The 401(k) Rollover That Bought A $1.8 Million Inn | Bruce & Emily Haupt E98

From Corporate Careers to Vermont Innkeepers Welcome back to the hotel investor Playbook. I am Michael Russell, founder of Malema Capital and your host on this podcast. We talk story about everything you need to know to make money investing in hotels and in hospitality assets. My guests today are Bruce and Emily helped. They left careers running billion dollar budgets to buy a 16 room historic inn in a Vermont town of 180 people. Bruce, Emily, welcome to the show. Speaker 2 Hi, Michael. We're happy to be here. Speaker 3 Thank you. Very good to be here. Speaker 1 Yeah, I want to start with the decision that you guys made to leave a metropolis of roughly 6 and a half million people in Houston and move to a quaint little town of 180 people in Land Grove, Vermont. You know Bruce, you're the chief financial officer of this what multi billion dollar agency and similarly Emily, you were running this $400 million budget at Shell. What made a 16 room in worth trading those careers? Speaker 3 For so, I mean, we did this just because what we were doing wasn't the right fit. I mean, we were in Houston, we were in these jobs. Jobs are going great. We're both doing really well at it. Emily was awesome in her career. I was doing really great in mine. I just got in the national recognition. She's like launching one of the biggest digital software programs projects for Shell. Things are going really good. The kids were in a good school. Everything was like theoretically good, but it just didn't really fit us. And I think a big part of that is we had as a part of really as a result of Emily's career, we had gone overseas. So the last five years we were in Houston, the seven years before that we were overseas, 6 in the Middle East and Oman, one year in China. And I think that that time overseas really changed us in terms of kind of what we were looking for. And I think that there are ways in which Houston just didn't fit us. Maybe it felt a little bit more traditional and we were now looking for something a little bit more different. We were looking for a different environment with which to raise our kids. And so it was kind of a multi year journey to figure out, OK, this doesn't feel right, what do we really want to be doing? And then on a trip, our first overseas trip since having been overseas were in Italy and the Alps at this incredible place, incredible, incredible place with a great story. And we, and that is apparently where everything came together after having researched STR's and looked at other opportunities. But it's where everything came together and we were like, maybe we should get a hotel and. Speaker 2 We could do this, Yeah. How hard could it be? I joke that that's my toxic trade. I, I, I will often say, how hard can it be? Because we saw this potential for a better quality of life. And I think that's something we've both agreed on over time, that it didn't feel like Houston was the right fit for us. We moved three times within the city within five years looking for the right fit. And it never felt like it was the right fit. And when my company was offering the voluntary severance with a major reorganization and gave us plenty of time to think about it, we started really thinking about what could life be like if we were no longer tied to Houston and no longer tied to the oil and gas industry, where where I spent 17 years in a career. And we started thinking much more broadly, what life do we want for ourselves from a career perspective? What do we want to build for our family and where do we want to raise our kids? And through a series of decisions and events, we ended up finding this gorgeous little valley in southern Vermont in the middle of the Green Mountain National Forest. And it truly feels like a destination that we are so fortunate to live in. This place that people come to on a regular basis. To feel at peace, to feel the calm and and experience the natural beauty that we are fortunate to live in now, every single day. Unpacking the Inn's Unique Business Model Yeah. So was your choice then driven more by wanting to change your location or wanting to run a hospitality business? Speaker 3 I think in a way, I mean, I would say it probably leans more on location, but I think it's really both because I think the hospitality part of the answer is that we were looking to just have more autonomy. I mean, to be able to create something as a family, to have something where we have more actual ownership. I mean, we both were coming from largely corporate backgrounds, big bureaucracies, and it's not always enjoyable to be in a big organization. I mean, it's always enjoyable in every type of organization you can be in. But the opportunity to really build something and, and to have that ownership, I think was something that was very attractive to us, a challenge and also just a way of potentially even building some level of generational wealth. I mean, for our family, for our kids to be a part of that. Speaker 2 I think we also recognized when we started looking into St. Rs and commercial real estate type opportunities that running something like that on the side while we were also working full time jobs, also having three young children, elementary aged and younger, it was not feasible for us to try and do all of those things at once. But if we were going to jump into and this alternate pathway and completely shift what we were doing for income, lifestyle, career, all of the above that we needed to go all in and create a new environment where our lifestyle became our career and we live on property. We are here all the time. We do all of the jobs at the end in the restaurant and we are immersed in it. But that allows us to have more flexibility to spend the time with our family when we have opportunities to with our kids. Speaker 1 Walk us through what you actually bought. So give me the details of this property. We know it's in Vermont, 16 rooms. What else can you share? Speaker 3 So the property is 16 rooms, as you said. We have a full service restaurant, has its license for 55 covers. It's here in the Green Mountain National Forest on 23 acres, 24 acres, depending on how you look at it. We have an art studio. I think this is one of the things that really stood out to us when we first found out about it. It's a 1500 square foot art barn that's up on the hill back behind the end going up kind of up the mountain. And in that art studio. It's really, it's one of the really interesting, one of the really interesting things about this place where we host 35 plus art workshops here. We have very prominent international and national artists, I mean, along with just like really phenomenal teachers who come in and teach art workshops, destination painting retreats. And so they will come in and teach and you'll have anywhere from 10 to 15 to sometimes 20 people who will come in to take that workshop with them. They're on a full room and board package. And so you can see how as an inn or as a hotel, how that could make a big difference if you are able to, especially for these art workshops, they tend to be midweek, so they're not on the weekends. They also operate in the shoulder seasons as well. But it's, it's both a really great thing for the business. That's really according to the past owner and what he believed and what other people believe is it's really what helped to sustain this place and the slow years. And I certainly believe that. But it's also, it's just a really cool thing to be around. I mean, with the family, to have all these artists who are here and what they're doing and the types of conversations that they have. Speaker 1 I want to stop there. I want to unpack something that gets really important distinction. So most people when you say, hey, I'm an innkeeper, they assume that you run a business that provides people with short term accommodations and that's only a portion of your business. 