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Cabin Plan

Cabin Plan

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Published by Cloud 9 Ranch Club

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Published by: Cloud 9 Ranch Club on Dec 17, 2010
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05/12/2014

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A five year cabin program:
We are at a point on the ranch where we need to look to the future and put in place aplan to upgrade our rental units. What we now own has been on the decline due to ageand that decline process is coming at us faster with each year. In the very near future allthe smaller units and the older fifth wheel units will need to be removed due to poorcondition.We have a sizeable number of members that come to the ranch for short visits anduse less than their 30 free days and it’s not feasible for them to own an RV. Thesemembers along with many guests present the ranch with a viable number of renters forour units.The number of units that is needed is a difficult figure to project. We had just a fewyears ago well over 100 of which most were the smaller units. Over the last few yearswe have seen that number fall to 78 and that includes the 20 FEMA units purchased infall of 2007. Of the original 100 plus that only leaves 58 and they are in poor conditionand some will need removed each year. It would be a good estimate that we needbetween 70 and 90 rental units that are more attractive, functional, easier to maintainand profitable.If we look at all successful campgrounds and listen to new member prospects cabins isthe future. It is and has been the belief of most board members and members thatcabins should be available. We have a start, but need to have a plan that will place theranch on a steady path to achieve the goal of cabins in a timely manner. We started witha very attractive unit on what is called trailer row and to present a very attractive showcase for the ranch’s image we need to complete the process of replacing the oldersmaller units with this same style of cabin.Cost is the primary concern in moving forward in this process and to do it at a rate thatwill replace older units at about the same rate as they will have to be removed. Cabinscost money and we have to find a way to involve the product being built into the processof the building.The ranch has basically two funding mechanisms, the general fund which is the day today operating funds that our General Managers has for his use to operate and dogeneral maintenance of the ranch, this is the fund that all fees and other revenue goesinto and it has been stretched to the limit, and the other is a special assessment leviedfrom the members for purposes of doing things that are considered a health or safetyneed. There has been several projects completed using these funds because thegeneral fund couldn’t cover the cost.In the fall of year 2007 the board agreed to establish a line of credit to give the ranch away to do some capitol improvements. This was something that the ranch’s auditing firmhad been telling the board they needed to do. This was first used to purchase the 20FEMA units to help upgrade the ailing rental fleet. This fund has funded several things inaddition such has helping with cost on the Lonesome Pine electrical upgrade, loan to thegeneral fund in year 2008 of $91,000, first two cabins, plus paying all interest cost on thefunds used and now the Powder Mill pad extension. The only funding mechanism for thisaccount to replenish its funds has been the rent from the 20 FEMA units. This is what
 
was set up in the beginning. Starting with the cabins it has been agreed that $60 of thedaily rent on each cabin also be placed back into this fund. For this fund to havesubstantial revenue for future use we have to have a good funding source. This will allowthe ranch a way to make some capitol improvements without requiring it from themembership in fees.The line of credit was first set up with a limit of $200,000 of which we used all of it inthe first few months with purchases of FEMA units and getting the Lonesome Pineelectrical upgrade started earlier. With these earlier expenditures and the expendituresstated above the account will be paid down to about $70,000 at the beginning of year2011. This has been a great feat for only 20 rental units. Also it is planned for thegeneral fund to pay the balance of the loan made back in year 2008 of $41,000 inJanuary. This will have the account with about $29,000 of borrowed funds.A plan has been put together by which we can have a cabin building plan in placewhere the line of credit using the funding from the FEMA units and the cabin units asthey are built to cover the cost. The only cost covered by the general fund will be thelabor as was done on the first two cabins. There is $25 of every rental day of the cabinsthat does go back into the general fund and after a number of cabins are completed thiswill add up to serious funds and help offset some of this cost. When the cabin project iscompleted in a few years a larger portion of the cabin revenue can be placed into thegeneral fund. For all this to happen the ranch has to make a start and understand thatthe investment has to be made before the revenue can happen.Wishing and hoping won’t make it happen; it takes action and a plan of action. What isbeing attempted here is to put together a reasonable conservative business plan thatcan be slowed if needed or other adjustments that might need to be considered. It isbeing set up to where we don’t have to jump into a high risk financial position, but canadjust as needed.Please take the time to study it and see where there needs to be adjustments and ifthe approach is conservative enough. Keep in mind that this is based on monthlyaverages and that revenue actually comes heavy during the seasonal months andslower during the off-season. But if possible the building process needs to progress on asteady program to get cabins in a timely manner.
 
Labor Costs:
I have had some who are concerned about the labor cost to build the interiors. As youcan see on the Fact & Assumption sheet that we done the first 2 cabins with the Ranch’s“Special Projects Crew” that our GM set up to do special projects. The reason for takingthis approach was to get the cabins built faster with less money up front out of the LOCaccount. There is $25/rental day that goes back into the General Fund. It starts out slowbut about 2 years into the project the cabins have generated $18,000 back to thegeneral fund. At the end of the 5 year plan there has been $99,000 generated back tothe general fund. During the year following the plan completion it will generate about$38,000 and that will continue each year.The rough estimate for labor to build the 30 cabin interiors is $105,600 at the end of 6years the $25/rent/day will generate about $137,400. If not changed, in 10 years this $25will generate $291,000.Once the cabin plan is determined to be complete by a future board they can at that timeset a new payment schedule. They may want to put $40 or $45/rent/day back into thegeneral fund.Think about it this way, when most businesses or individuals purchase a building orhome you make a commit for the whole cost and you start making payments for 15 ormore years. With these cabins the commitment is one at a time and the commitment canbe slowed down if needed or design changes can be done at anytime. The material willbe paid off when the cabins are completed in 5 years because of the funding systembuilt in, only the labor cost will be paid over time which might run one or two years aftercabins are complete. This would be considered a very fast pay off by anyone’sstandards.This approach was used because it was available to be used. We have to takeadvantage of our strong points.

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