecastThe property is rented for twelve weeks in 2019. The yearly rental income is $35,100.00. We realize our rental income and budget can change due to cancellations and cost of repairs. We have some minor upgrades that we plan in the off-season that we estimate will cost $5,000.00. We are in the process of evaluating 2020 rents and working with the property management company on comparable rentals in the area to ensure we are in line with the market. At this time, the house will not earn any rental income from November – May. We are going to visit the home only a few times a year and hiring a property management company to coordinate maintenance jobs is an added cost but will save us the stress of worrying about our home when we are not there. Profit Loss ForecastA profit-loss forecast helps us estimate when our business will start to make a profit. We are starting this venture on a positive note. We have set aside funds for maintenance and repairs. We have also set up an account for annual property taxes, as well as Homeowners Association and Condo fees. We have completed the following: set up a Limited Liability Corporation (LLC), opened a separate business account, implemented a system for tracking income and expense budget using quick books, established a condo owners association agreement and are prepared for fluctuating expenditures.The BudgetWe will keep a consistent monthly budget year-round. The following is the estimated monthly expenses at this point in the business:A major advantage of investing in a vacation rental is that we can make more rental income as a beginner real estate investor. We have chosen a great location that has attracted many travelers during the high season of the Emerald Isle Beach area. We are off to a great start towards understanding the basics, keeping track of our business records and budget. Operational Requirements for Kindred Spirit WestOur vacation rental business needs an operational plan that sets the tone for our business and serves as a guide to ensure we are on the right track towards achieving our goals. This plan is an insight into how we are going to run our new business on a day-to-day basis. The owners work well together and exhibit the passion to make our new venture a success. Passion is a strong indicator of how motivated an entrepreneur is in building a venture, whether she/he is likely to continue pursuing goals when confronted with difficulties, how well she/he articulates the vision. Passion is often critical to convince the targeted individuals to invest their money, time, and effort in the new venture (Chen, Yao & Kotha, 2009).Management TeamThe management team for RAKE Investment Group, LLC consists of a President, Vice President, Treasurer and Secretary. These individuals are responsible for the overall success of the property rental. This team is our biggest asset. The person or persons who run the business will determine, more than any other factor, whether the enterprise has a chance to succeed or is doomed to crash (Amerpohi, 2005).Key Responsibilities include: The President will guide the key decisions made for the business. This individual is also experienced in remodeling and building projects. The Vice President will assist in the research and provide recommendations for the interior design. The Treasurer will take care of the record keeping, business and preparing documents for taxes and paying the bills out of the LLC. The Secretary will ensure all documentation is kept for the business and maintain the agreements for the LLC and the Condo Association. This position also serves as the liaison with the property management company. All owners will participate in the remodeling.Monitoring PerformanceRemodeling projects – We have identified the following projects that we will be responsible for during the off-season: replacing laminate countertops with granite, removing outdated wallpaper, paint the entire interior walls of the unit, repair deck boards, power wash the deck, replace blinds and add window treatments. When people browse for a vacation rental online, they have a goal to find the prettiest listing that fits their list of parameters. We realize the unit needs updating and how imperative it is that our photos make a good impression if we want to convert more bookings.Account Management – We have established a checking account to pay bills with automated bill pay system.Obtain bids – In the event we are unable to complete the repair, we will obtain bids from local contractors to ensure we receive the best pricing.Accounting – We realize the importance of keeping track of all purchases and receipts for our rental. We have purchased Quick Books for businesses to guide us in the process. This will also be a valuable resource when we hire an accountant to complete our tax returns. The heart of the operation is in the accounting system. Control is essential. If you don’t control your business, it will control you (Amerpohi, 2005).Management CompanyThe company will manage reservations, changeovers and routine maintenance. They will be responsible for handling guest issues and emergency management and are responsible for general communications through the owner’s portal. They will communicate with the us via email and phone calls and track marketing and social media automation, collect reviews and collect and remit lodging taxes. Having a vision of where we want to be and how we’ll get there is a good start as it defines what we want our business to look like and what we want our guests to see and experience. The moment we started taking money from travelers in return for accommodation, we became a provider to the tourism economy. This is no small responsibility as a breakdown in any of the systems that contribute to the traveler having a great stay reflects on us. It’s great to be excited about our vacation rental but we realize the importance of paying attention to