Investor · Noblesville, IN · Member since 2015 · 9 posts · 4 votes
Gosh I'm in a good pickle...
I have a vacation rental in an amazing market that I have owned for 10 years and have easily grossed 45k+ a year consecutively and no signs of slow down. I have about 170k in it and only owe about a 100k. I can sell for 325k right now. My thoughts are to 1031 exchange and build a brand new vacation rental in same area. Basically to have a brand new more desirable and less maintenance and less negative comments on age. It's currently 30-40 year old log cabin.
Am I dumb for selling? Should I keep it and just deal with the maintenance and figure out a way to leverage and still build a new one and keep both? Just figured I could possibly own a brand new cabin free and clear. But I also dont want to be kicking myself later thinking how silly I was to sell it.
What a great problem to have! My question is this: would 1031-ing and building a new one be a lateral move cash flow wise, or would it increase your cash flow? If it wouldn’t significantly increase cash flow to 1031 exchange it, then I’d work on a way to keep the one you have and leverage for the new one.
What a great problem to have! My question is this: would 1031-ing and building a new one be a lateral move cash flow wise, or would it increase your cash flow? If it wouldn’t significantly increase cash flow to 1031 exchange it, then I’d work on a way to keep the one you have and leverage for the new one.
I wouldn't sell it. Sometimes older things get better with age. My oldest STR was built in 1906. 3 story, 4 baths, jacuzzi, 8 beds and a ghost in it. It's haunted. Paid $15,900. I'm charging $1600/week. There's going to be 5000 potential tenants coming through my town of 9500 in the next 8-10 months. Maybe your log cabin will get haunted? It's a draw.
Based on the consistent performance of the property you have there, my vote would be to keep it and buy another one. Hopefully as good or better.
When you have 4-5+ successful STR's going, you're going to see income into your account every week and sometimes every day or every other day.
Combine that with some solid LTR's and those will send money to your account on the first of each month as a kicker.
I wish I could remember which of our BP colleagues coined the acronym VOM (Velocity of Money), but that seems a great description & something worth striving for.
"I have a vacation rental in an amazing market that I have owned for 10 years and have easily grossed 45k+ a year consecutively and no signs of slow down."
^^ This is key. I've helped clients acquire more rental property, but sometimes they've sold what I thought was a great cash flow property to acquire another home (or homes) that didn't seem to be a better move. To each their own but give this some thought:
"Basically to have a brand new more desirable and less maintenance and less negative comments on age."
Maybe the next best move for you is to take some of the $45k gross revenue (and a refi if needed) to begin updating some of the older areas. How's the kitchen? How's the master bath? What are the maintenance pain points - appliances, toilets? Then, replace them all.
Brand new homes aren't always more desirable. Your home is clearly a nice home and in a nice area to be attracting consistent renters with no signs of slowdown. Sure new is all shiny and great, but maybe your home is closer to the amenities people want, on a great street with mature landscaping, etc. So my vote is to keep and update the home, then buy another home to diversify.
Hi @Cody Robison, I echo what the others have said. You have a long term performing property with some significant equity. Cashing out some of that equity and doing your next cabin is the best move.
Before you get that ball rolling, make sure you have a handle on the building process. Is there a LID in place? What about ecological surveys, are they required? How long on a permit? Septic perks for the area if necessary? Do you have to dig a well? Once you have those things settled, then you can start the refi. Also, there are plenty of good cabin builders with lots of neat designs. Get a bunch of estimates and talk to current owner of their builds, see how they did.
Frankly 40 years on a log cabin is nothing. Properly built and maintained log cabins can stand for hundreds of years. Just keep up on the roof and mechanicals and you should be good to go.
Appreciate all the feedback. I think my biggest issue is that I can go 4 months with 5 star reviews and get this one pain in the *** guest and give me a crappy rating. Or some major event (breakdown) happens with a guest and I take it all to personally. I own 2 cabins near each other. One is smaller and I get 1 or 2 issues a year because it's just couples. But when 6-8 people stay as a family with my other one it becomes very difficult to please every person. So I guess my thought was to ditch the headache and build smaller cabin that performs just as well.
I think I really need to work on letting things go that are out of my control. It's just hard when you genuinely care about their vacation and dont want to ruin it. Vacation rentals are a big roller coaster. Your highs are high but your lows are really low.
I own 15 local rentals and if something breaks I can get someone over there in a day or so. But in a overnight rental things need to be addressed immediately.