16 rooms is not the whole story. What you just described is there's the accommodations, but then there's additional aspects of the business. There's food and beverage which I want to get into, and then there's an idea of catering to a specific clientele. These are group events or retreats where you get bookings in advance for groups of people that want to come and use the facility as a destination instead of just people like honeymooners or, you know, romantic getaway things where maybe they're a little bit less predictable. And the reason why I want to emphasize this from a strategic perspective is if you told me you're on a 16 room boutique hotel, I would immediately do the math and go, wow. Not for me because there's just not enough revenue, I would assume unless it's like Uber luxury. But the reality is it's probably probably not like The Four Seasons. That's just what I would assume. And so from a revenue perspective, when I kind of think about your careers and I think about where you might may have been in the economic spectrum of things to go and run a 16 room boutique hotel, My initial reaction was, wow, that's a big pay cut. But you're describing a variety of things. OK, you walk through lifestyle choice, it takes precedence, but then you walk through, hey, it's more than just an inn. We've got a full restaurant and we've got a business that caters towards folks that are looking for retreat bookings and that changes the ball game because like you said, it's all inclusive. You can also charge a premium for retreats because I know from my own experience with our hostels that we actually charge more for group bookings, not less. It's sort of contrary to what people think. Oh, if you book in bulk, you book as a group, then you maybe get a discount. The opposite applies in our situation. And I don't know how you guys handle this, but the reasoning behind this is there's not many locations that can handle groups. And so when you're marketing a niche product to a specific demographic where they don't have a lot of options, then you can upcharge or you can charge a premium for that, that type of service and that type of experience. And I, I think, I hope we're going to unpack this a little bit more, but that's sort of the direction that I, I kind of wanted to go down because I think that a lot of listeners could benefit from how you guys are packaging your hospitality business as more than just an inn, but these other aspects that are auxiliary revenue sources. And I've seen this from, you know, time and time again that people when they describe their hospitality hotel, if it's, if it's not a huge Marriott or something, they got to find ways for auxiliary income. And, and this is a perfect example where folks can go and get started without having to raise tons of money and be some huge private equity company and can go carve out a nice lifestyle for themselves in a remote part of the country. And, you know, be relatively profitable and, and have a nice, have a nice, nice life with that. The Landgrove: More Than Just an Inn So I know I just went on a tangent, but I believe that this is what excites me most about your story. Speaker 2 So you mentioned a phrase that stuck in my mind because you said you're more than an in. And when we bought the place, it was called the Land Grove Inn. And we had a lot of discussion about how are we going to brand this place because it is so much more than an inn. And on our website on thelandgrove.com, the very first line under our headers is we're more than an inn because we are an art studio. We are been in and we are also a full service restaurant that's open to the public five nights a week. The previous owners, they were the ones who had this vision along with some, some friends and partners, business partners in the area had this vision to build this art program. And it's been about 15 plus years or so of building this arts program at the Land Grove Inn where artists have been coming here for, you know, almost 2 decades now. And it has been this, this long journey of building the reputation. And we were incredibly fortunate to come in at just the right time when the previous owner was ready to retire. And we took it over mid flight. Really, truly, we, we closed on the property and the very next day we hosted our first art retreat as the new owners. And it was the end of October in 2025 and we hosted 6 back-to-back artwork shots through the end of the year. And that was how we started. We, we dove right in head first, but we really embraced that distinction between the three lines of business that we have. And that's why we rebranded it from the Land Grove in to the Land Grove because now we have the Land Grove studio. We've even further rebranded our restaurant to have its own independent identity in the last week so that it's more easily searchable, more easily findable. It has its own independent set of resources available to it as a public facing restaurant. In addition to the restaurant serving our guests who join us for not just artist retreats, but we also post yoga, we host scrapbookers, we host celebrations of life, we host a a retreats, anything that requires people coming together, we can host it here. And we're actually ideally suited for groups of up to about 40 because of the infrastructure that we have in place that was built by the previous owners and and started by them. And now we've taken it over and are continuing to grow that even further. Speaker 1 Hey guys, if you're getting value out of this conversation, do me a favor and take 30 seconds right now and leave me a review on Apple Podcast or Spotify. It literally takes half a minute, but it makes a huge difference in helping other hotel investors find the show. OK, now back to the episode. From Corporate to Inn: Transferable Skills I want to stop you here if I can real quick because I'm first of all, I'm very impressed with what you guys are doing. But when I look at when I consider your resumes and your background, I mean, nothing is screaming. You guys are qualified innkeepers here, you know, like you just jumped right in to this completely separate universe that you said, hey, we got off the plane and it's like dive right in. But I mean, can we maybe unpack a little bit about your backgrounds? Because first I was surprised like your arc is unique, right? You are a high school dropout. You