SELL VACATION HOME NOW OR AirBNB/VRBO IT?

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SELL VACATION HOME NOW OR AirBNB/VRBO IT?

R Jun
Member since 2022 · 9 posts · 5 votes

Last year I bought a gorgeous 20 acres country property in a famous small town in the middle of a forest with a 2008 built house in like-new condition. I put the property in a LLC with the intention of using it as a winter home (warmer weather there in the winter) and renting it out AirBNB/VRBO for 5-6 months when I'm not there at my summer main home. However, the real estate market has been so hot since I bought it and it has now gained about $110k (or more) in equity in just a year. So I put it up for sale fully furnished (Spent about $10k on furnishings) just to see what happens and I got multiple offers within a week. I'm conflicted, my heart says keep it and my mind says sell it and make $110k+ profit after just a year because I feel we are at the pinnacle of the market and I sense that the equity will remain pretty stagnant for some years to come judging by past local real estate values through the years prior to the pandemic hot market and now the higher interest rates. I never did short term rent it out yet but I fear it could be more hassle than it is worth, especially since my main home is 12 hours away up North. I would have to hire a property manager which would cut into my profits. There are a few other short term rental homes in the area that seem to do well but don't look nearly as attractive or private as my property.

Question: Would you sell the property now or keep it and AirBNB/Vrbo short term rent it out half the year? Is short term renting worth it when living far away from the rental? As we speak I have offers I have not accepted yet and can back out and take the house off the market. I put it up for sale by flat fee MLS without a seller agent, (2.5% will go to the buyer's agent). Capitol gains tax will be 15%. I'll take home about $60k to $70k after paying commission and taxes which will be about a 25% profit gain. I'm conflicted, any insight would be appreciated. Thanks.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y
Quote from @R Jun:

Question: Would you sell the property now or keep it and AirBNB/Vrbo short term rent it out half the year? Is short term renting worth it when living far away from the rental? As we speak I have offers I have not accepted yet and can back out and take the house off the market. I put it up for sale by flat fee MLS without a seller agent, (2.5% will go to the buyer's agent). Capitol gains tax will be 15%. I'll take home about $60k to $70k after paying commission and taxes which will be about a 25% profit gain. I'm conflicted, any insight would be appreciated. Thanks.

This is what happens when you invest without a plan. You bought a property with no real goal in mind, so you get distracted by a shiny object (fast equity).

Let's say the house is currently worth $500,000 and could conservatively bring in $25,000 a year as a short-term rental. In 10 years, that's $250,000 income from the rent! The home will continue to appreciate, you'll pay down the mortgage, you get some great tax advantages, and you get some personal use of the property. Within 10 years you can easily earn $500,000 or more.

What happens if you sell? Invest that $70,000 in something that produces an 8% return and in 10 years you'll have gained $120,000. That's 1/4 what you'll get from keeping the home, you'll have no pocket money along the way, you don't get the tax benefits, and you won't have a vacation home for personal use.

Sit down for an hour or two and really think about what you want your money to accomplish, then make decisions that move you closer to that goal.
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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    Keep it as an STR. 110k in equity is really not that much.

    I also beleive further appreciation will happen on good properties.  The fact is there are still more people looking for houses than their is inventory. 

    1Reply
  • Melissa S Vrobel
    Investor · Orlando, FL · Member since 2021 · 79 posts · 36 votes
    4y

    KEEP IT!  Properties with land are hard to find and unless you are strapped for cash, you will not likely find another property like this.  Have you done research on how much it will bring?  Do you enjoy going there as you second home?

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y
    Quote from @R Jun:

    Question: Would you sell the property now or keep it and AirBNB/Vrbo short term rent it out half the year? Is short term renting worth it when living far away from the rental? As we speak I have offers I have not accepted yet and can back out and take the house off the market. I put it up for sale by flat fee MLS without a seller agent, (2.5% will go to the buyer's agent). Capitol gains tax will be 15%. I'll take home about $60k to $70k after paying commission and taxes which will be about a 25% profit gain. I'm conflicted, any insight would be appreciated. Thanks.

    This is what happens when you invest without a plan. You bought a property with no real goal in mind, so you get distracted by a shiny object (fast equity).

    Let's say the house is currently worth $500,000 and could conservatively bring in $25,000 a year as a short-term rental. In 10 years, that's $250,000 income from the rent! The home will continue to appreciate, you'll pay down the mortgage, you get some great tax advantages, and you get some personal use of the property. Within 10 years you can easily earn $500,000 or more.

