When to Sell? Short term rental

Question

My partner and I are debating on selling our short term rental townhouse (technically, it’s in a condotel community but we manage it independently).

It’s in Florida and doing fantastic right now, and cashflows better than ever (12% return, self managing - we make ~20k per year).

My partner is fed up and done with dealing with guest and maintenance issues. He wants to sell and get rid of it.

I like having a cash flowing asset, and diversified portfolio. I am considering hiring an all inclusive management company instead (our return would then be around 5.5-6% annually).

However, the community has been going downhill. There have been more poor quality guests in surrounding units, maintenance of the grounds and amenities has been slacking, yet management just bought new souped up golf carts… The resort is getting bad reviews on Google for poor service (the staff IS rude, even to me before), and the resort staff is not addressing those review online like they used to. Idk if it’s still recovering from COVID or if this early signs of further decline.

Home prices are record high and we would make around 50k in appreciation by selling now. Any unbiased opinions or insights?

Robert Parks · Answer

I have a cabin in North Carolina, I have been using a company that does the booking for me. They put it out to all the big sites and adjust the price according to the market. I've had it with them for the past 2 months with almost zero vacancy. I hire my own guy to come in and clean. Maybe you could try that for a few months till at least spring

Connor Cushman · Answer

Where in Florida? Is the market growing or stale? I'd be interested in buying it potentially haha

Bill B. · Answer

You’re lucky it’s not based on the Vegas condotel model where you have to use them and they take 50%. You also can’t personally use it mroe than 2 weeks per year. You’re basically buying a hotel room. That’s why I was never a fan after investigating one I wanted to buy  it was almost as bad as an mgm condo for a million $ in 2008 with “access to the mgm casino property” listed as the main selling point.

Maybe look at some of the Destin properties if you like Florida or a regular every day long term rental in a better market if you want less work.

John Underwood · Answer

Are you getting any bad reviews from your guests due to the resort?

Sound like your partner isn't suited for this business.

20k per year net or only 50k profit if you sell? Sounds like you should buy your partner out and keep self managing.

Joe C. · Answer

@Elaine E. you should sell and get something better.

I had been struggling with an STR I owned at the NJ shore thinking about how I was really not making enough for it to be worth all the hassle and I posted here some question about that. The overwhelming response from everyone was to sell it and get something that made money! I did and couldn't be happier.

So my response to you is, if you are on the fence about the future of the place you own, listen to your internal voice and sell and buy where you are confident and happy about the future of the property. If you have concerns about the future of the property so will other owners and eventually so will potential buyers. The longer it goes on the harder it will be to turn around and you likely will have special assessments to pay for the things the manager should have been doing all along instead of buying expensive golf carts. Recent buyers will protest paying more as they likely were at the top of their budget when they bought in the community. Your board should have been on top of the situation but they aren't, so get out before it gets worse.

At the new place get a property manager and take a break from it for a while. When you and your partner have had a few years off you might decide to get back into self-management again.

Good luck!

Dave Foster · Answer

@Elaine E., When I dive into what your saying this just sounds like a recipe for disaster.  Your partner has burned out through self management.  The resort is in a down swing.  You have no control over management.  Yikes!  My anti condo bias is going to show.  But I'd get out of there as fast as I could.  Do a 1031 into something you own totally and can control.  A refinance or buyout of your partner just means you owe more and make less on a venture headed south.  Perfect time to pivot.

Bruce Woodruff · Answer

Read that again and answer your own question.....subpar mgmt will ruin everything given time.

Elaine E. · Answer

@Joe C. Thanks, Joe! I appreciate you sharing your experience. I agree on the maintenance getting worse being a potentially big risk. Good insights for us to think about :)

@Dave Foster An interesting viewpoint as well; condos are definitely higher risk!

Thank you everyone for your thoughts, we have a lot to consider!

Nancy Bachety · Answer

Would you buy it today? If not, then sell it and move on to something else, using what you learned to guide your next purchase. If you can’t pull the trigger, I’d run for the board.

Ian Walsh · Answer

Does it cashflow enough to justify a sale and does it fit into your long term goals?

When to Sell? Short term rental

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