you got your GED, but full circle here. You, you went and you got a masters degree from Harvard, right? You have a PhD. I mean, that is, it's just a very a variable career arc there. And obviously now you're working in hospitality and Emily similar. I mean, you have a dynamic career background as well. We're working 16 years at Shell as a geologist. You guys work internationally operating this huge budget, you know, $4 million budget. But simultaneously you you also played a geologist on Sesame Street and his real children's books. So it's like, you know, when most people think about the skill sets of the careers that you were in, they don't necessarily always translate to innkeepers and retreat operators. But you guys have this background that's that just share that tells me that maybe you're you're more versatile than the average person. Can you kind of walk me through how you connect the dots between your former careers and what you're doing now? Speaker 3 I mean, I'll, I'll oversimplify it and just say that I think there's both a combination of a really special thing about hospitality is just, it's the environment where it really fosters. I mean, in the best case, you, you create, you help to nurture an environment where it's about connect, connectedness and relationships and people having a good time and feeling seen. And, and that is certainly something that appeals to us and to be able to, to be in that space. But then at the same time from our corporate government careers, I think that there's, there's also just, I mean, we each on a whole array of different things in terms of data processes, finance, etcetera, etcetera. And so that's a bunch of different skills that we can then bring to bear on the operational and financial aspects of. And then to the extent that Emily might have ever been bored in her career, she has an unlimited canvas here with which to go out and procure quail and to grow quail, to renovate rooms, to become a social media marketing guru who just made a quite a clip today where our our dog as a ghost in one of our newly renovated rooms. Speaker 2 I also cook breakfast three days a week. Speaker 1 Well, what's the through line between running a $400 million operating budget to, you know, doing some of these things you're describing now? I guess what's the connecting thread like how did, what are the skills from your previous careers? What would skills apply for what you're doing now more specifically? Speaker 3 I guess just talking a little bit more about skills. So if I think about Emily and what she's done, I mean, there's both things in Shell and outside of Shell. So when we were overseas, she ran some large social events. She is a consummate host. She's a great cook. She's very creative. She's able to bring that to bear. She's also an incredible project manager. Sort of she been doing process analysis, sort of interior decoration and sort of redesign and renovation. So there's all these different parts of her and hobbies and interests and such that she's able to apply here. For my own part, at the very least, I could say just from just looking out like almost like resume items and the types of things that I did in my last work. So I've been, I've done done IT consulting, finance consulting, I've been in like a strategy and innovation office. I've done a lot of those different types of things in government. And in this role, I mean, certainly the, the scale is much smaller, but I'm able to apply all of that and able to see where the Rover meets the road. I'm not in some abstract place where I'm advising the mayor or someone in the government of Oman. I'm here in a position where we can actually, if we see a problem, we see a new technology that we need, we can actually go out and very quickly acquire that, implement it, test it out, see how it works. We can interact with our customers. I mean, it we're really connected with, I think one thing that made us probably good at what we did is I think we both could see both the big picture, like what's the purpose in our past organizations, but then also the skills to apply things kind of in the weeds. So to see both the forest and the trees. And this is a great environment for doing that too. Like what is the purpose of this end and the art program and what we're doing? And then how do you actually execute and change things And how do you build a team around this? Because I mean, we're not, we are not alone by any means. We have 15 people that are working with us that are. Speaker 2 I would like to add one thing about Bruce that he did not mention yet, which is that he is a very, I was about to say aggressive, but aggressive comes off sounding wrong. But he is an incredible networker. This is a person who will go on LinkedIn and find someone that he wants to talk to anyone, doesn't matter what role they're in, and he will send just a direct message to them and just introduce himself and say hey, you seem like a really interesting person and I really love your work on XYZ and I'd love to chat with you about it sometime. And he cold calls people like this. Being willing to put yourself out there and go for it without doubting yourself, without second guessing your capability or whether it's worth it for you to reach out to someone new. Bruce will absolutely do that without hesitation. And I think that's gotten us to so many different places and gotten us through so many of the unknowns that we had, especially going into this whole new line of business that neither one of us had any real depth of experience in, right? So just asking, being being unafraid to ask questions and talk to people and seek out any references that you can find, any information you can find. And Bruce is truly exceptional at doing that. How They Financed a $1.8 Million Inn Thank you. Speaker 1 So I want to shift gears a little bit because I really want to jump into the capital stack. I want to talk about how you guys were able to finance this because you did some of it with a structure that I've not seen with a hotel hotel deal before. Maybe let's start with the purchase price, which correct me if I'm wrong, was 1.8 million. But can you walk me through the four pieces that you put together to be able to purchase this? Speaker 3 Yeah, so 4 pieces, there's the traditional bank partnered with the Vermont Economic Development Authority. It's kind of the Vermont version of the SBA. And then there's also seller financing. So we heard about that on podcasts like yours when we were first figuring some of these things out. But then the other piece that came up is using Rob's four O 1K. So it's within the US tax code Rob Standing for Rollover for Business Startups, which allows you to bring your 4O1K not to take a distribution on your 4O1K, but actually roll over. 401K your retirement funds into a new corporate entity. It does require that you set up AC Corporation. So we are AC corporation for this purchase on an LLC or an S Corp. But there's those 4 components and that's where of. Speaker 1 Down payment your your, your own down payment, right. So you, you had a traditional bank, you had kind of like the community version of an SBA, the Rob's and then