Valuation of a Vacation Rental

[Jeff Wells]

I have explored the forum posts regarding vacation rentals, and I haven't seen this exact topic addressed (unless I missed it), so I wanted to ask for feedback on this particular property.  We have a vacation rental in San Antonio, and the numbers look something like this:

Market Value of the Property By Itself:  $166,000

Value of Furnishings, Appliances, Etc:  $17,000

Net Income for 2015:  $21,000 (converted to a short-term rental in March of last year)

We have accumulated a great portfolio of reviews, etc, but we're are looking to utilize the proceeds from the sale of this rental to re-invest in a commercial property.  I was curious to hear your feedback on how we should value/price this property?  Should we evaluate more as a business, or what would you recommend? 

Thank you in advance for your feedback!

[Neal Collins]

Furniture aside people will value the property either based upon market comps or market GRM. You may have been able to squeeze out a higher return relative to a non VR, but it's still an active business model that is separate from the physical property and should not be used to determine the value of the property. It becomes much more of a grey area if it is sold explicitly as a turnkey business model, but even then, I would be wary as a buyer to use that value rather than deriving a value from market rates/comps, especially if it is a SFR.

Is begs the questions though of why sell. The higher income from the property is leverageable and could be used in a number of ways, especially if you already have a sizable chunk of equity in the property.