    What happens if you sell? Invest that $70,000 in something that produces an 8% return and in 10 years you'll have gained $120,000. That's 1/4 what you'll get from keeping the home, you'll have no pocket money along the way, you don't get the tax benefits, and you won't have a vacation home for personal use.

    Sit down for an hour or two and really think about what you want your money to accomplish, then make decisions that move you closer to that goal.
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @R Jun

    I would sell it. There was a reason you put it on the market and with it being that far away are you fully engaged and want it. What happens when you get a manager and there are issues you are gonna have to deal with. Will those stress you out.

    I would take the 25% as bird in hand better than 2 in bush and move on.

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  • Nancy Bachety
    Rental Property Investor · North Fork, NY · Member since 2016 · 1k+ posts · 631 votes
    4y

    You are not the kind of person to make much money off of using it as a STR. What will $70k profit mean to your life? If money is tight (selling on your own might actually be costing you money, like using a PM will cost you returns) and it means a difference in your quality of life, sell. Sounds like you'd miss using it too much and miss the thought of having another place of your own to go in the winter.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    Keep it. $100k is not enough equity to bother selling. Sounds like you can make $50k a year (?) from this, so over 10 years that would be $500k.....plus you have the personal usage as well. Even at $20k a year, I would keep it. Maybe pull some equity out of it and buy another.....

    0Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y

    Thanks to everybody for the replies, they have helped greatly. 

    Btw, I bought the property in cash. I'm not strapped for cash but I have no experience doing a short term rental. I do have experience with regular long term renting and it was a horrible experience but that was to be expected with section 8 tenants who tried their best to destroy my former property. However, I'm sorry I sold that rental property in Colorado Springs because it is now worth five times more than what I sold it at and renting at a much higher rate.. I figure short term renting will be much less chance of the property being destroyed. 

    Your posts have motivated me to keep the property and try short term renting it and I'll continue to use it as my winter retreat. Now I just have to do some research on how to properly operate the property as a short term rental and execute. I'll start researching on this forum which has some great tips from investors like you all who have experience. Thanks again for the feedback, it was greatly appreciated.

    4Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Quote from @R Jun:

     I figure short term renting will be much less chance of the property being destroyed. 

    Only if you are smart in setting up your rules....


    0Reply
  • William Anderson
    Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes
    4y

    You should find a competent manager for your property.  Do you want to receive a call at 11:00 am when the guest loses the remote control?  How about the call that the heater or AC is not functioning.  You may spend hours finding someone to fix it.  I love the concept, I have built a business around vacation rentals but I will not manage any of them.  I created a property management business with partners, my income is on the minimal side because the partners and managers take all of the heat.  

    I know what they go through and it takes a personality type that does not stress easily and is well organized then you still need a property manager.  If you want to keep this property as a vacation rental and buy more, consider the value of your time.  Leave the details to the professionals.  

    I have owned several vacation rentals in Spain for many years well before the current trend in the U.S.  My manager was excellent.  I received checks each month and never had to deal with any issues.  If you are not located around the corner, hand it off.  Having said that, if you are close by, manage it by yourself for six months.  Contact a property manager and tell the manager what your plans are.  They will help you during the first six months.  It's a good idea as someone already mentioned to understand the management process.  Then hand it off.

    1Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y
    Quote from @William Anderson:

    You should find a competent manager for your property.  Do you want to receive a call at 11:00 am when the guest loses the remote control?  How about the call that the heater or AC is not functioning.  You may spend hours finding someone to fix it.  I love the concept, I have built a business around vacation rentals but I will not manage any of them.  I created a property management business with partners, my income is on the minimal side because the partners and managers take all of the heat.  

    I know what they go through and it takes a personality type that does not stress easily and is well organized then you still need a property manager.  If you want to keep this property as a vacation rental and buy more, consider the value of your time.  Leave the details to the professionals.  

    I have owned several vacation rentals in Spain for many years well before the current trend in the U.S.  My manager was excellent.  I received checks each month and never had to deal with any issues.  If you are not located around the corner, hand it off.  Having said that, if you are close by, manage it by yourself for six months.  Contact a property manager and tell the manager what your plans are.  They will help you during the first six months.  It's a good idea as someone already mentioned to understand the management process.  Then hand it off.