down payment. Can you walk us through like, well, what? How much were each one of those? Speaker 3 Well, the Rob's was our down payment and then there was seller financing. So, OK, Yep. So 1.8 million, there was 525,000 each split between the credit union, the traditional bank and Vita, the Vermont Economic Development Agency. And then we had 450,000 that came from Rob's sort of equity in the four O 1K money. And then we had a $300,000 seller financing note. On the seller financing note, that was where 4 1/2 percent interest amortized over 15 years, sale payments in the first year, which has helped us significantly at least in terms of like renovations and fixing things up and a balloon payment in year 6. So very, very appreciative to the seller for working with us on that because it helps a lot in the first year. Speaker 1 And so in what position was the sellers know if the seller was in second position? Speaker 3 It was in third position. So I mean that was one of his concerns too, because you've got first position is the bank Vita was willing to take. So there's a difference between Vita and Vermont and SBA as the SBA I think requires that they take first position. I remember right, maybe I'm wrong. Speaker 1 No, it's second position for the SBA as well. Speaker 3 OK, OK. Yeah. So he was taking on third position. And so that was, I mean, that also influenced, of course, what's the amount he was willing to do for seller financing because obviously should things not go in the right direction, then, you know, being in their position is not necessarily the best spot to be in. Yeah. Speaker 1 And four and 4 1/2 percent interest, right? Is that what you said? And no payments per year. I mean, that is very attractive. What was the motivation of this seller? Were they retiring? Speaker 3 Retiring so he and his wife had bought the place 2324 years ago. He was definitely looking at retiring at this point. And I mean ends and B and BS. They don't necessarily move really quickly on the market. Speaker 2 I think he was also really happy to be selling it to family that was going to live here, own it, operate it and not a corporation that was going to attempt to flip the place. We were very firm on keeping the art workshops going to keeping the artist retreats going the way that he and his his wife had created created them with that vision and we wanted to maintain that and grow it even further. And I think that was really important to him to support us going forward with it as well. Speaker 3 I mean, we had heard that that he had had multiple offers that he had turned down in particular, what was like, here's someone who wanted to come in and scrape the building or someone who wanted to do something that was going to result in the art program ceasing to exist. And I mean, an important note. I mean, his, his past wife, his late wife. I mean, I think this was really a big part of their, but also him sort of really thinking about the legacy that that they had together and building this and wanting to make sure that it continued. And it's not something where he had to twist our arms on it because it was something that was just really exciting for us. And it is surprising to us that anyone else didn't want to continue it and keep it going, given what it actually does for the yen and the business that it actually creates. Speaker 1 Yeah, and I assume he must have owned this for a while. And if we go without assumption, The thing is, you know, he bought it for 1.8, he's only carrying back 300,000. And so although there is risk that in third position that 300,000 might not get paid, but the benefit is the other 1.5 million did get paid through other sources. And so depending on if he had a mortgage or whatever debt he had, there's presumably a comfortable cushion to where he still got paid a good chunk up front. And so these are the types of things that I feel like listeners can benefit from if they're entered during a negotiation to start kind of unpacking. Well, what is the seller's motivation? What are their needs? You know, how can this thing work where it doesn't necessarily need to always be 100% seller financing? And often times the seller will take a second, or in this case, third position if there's still enough meat in the bones, if they're completely leveraged. And they were, they were to sell this and after paying off their own debt that there's nothing left for them that that's probably not a good candidate for seller financing. But in this situation, it worked out. And to the extent that you guys had a human connection with, with the seller, that played a role as well. There were other offers, but he really liked the idea. The Ins and Outs of ROBS Financing We all want to hop back on track with the capital stack here because I think this is really critical. So what you described so far is that there was a regular bank loan, you had a Vita loan, a Vermont Economic Development Association loan, the seller note. But in between there was the the Rob's, which I forget the exact, you know, it's an acronym. But how does this work? You take money from your retirement account and you start a corporation and then you become employees of the corporation. And in this way you avoid getting taxed with the withdrawal from your 4O1K. Is that essentially how? Yes. Speaker 3 Yes, that's right. And I mean to the extent that anyone wants to look into this, I mean, it's not something I had actually been aware of it all. But there are certainly a number of specialized firms out there that do this and where there's information that's out there on them and how to get this all set up. Rob's though, I mean this is something I think it was created by Congress back in the 70s or 80s. So it has been around for a while. This is something that really helped us where in terms of down payment equity in France when we're looking at properties there, I mean we were one of those issues that we were under capitalized for being able to make something happen. And so in being able to use our four O 1K funds that provided us a whole heck of a lot more money available to us. You know our investor is then you know we have an investor in this property and it's our four O 1K. Speaker 2 And importantly, that money from the Robs was considered. It was counted almost like cash and so it was effectively cash that we were bringing to the table for for that. Speaker 3 And that main. Speaker 2 Purposes. Speaker 3 And that made the seller much more comfortable too. When you talk about seller financing, looking at how much we were putting down, like we weren't putting down 10% like what you might see with a traditional SBA loan, I mean putting there was. Speaker 2 Barely scraping by, like what pennies can we pull together personally, right? We had a substantial amount of money that we were putting down. Speaker 3 And that wasn't the full amount either. That was how much we put down for the purchase. We had additional cash flow that went into the business as well to give us operating reserves as well. Speaker 1 Yeah, I, I think the idea of pulling from a 401K is, is not necessarily new or unheard of. What, what is unique about this situation is most