the core operational plan sets up a framework for success. Having a strategy and operations plan clearly defined, we have a vision of what we want for our business to become and the plan will assist us in getting there. BUSINESS RISK FOR RAKE INVESTMENT GROUP, LLCIdentifying our vacation rental business’s strengths, weaknesses, opportunities and threats (SWOT Analysis) will assist us to properly evaluate our business standing against competitors. The SWOT analysis is a key component of a good business plan. Things change over time and this is especially true for the accommodations business. Conducting a SWOT analysis provided some great insights into our rental business. Firms do initiate and implement changes in resource allocations in response to changes in economic conditions. Firms do this in order to improve the matches between their strategic postures and the environmental conditions (Ma & Karri, 2009). With the vacation season coming to a close, now is the perfect time to conduct a thorough year-end evaluation of the rental business to see how we performed this year and to make a plan to do even better next year.SWOT ANALYSISStrengthsWe purchased this home for $50,000.00 less than the appraised value. Tax benefits and advantages apply to this investment property. The property will appreciate in value. The property has strong appeal to the tenant profile we are trying to attract. It is located in a popular area and has consistent rental history. It provides a clean-living space combined with comparable rental rates. It is prime real estate that will attract a higher rental income niched to a higher-end tenant. WeaknessesUnderperforming occupancy rates could affect the rental income. Higher renovation and repair costs could occur.This property could be prone to weather damage.The owners do not live close to the petition could affect rental.Opportunities Improvements will enhance rental income.Location is in a really great area – rents are excellent. Local attractions to a popular area.Close to military base for family reunions.List on new channels to expand our reachThreatsChanges in the economy can affect rentals.The property could fluctuate in value.Repairs could be greater than anticipated.The property management could change and service could decline. The economic strength of the property could change.The neighborhood could deteriorate.In the event one of the owners becomes disable and unable to perform their duties, we will need to evaluate the business. Vandalism and damage to the property could occur.A natural disaster such as hurricanes can hinder tourism and result in costly repairs.Cost of insurance increases, property management increases and maintenance on the property could occur.Purchasing this vacation rental property is a good way to generate cash flow and obtain a steady income. The process was not easy and required some thought. Any business decision is about capturing some reward. To capture it, you take certain risks. The ?rst questions for a risk person are: What’s the reward we are trying to capture? Do we really understand the risk we are taking? Is it an acceptable risk? If so, the next question is whether the reward is high enough. But before you start to model the risk, you have to think about whether you understand the nature of it (Kaplan, Mikes, Simons, Tufano & Hofmann, 2009). Now that we have identified our strengths, weaknesses, opportunities and threats, we feel we are much better equipped to create a plan of attack that will increase the business’s performance in the year ahead. We have discussed this partnership at length and have recognized the potential risks. Purchasing this property has proven to be a great investment opportunity at this point. It has also allowed us to diversify our retirement portfolio. This new asset will deliver stable long-term cash flows while building equity in the real estate market. ReferencesAlvis, S. S. (2007). Chapter 12: Vacation Getaways. In Complete Guide to Purchasing a Condo, Townhouse or Apartment: What Smart Investors Need to Know Explained Simply (pp. 119–128). Atlantic Publishing Company. Retrieved from , N. (2005). How to Write a Business Plan. SolidSurface Magazine, 11(1), 40–45. Retrieved from: , J. (2009). How to Create a Simple Budget Having a business budget in place is an essential part of running a business. May 15, 2009. Retrieved from: , X, Yao, X., & Kotha, S. (2009). Entrepreneur Passion and Preparedness in Business Plan Presentations: A Persuasion Analysis of Venture Capitalists’ Funding Decisions. Academy of Management Journal, 52(1), 199–214. , Terri B. Clark. (2008). The Complete Guide to Your First Rental Property A Step-by-Step Plan From the Experts Who Do It Every Day. Ocala, FL: Atlantic Publishing Group, Inc. Retrieved from: , D., & Warner, R. (2017). CHAPTER 9: Getting Your Business Started. Form a Partnership, 171–183. Retrieved from: , R. S., Mikes, A., Simons, R., Tufano, P., & Hofmann, M. (2009). Managing Risk in the New World. Harvard Business Review, 87(10), 68–75. Retrieved from: , H., & Karri, R. (2009). Impact of firm performance on changes in strategic resource allocation decisions. Journal of Business and Management, 15(2), 171-185. Retrieved from: , S. T. (2018). Make a Coastal Living: The House Rescuer Turned Rental Genius. Coastal Living, 22(1), 66. Retrieved from: Maverick, J.B., (2018). Best Beach Towns in North Carolina. Retrieved from: , B. (2009). Web collaboration - how it is impacting business. American Journal of Business, 24(2), 7-9. Retrieved from: ., K., Isenberg, D., Herzig-Marx, J., Su-Ting Yang, & Wilson, H. J. (2010). Social Media Customer Leaders: Some Early Performance Data: Interaction. Harvard Business Review, 88(5), 20. Retrieved from , J. B. (2000). A Second Home for Fun and Profit. Making the Most of Your Money, 506. Retrieved from . ................
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