    Thanks for your insight. I'm definitely getting a manager. I actually set up the property for STR initially but changed my mind because I didn't want to deal with stress and liability and the house was so immaculate. Part of me still says just sell it and make the 70k after all expenses and taxes and move on to flip another property. I did get to enjoy the property all last winter (5 months!) and enjoyed the country life. So getting paid 103k (after commission paid) but before taxes for just owning the property for one year is pretty good to me ( no renovations made, just added 10k in furniture). I've only owned it one year. One issue that I'm concerned about is the previous owner did not tell me the house had an infestation of black scorpions. I was able to get rid of most of them with boric acid put all throughout the perimeter inside the house but every now and then one or two will appear. I also had the exterior of the home sprayed by a professional but those little suckers will appear out of nowhere like a ghost on a rare occasion. If a guest sees one or gets stung they will certainly leave a horrible review and ask for their money back or try to sue. What do you think? Still keep it or sell while this market is good for sellers? I got the property super cheap with a cash deal and the house is like new with gorgeous land but scorpions are a concern that worries me. Would you still keep it and STR?

    0Reply
  • William Anderson
    Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes
    4y
    Quote from @R Jun:
    Quote from @William Anderson:

    You should find a competent manager for your property.  Do you want to receive a call at 11:00 am when the guest loses the remote control?  How about the call that the heater or AC is not functioning.  You may spend hours finding someone to fix it.  I love the concept, I have built a business around vacation rentals but I will not manage any of them.  I created a property management business with partners, my income is on the minimal side because the partners and managers take all of the heat.  

    I know what they go through and it takes a personality type that does not stress easily and is well organized then you still need a property manager.  If you want to keep this property as a vacation rental and buy more, consider the value of your time.  Leave the details to the professionals.  

    I have owned several vacation rentals in Spain for many years well before the current trend in the U.S.  My manager was excellent.  I received checks each month and never had to deal with any issues.  If you are not located around the corner, hand it off.  Having said that, if you are close by, manage it by yourself for six months.  Contact a property manager and tell the manager what your plans are.  They will help you during the first six months.  It's a good idea as someone already mentioned to understand the management process.  Then hand it off.

    Thanks for your insight. I'm definitely getting a manager. I actually set up the property for STR initially but changed my mind because I didn't want to deal with stress and liability and the house was so immaculate. Part of me still says just sell it and make the 70k after all expenses and taxes and move on to flip another property. I did get to enjoy the property all last winter (5 months!) and enjoyed the country life. So getting paid 103k (after commission paid) but before taxes for just owning the property for one year is pretty good to me ( no renovations made, just added 10k in furniture). I've only owned it one year. One issue that I'm concerned about is the previous owner did not tell me the house had an infestation of black scorpions. I was able to get rid of most of them with boric acid put all throughout the perimeter inside the house but every now and then one or two will appear. I also had the exterior of the home sprayed by a professional but those little suckers will appear out of nowhere like a ghost on a rare occasion. If a guest sees one or gets stung they will certainly leave a horrible review and ask for their money back or try to sue. What do you think? Still keep it or sell while this market is good for sellers? I got the property super cheap with a cash deal and the house is like new with gorgeous land but scorpions are a concern that worries me. Would you still keep it and STR?


    0Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y

    @WilliamAndreson - I did not get a reply to my answer, just a quote copy of the previous post.

    The house has problem with black scorpions on occasion would you still STR it? This is another reason I initially did not STR out of fear a guest will get stung and leave a horrible review and possibly a liability issue. The house had regularly been sprayed by pest control but the scorpions were still a problem. I put boric acid all around inside the house and that seemed to keep them away but on occasion one or two scorpions will come out of nowhere. Still do STR or would you sell it while the getting is good?

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    Ahhhh, now you mention the scorpions....

    If you cannot get them under control, then I would not take the chance. A scorpion bite hurts like h*ll and you will definitely get a review for that.....

    4Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y
    Quote from @Bruce Woodruff:

    Ahhhh, now you mention the scorpions....

    If you cannot get them under control, then I would not take the chance. A scorpion bite hurts like h*ll and you will definitely get a review for that.....


    Local pest control companies have been useless when it comes to these black scorpions. The boric acid worked great but one or two scorpions still show up on occasion and I feel it will cause problems with STR.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Quote from @R Jun:
    Quote from @Bruce Woodruff:

    Ahhhh, now you mention the scorpions....

    If you cannot get them under control, then I would not take the chance. A scorpion bite hurts like h*ll and you will definitely get a review for that.....


    Local pest control companies have been useless when it comes to these black scorpions. The boric acid worked great but one or two scorpions still show up on occasion and I feel it will cause problems with STR.