people that promote, hey, just pull money out of your 401K, get it out of the stock market, take that money and buy a hotel. What is involved with that is, is paying a penalty and they just absorb that penalty most of the time, which is painful. I think it's 10%. I'm not, I'm not exactly sure, but I know that it doesn't come without cost. And so when you go through the ROBS route, I assume that there's some cost of that money as well. Can you walk through maybe and summarize like what is the cost of a ROBS going the ROBS route that maybe a normal bank wouldn't involve? Speaker 3 Or include and I mean one thing I would say that we did see is that you can also I guess use a four O 1K to do self-directed investing in other properties. You can't manage them yourself. So you have to have that arm's length distance. But with the Rob's and in this situation, it's like it is not a problem for us to in putting the money into this corporation that we are buying. We are actually able to live here as well. So there's it is a different arrangement. But in terms of costs, so there was, I mean there were the fees to the firm that worked with us on this. There's a couple of other firms, I would imagine anyone doing this is going to end up supporting one of these, but it was $5000 effectively for us just in terms of all of the setup and compliance and form the corporations and all these things. Just to get it started. That 5000 also counted as equity into the company as well. So we did spend it with them, but it also is actual cash equity that we have. Most of the business at least though is actually not owned by us. Most of it's actually owned by the 401K. So that's a interesting fact. Cost wise though, there's that 5000 in terms of the initial setup. The other costs I think really revolve around compliance and to the extent that you need specialized accountants, tax people potentially to look at this. And I think I've learned over time that they don't necessarily have to be as specialized. I think there might be some more flexibility. There's a lot of qualified people out there. You do have to form AC Corporation. So that limits you in terms of what you're able to do. And to the extent that your corporation, your 4O1K, owns your business that does, then put in place certain rules around what you have to do. Speaker 2 There was no penalty for moving it because you rolled it over into a different IRA. We're. Speaker 3 Not paying a percentage each year, there's no assets under management or anything else like that. It's OK. So I'm going to continue to pay this firm X amount per year. We're using them for both sort of plan administration related to the 401K. We're also using a separate service for the from them on accounting. It's not required, but it's just especially with us jumping into something that's brand new with a number of different rules and or we don't want to go afoul with the IRS, having that assurance that this is a firm that knows what they're doing and that they're tied together, that was important to us. Speaker 1 Well, knowing what you know now about this process of going through this ROBS procedure to pull out money from your 401K, is this something that you would do again? Would you repeat this if you could, going back in time? Speaker 3 Yes, absolutely. I mean the amount of money we are able to bring to bear via the Robs, I think just gave us a whole lot more latitude to do more. It gave us a lot more cash available in terms of renovations and to make things happen without having to go out to find external investors. I mean, really and truly we are through our four O 1 KS able to invest in ourselves and to the extent that we think that this is a, a sound investment, it's nice to be able to bet on yourself. Draining 401(k)s and Quitting Careers Yeah. Did you ever go through a moment of fear? Like are we crazy for draining and draining our four O 1K? Did you have moments ago? Speaker 2 300 times, like 300 times. There was, I remember the morning I was walking in because there, so there were, I had to quit 2 jobs, right? Two very nice careers that I had worked hard for, One that was 16 years, one that was six months. So the 16 year one that was with show and there was a, we had a time period where where we were going through this reorganization and internally you had to apply for the jobs that you wanted in the reorg in order to be considered for placement in, in the new organization. And I had applied to just one job and I'd been second guessing it all along. I talked to a dozen different people about things, right? And really, really questioning it. And the deadline was like 6:00 PM on a Friday afternoon of putting in all your applications. And at 5:00 I pulled my application and I deleted it. And then Bruce got home that day and I was like, Hey, I think I just quit my job. And I was like, because we, we've been talking about this, you know, for months and months we've been talking about it and it was like, this is what we're doing, right? And, and that, but that moment of, of actually hitting delete my application, rescind my application. That was intense. Speaker 3 I mean, you did that and you're talking about the shell. Yeah. But I mean, even later on with Ernst and Young, when you were, I think you had a similar moment. Speaker 2 Yes, I was going in to quit my job that day. I knew that first thing I was going to go in and I was going to message my manager at the time. And I remember looking at Bruce before I walked out the door. Just so we're being clear here, I'm quitting today. Like that's what I'm doing. I'm going to walk in, I'm going to talk to my manager and I'm quitting today. Like we would like almost like when surgeons go in and they talk to the person they're operating on and they write, yes, on your left hand and no on your right hand. So that there's no doubt, which with that, this is what's happening today, right? And, and so all of those confirmations between ourselves of yes, we're doing this right. Like, let's just make sure we're clear. Speaker 3 But she also, she had to quit her job and she had to quit her job first because for us to put in the offer and to do all this, we had to have the money and to get the money. I mean to roll the money out of your four O 1 KS you, you can't, you can't still be employed and roll your money out of your your four O. Speaker 1 One, this is a really important distinction. I think that that is worth knowing. Speaker 2 Because they were employer managed 4 O1 KS. So in order to roll it over, there were all these periods. Speaker 1 You got to burn the ships. Speaker 3 And we had to manage the timeline around that too, because it doesn't immediately go in and so she had to. Speaker 2 Have like 90 days or something like. Speaker 3 But then I mean, that was essentially, and then I'm actually just now, So what I do, Rob's again, we're actually in the process of moving my retirement funds over now because mine didn't come over. I didn't quit my job just yet. Actually. I mean, it's also the fact that Emily's retirement funds were much more significant. So in many ways, it's really it's that, you know, the person who's sitting right here