     Yes it will. Some people are terrified of them.....

    0Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y
    Quote from @Bruce Woodruff:
    Quote from @R Jun:
    Quote from @Bruce Woodruff:

    Ahhhh, now you mention the scorpions....

    If you cannot get them under control, then I would not take the chance. A scorpion bite hurts like h*ll and you will definitely get a review for that.....


    Local pest control companies have been useless when it comes to these black scorpions. The boric acid worked great but one or two scorpions still show up on occasion and I feel it will cause problems with STR.


     Yes it will. Some people are terrified of them.....

     What do you all do in AZ to keep them away? Scorpions are prevalent in AZ. I'm sure all it will take is one bad comment about a scorpion to scare everybody else away.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Quote from @R Jun:

    What do you all do in AZ to keep them away? Scorpions are prevalent in AZ. I'm sure all it will take is one bad comment about a scorpion to scare everybody else away.

    We have not had one (yet) inside our houses. Last year there was a big tarantula outside that freaked out a guest from Wisconsin.....

    1Reply
  • Leslie Anne Morris
    Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
    4y

    Sounds like you already decided to keep the property. I would reach out to a local property management company and have them put together an ROI calc on how the property could perform, this should be easy for them to do for you (then you can analyze and decide if you truly want to go STR route or sell).

    Try more pest companies.  I am in the Smoky Mountains, and we get crazy pests out here, they can usually be handled by routine pest control.  Definitely up the ante on your insurance policy, I recommend Proper Insurance for folks who are short-term renting their properties.

    2Reply
  • R Jun
    OP
    Member since 2022 · 9 posts · 5 votes
    4y
    Quote from @Leslie Anne Morris:

    Sounds like you already decided to keep the property. I would reach out to a local property management company and have them put together an ROI calc on how the property could perform, this should be easy for them to do for you (then you can analyze and decide if you truly want to go STR route or sell).

    Try more pest companies.  I am in the Smoky Mountains, and we get crazy pests out here, they can usually be handled by routine pest control.  Definitely up the ante on your insurance policy, I recommend Proper Insurance for folks who are short-term renting their properties.


     Thanks for sharing your insight. I will do just that tomorrow!

    Actually, I did initially have Proper insurance, they are the best from my research. However, because I had encountered the infestation of scorpions after staying at the property over the winter, I had decided not to STR until I could eliminate them, so I switched insurance companies to save money until I can get the pests controlled. I put boric acid powder around the entire perimeter of the inside of the house and it pretty much wiped the scorpions out and kept them from coming back, but then a couple started to emerge but nothing like it was before. Btw, the property has always been sprayed in out by a local pest control company and it never stopped the scorpions, it would kill them but there would lots of them dead all around the house which is not a good look for STR. The boric acid I did myself was much better but I still get the exterior sprayed as well. I need to hire someone to seal every single crack or space around the exterior of the house and foundation, that should be beneficial. If I can just permanently get rid of the scorpions I know this property will do well as a STR. The land and forest is picturesque and majestic.

    0Reply
  • William Anderson
    Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes
    4y

    Sell it.  You don't need the stress.  Most investors do something else to earn higher income while their investments are working.  The idea behind passive investments is for them to create wealth not problems.  Scorpions are not something you can turn over to a property manager.  I have owned property in Las Vegas and Phoenix where scorpions can move in and cause much grief.  I recall being told about a house in Las Vegas that was so infested that it had to be torn down.  They could not eradicate them.

    0Reply
  • Dale Summons
    Rental Property Investor · Cockeysville, MD · Member since 2016 · 14 posts · 16 votes
    4y

    @R Jun $100k in my opinion isnt worth losing something thats dear to your heart. 20 acres with a new build and its private...my god that sounds like my dream!! I would str it.

    1Reply
  • Andrew Street
    Member since 2019 · 1k+ posts · 292 votes
    4y

    @R Jun it sounds to me like you have a wonderful property. Selling and making the short term profit, does not seem like the right option at this point. I believe that inflation will continue to help push appreciation, but outside of this, if it's the property you say it is; hold onto it. Investing is about the long term and this property sounds like it has a very bright future.

    1Reply
  • Joshua MessingerBusiness Member
    Property Manager · Poconos, PA · Member since 2020 · 443 posts · 264 votes
    4y

    Hey @R Jun! 