next to me is the one who really owns the business. And I am and I am hopefully her favorite employee. Navigating Business and Marriage as Innkeepers But yeah, so. Speaker 1 I've got to ask, what's it like working with your spouse, especially in a, in a business in which it requires the two of you to be so hands on, operationally speaking? There's got to be moments where there's tension or maybe there's conflict in like, well, difference of opinions. And at the end of the day, you guys got to not just be business partners, but your husband and wife. And so how do you guys handle that? How do you handle your your relationship and your business without things falling apart? Speaker 2 I think there's two things with that to answer that one, we don't see each other a lot throughout the day actually. And and a big reason for that is because we each trust each other with the elements that we are leading, right? So Bruce takes on certain elements of running the business and I take on different elements of running the business. There are places where it overlaps and there are certainly more strategic discussions that have to happen with both of us together. But largely speaking, when it comes to I'm doing all of the purchasing and procurement for things, for the restaurant, for the hotel rooms, for all of you know, managing inventory, all of those things. I don't discuss it in detail with him. I just do what needs to be done and he trust me to do that, right? So I did this whole deep dive on on costs, right, of goods that that we had to purchase for the end. I looked at 7 or 8 different vendors that we purchase things from and did a, you know, unit cost analysis on the 2, 100 or so things that we buy on a regular basis to figure out where is the most cost effective place to purchase each of these items from. You know, sometimes it's Amazon, sometimes it's our local food supplier, sometimes it's something else, the local grocery store that has specialty items, right? So there's, but I take that on and he doesn't micromanage me and I don't micromanage him, right? We, we have, we've always done a really good job, not just in our marriage, but now also in our business of kind of subdividing out. These are the things that you manage. These these are the things that I manage and we talk about it when we need to, but we don't get in each other's business. We really trust each other to run those things and execute on the decisions that we when we do have those strategic discussions, we understand how each of those strategic discussions trickle down into the things that we are each managing. Speaker 3 As the husband, I think it is my role now to say that everything she said is absolutely right. But I, I guess I would also add, I think, I mean, there are definitely points of friction. I mean, earlier today, I think that, you know, Emily has 100 things. I have 100 things. We probably have a total of 500 things that we have to do. But she had her whole agenda. I have my things. And, you know, it was kind of like, Hey, can you help me with this thing? And it was like I was feeling overwhelmed in that moment with my things already. And you know, there was, there's a way in which it's certainly not taking, taking things personally when there are disagreements too. I mean, it's about, I mean ultimately it's about the business overall. What do we need to do day-to-day to really make sure, especially day-to-day to make sure that the guest experience runs and is operating. I mean, there's all these long term strategic goals, but then there's also just like, okay, we need to make sure that just operating today that we do what we're supposed to to make sure that people have an awesome time. Speaker 1 Yeah. Speaking of operations, though, I mean, can I ask you, what are some of the the surprising things that you've learned now that you've been operating for about a year or so that you didn't expect going into this? What were some of the challenges that surprised you? Speaker 3 I mean, that's like another couple episodes that we could do. I mean, some of the basic ones I would say. So we were coming from corporate jobs. We were not coming from blue collar. We were not at least not anytime recently have we been officially in hospitality roles. And so the hospitality industry is different. Labor market works differently. I mean, to the extent that you have a much more extended HR recruitment process, for instance, in either of our past organizations in hospitality, it's more like, OK, we need people. And I just post it on Indeed and then applications start coming in. I talked to someone and I just hire them and it's like, OK, you see like you're a normal person and you're good. Or hopefully maybe there's someone else who says that. I mean, especially if they're vouch for. I'm oversimplifying. We don't just take anyone who's breathing. But I guess the point being that it's just it's a much faster process, at least so far. It can end up being more intuitive. And then also it tends to move much more quickly when people have left as well. Like we're coming from organizations where things are much more structured and someone's going to give a multi week notice. Speaker 2 And it's a big deal for someone to leave, right? You, you would never dream of like walking out the door of your corporate job and being like, I'm done with this place, I'm out of here, right? But that happens in hospitality. It's something you never know why people's reasons for walking out, but we've had it happen a couple of Times Now. We have, you know, we have about 12 or so staff on hand at any given time and, and over the course of a year, you know, few of them have walked out and it's just like, well, OK, I guess that person's gone now. We will never see them again. OK, I don't know why there are reasons for walking out and in a lot of cases, but it happens. And that's that is a very different working environment I think to to have gotten. Unexpected Challenges: Staffing and Finances What are the challenges of staffing in such a small town? I mean, you've got a population of 180 people. I don't imagine the recruitment pool is too large. How do you guys handle that? Speaker 3 Yeah. And so, I mean, one thing that's important to note. So we're not just living way out where there's nothing around us. So we're this itty bitty town surrounded by a whole bunch of other little towns. And they're all generally bigger than us actually. So there are more people in the area quite a bit more. So there are quite a bit more people in the area now. I mean, the big constraint on hiring and hospitality in the area, it's just, I mean, it's, there's not that many people available. And that's because there's not affordable housing. And that's not unique to us. I mean, that's something you would probably see in most destination areas. I mean, if you're out in the mountains in Colorado, here on the beach is somewhere else, it is a place that is expensive to live. And so you have a lot of people from the Northeast and people who live in Florida and other places where they have a second home up here. There's a lot of properties that have been purchased and turned into Airbnb. So