    You are definitely in a unique situation that is for sure! I'd love to help you out and run some market analysis for you to determine if your property would be a good fit to use as an STR or not. $100k in equity really doesn't seem like too much, especially for a brand new house like yours. Especially if you could keep it for 10 more years and it can possibly appreciate more. Another thing to think about is it's revenue it could potentially be pulling in. If you end up grossing $100K/yr and take home $50K - $60K over 10 years that is around an extra $500K - $600K in cashflow.

    But, given your situation and living at a distance from this property, you need to consider the fact that all operations will have to be outsourced. In this case you will need to vet the companies that you intend to work with throughout this process extremely dilgently. Ask them about their rating for other properties, ask them if they have in-house or out-of-house workers, ask them if they handle all guest communications, etc. 

    I hope this helps! If you ever need anything else don't hesitate to reach out! 

    All the best,

    Josh 

    [email protected]484-986-5012
    0Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    4y
    Quote from @R Jun:

    Last year I bought a gorgeous 20 acres country property in a famous small town in the middle of a forest with a 2008 built house in like-new condition. I put the property in a LLC with the intention of using it as a winter home (warmer weather there in the winter) and renting it out AirBNB/VRBO for 5-6 months when I'm not there at my summer main home. However, the real estate market has been so hot since I bought it and it has now gained about $110k (or more) in equity in just a year. So I put it up for sale fully furnished (Spent about $10k on furnishings) just to see what happens and I got multiple offers within a week. I'm conflicted, my heart says keep it and my mind says sell it and make $110k+ profit after just a year because I feel we are at the pinnacle of the market and I sense that the equity will remain pretty stagnant for some years to come judging by past local real estate values through the years prior to the pandemic hot market and now the higher interest rates. I never did short term rent it out yet but I fear it could be more hassle than it is worth, especially since my main home is 12 hours away up North. I would have to hire a property manager which would cut into my profits. There are a few other short term rental homes in the area that seem to do well but don't look nearly as attractive or private as my property.

    Question: Would you sell the property now or keep it and AirBNB/Vrbo short term rent it out half the year? Is short term renting worth it when living far away from the rental? As we speak I have offers I have not accepted yet and can back out and take the house off the market. I put it up for sale by flat fee MLS without a seller agent, (2.5% will go to the buyer's agent). Capitol gains tax will be 15%. I'll take home about $60k to $70k after paying commission and taxes which will be about a 25% profit gain. I'm conflicted, any insight would be appreciated. Thanks.


    Honestly, you should be able to male that profit in a year or so of renting as an STR. That should pay back your initial investment, allowing you to deploy your capital again without paying the capital gains taxes. Or, you can re-fi/HELOC and pull some cash out and still cash flow. If you don't have a property/asset in mind, you should stay the course.

    I don't know your market, but I know my market may stop or slow the inflation-caused appreciation of the past few years, but we should not go backwards in price.  A "stagnating" sales market doesn't necessarily affect rent rates.

    My vote, without knowing much more about you, is to keep it.  Make money, realize all the  benefits of being a Real Estate Investor, and decide at a later date what your plan is.  At the very least, you will get paid to have a vacation property.

    0Reply
  • Mike Smith
    Boise, ID · Member since 2018 · 203 posts · 188 votes
    4y

    @R Jun If you plan on keeping the home as a STR, then it's an investment. It should be analyzed from an investment prospective, which is very similar to analyzing a business. I'm always surprised on BP, when questions are posed, I have a house I bought for X, it's now worth Y, should I keep it as a rental? Whether you keep a house as a rental has nothing to due with what you paid for it. It has everything to do how much net profits it generates annually and how much appreciation can be realistically be estimated. I share you opinion that after 3+ years of double digit appreciation in many markets, we are in for a relatively flat appreciation figure for the next 3-5 years. Just my guess...

    Imagine if you owned a sandwich shop, and you are deciding to sell it or not?  The question wouldn't be "How much did you buy the sandwich shop for?"  The question would be "How much can you sell the sandwich shop for, and how much annual net profit does it produce?"  The last question is, how much do you think the sandwich shop will appreciate in the next X number of years"

    So I can't answer your question intelligently because I don't know the realistic estimated net profits on your STR. I do know that hiring a full service property management company will cut into your profits substantially.

    If the annual net profits + realistically appreciation divided by the market value of the property is a better percentage than your new investment if you sold, then keep it.   If it's less than a new investment, then sell it.

    Blanket statements based only on market segment like "It's an STR, you should keep it." are ridiculous. Every single investment property (and every single business) need to be analyzed on their individual financials.

    1Reply
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