of the available stock of just like places to live, there's less just because of that. It's more expensive. And so it is hard to find people. There's only so many who are here. And if you do want to be able to recruit and people from elsewhere, you have to be able to answer the question of where are they going to live and how. Like we just posted position for new prep cook and seeing a lot of different applications. I'm getting tons of applications. There's a lot of people who want to move here and to live in the area they don't necessarily know at least yet. I mean the cost of living up here. So that's something that we have to be able to sort out if we're going to be able to bring someone in. Speaker 1 Well, how do you overcome that? Speaker 2 Well, we're, we house people honestly. So we have one of our, one of our rooms right now is dedicated to one of our staff. At one point we had two of them dedicated to staff. We've also got an apartment that we are renting from the local person who, who you know, is currently occupied by two of our staff that are in a relationship. So they they live there together and in this other apartment that we're paying for. So we have to include that weighing out is it more cost effective? And also for the job that they have, is it better for them to live on site where they are here 24/7 just like we are, but then we lose a guest room when we do that? Speaker 1 Yeah. Speaker 3 Really important. Speaker 1 It's like, really important. Yeah. The labor challenge is real. Like we went through the same experience with one of our properties in Maui where it's so darn expensive for people to live on Maui that you, we just can't pay them enough for them to be able to retain employees. So our solution was we rented the entire building next door to our hostel, our business, it was basically an apartment building and we put in 16 people in the in the building next door. We had multiple apartments and people had to share rooms and such, you know, so forth. But ultimately we ended up buying that building strictly because it was so critical for our business model. And so this is something that if someone's evaluating buying a hospitality business, they, they got to account for where their staff is going to live. And to your point, Emily, you can house them, but then you're eating into revenue. And it's just that it is a constant struggle that we dealt with because we're paying this mortgage for the building next door and that is just eating into our profit. But the alternative would be to eat into our revenue. And so we choose the lower of those costs to just in your case rant our case, we we bought, but that to house our employees and something that we control. So I think it's a really important distinction to make when you're evaluating not just you know in your underwriting sheet you get, you guys have mentioned this before we started recording how you know some of the things that some of the assumptions that you make initially those those get challenged and you hope that you can be as accurate as possible in your assumptions after you start operating. Have you found that now that you guys are operating that some of those financial assumptions didn't, didn't pan out as accurately as you initially anticipated? Speaker 3 I think it's when you, I mean, you look at a podcast like this in your guests and I think that month to month cash flow forecast is so important. And I think to the extent that you do a cash flow forecast, I think what you might find, and I hope I'm not the only one who's experienced this, but where, you know, the increased revenues that you were forecasting out in the X month, you know, might come a little bit later. And the expenses that there's some expenses you hope you never would have had and they come earlier and, and, and more frequently. And so I think, I mean, that's really part of the story. I mean, when we had different, I mean, we've updated a lot in terms of FF and E. There's been, there was a substantial renovation. I mean, it was supposed to be a substantial renovation in March and April, the five week closure, which ended up being probably a 4X substantial renovation actually that happened. And that certainly impacted, for instance, cash flow. And so then it's kind of pushed out a lot of those different numbers. And I guess the really nice thing to see now, at least now that we're here is that now we're seeing all the momentum building because it was like that. It's a big hit to be closed for any period of time to have those higher expenses, have some bigger revenue assumptions not panning out just yet. But then to the extent that you have enough operational reserves to make it through that to then start to see the fruits of your labor. So we're now in that phase very thankfully where the numbers are starting to come in very positively. Speaker 1 Yeah. Building a Family Legacy and Expanding the Inn I'm curious to know where this goes long term, you know, 5 to 10 years out. What does success look like for you guys? Are you guys still the ones running this or is there someone in place operationally that's running it? Or is there a sale somewhere in that picture? What do you guys think success looks like? Speaker 2 I would like to continue operating it to get to a point where our kids will work here. Honestly, we have three young children that are elementary aged. And I think our vision when we when we bought the place was let's own and operate this with our family. We want to raise our kids with a good work ethic and to build a family business and to, you know, work in the service industry when they're teenagers and to learn the value of being kind to strangers and that that's actually how your business works. And that's how most businesses work around around the world. I think operating it for at least that long. I think this is a place that needs a heart and a soul and needs people who really love it in order for it to continue to be successful. There's a tremendous amount of character to the place. It has an 1840 barn that's converted into this Tavern and bar area that smells like burning firewood when you go in there. And there is, there is this almost deep emotional connection to this place that a lot of our guests either have had from being here for decades, coming for decades, or they grow it when they're here. Right. There is part of the success of this place is the authenticity and that very personal connection that comes when you are visiting a family on an operated inn and not a cookie cutter box hotel in a city, you know, 20 or 40 minutes away, right? And I think in order for us to preserve that, it almost has to stay in the family, right? Speaker 3 I mean, our staff talk about it being about like this is a place of real people. Our guests talk about that like it's in connectedness and connection and that definitely resonates with us. But then talking about vision, I mean, it's like this is a place where, I mean, this is an amazing community. Like the people who live here means this is a community filled with just characters with great stories. And it's the kind of place that I mean, we chose that we want to live here and we want to live here and be a part of it. I would say we would hope that as the place continues to stabilize, that we're able to bring on, you know, to to be better staff where, you know, for instance, where we have more time to be a much bigger part of the community. I think there's also something that that we had talked a little bit about is, I mean, there's there's a long term vision too. So we could there's a lot of optimization to be had here already right now. But then there's also, this is a 16 key N, but we're on 24 acres and we have demand that exceeds our supply of artists and workshops. And so the idea that we could expand what we're doing, like to have a larger, you know, quote, UN quote, creative campus, like we could build a larger studio where we could host more workshops. We have the space where we could build potentially, you know, if things work out, you know, 510, even 20 cabins or tree houses or a frames. And the economics on what the business would look like if that happened would be, I mean, multiples above what they are now. And the business is great right now as it is. But if it's just thinking about long term, I mean it's it's AI mean we're going long on this certainly for our family and I think for the whole community here that supports the place. Speaker 1 For someone sitting in a corporate or maybe a government job right now who's dreaming about buying a small in or, I don't know, a hospitality asset, I wanna know what's the first, What's the first practical step you tell them to take? Your First Steps to Buying a Hospitality Asset Apparently this is a difficult question. We weren't ready for this one. That's. Speaker 1 A good question. Speaker 3 I think you mean to do the I'll go with the assumption that we're looking at something owner operated like us. And so in that case, I mean, you have to have an idea of what it is you're looking for. So we we are a family and so we do have three kids. And so for instance, we needed to find a place that we needed that we wanted to actually be. So to have some kind of an idea of the type of place and then to know your constraints on some of the property. So if you were going to be living on site, there's a lot of places that aren't going to fit because they're not going to have a space where you can actually live. I mean, certainly for a family of five, I mean, I think that there's a lot of the search and looking at properties that is very important just for kind of figuring out what you want to do. Speaker 2 Now any of these properties that we saw, we saw 23 or 24 properties, right? And there were elements of good and bad in every single one of those properties. A few of them, as I mentioned, were like an immediate no. You knew it right off the bat. This is not going to work. But there were some that we walked that path pretty far with, with each of our kind of top 3-4 or five properties. You know, we dug a little deeper, we got to know it a little better. We got to deep dive into the financials. We got to try it out. We got to imagine what would life be like living here? Where are we going to live? Where are our kids going to go to school? Where are we going to go grocery shopping? How are we going to, you know, how is life going to feel in each of these kind of top places that we love or that could work And you don't really know until you try. So my advice to anyone who's considering doing this is to just start looking and to start taking yourself seriously because it's a dream for a reason, because you can picture yourself doing it. And if you don't start down that path and start trusting yourself and start becoming even more self aware of what you need in your life to feel successful and fulfilled, if you don't take that first step, no one's going to do it for you. You have to do it yourself. Speaker 3 Can I see something that's more technical, maybe not as I don't inspirational perhaps. I mean, I think something this maybe wouldn't be one of the first things that I would have actually done. But I think something that's really helpful is, I mean, when we first, when we started having the conversations with the banks, with the SBA representatives, with Vita, that was really where despite the fact that we have read this or read that or you know, or Chad GBT said this or Claude said that about, you know, what we would need in terms of our capital stack and how much you would need to invest. I would say that those answers didn't necessarily always align with what the banks actually said when we talked to them. And so having conversations earlier versus later with a bank, I mean, some banks, some people who are actually in that industry to help you refine your buy box because if you go in dreaming that you can get in with X percent and actually you need Y percent, I think that that's just a helpful concrete thing to know. Again, we didn't really start that until we had the properties kind of identified, but that's not a first step. Maybe that's a second or third, but it's just something to keep in mind. Speaker 1 No, I think that's so good because a big portion of acquiring a property is whether or not you can finance it. And you don't want to spend all this time, money, bandwidth and then find out six weeks down the road that all of that was for nothing because no banks will touch her. And right now, we're in a time period where financing is tougher. Banks are, they're more stringent with hospitality assets than they are with other assets. I've had multiple conversations with bankers and some of them are just eliminating hospitality from their assets that they'll lend to all together just arbitrarily. You know what, normal hospitality, we're not going to do it. So it's really important to start that conversation early. The hotel is called the Land Bill. How can people follow along with your journey or perhaps get in touch with the TV? Speaker 3 Thelandgrove.com So the THE&LANDGROVE landgrove.com at the Landgrove on Instagram. Certainly, if you want to be able to see our April Fool's prank where we were going to turn our completely demoed Tavern barn into a. Speaker 2 Fully restored actual cow barn that got a lot of the neighbors surprise. Speaker 3 There's Emily's most recent video. I mean, we try and keep it light, but then also just really show off the property. But Instagram, Facebook, the Landgrove as well. We did just, we brand Emily just really did all the work on that in terms of parking and rebranding. The restaurant Vilda House actually has its own socials as well at Vilda House VILDAHAUS. But we would love to be in touch, share the story, share a journey. If we can help someone else who wants to learn more about Rob's or wants to learn more about art workshops, wants to learn more about Southern Vermont, we'd be happy to help. Speaker 1 Awesome tweet. OK, well, Bruce, Emily, thank you guys for coming on the show. And listeners, if you got something out of this one, please share it with someone who could benefit from hearing it and leave us a review. I am Michael Russell, They are Bruce and Emily hopped. And we're signing off on another episode of the Hotel Investor Playbook. We'll catch you again next week. Aloha.