Should we sell our STR property to pay kids' college loans?

[Juli Ford]

Hi all- My husband and I are considering selling our short-term rental property in Vermont to pay our kids' college loans, and we're looking for input to see if we are missing anything in the big picture.

Here are the details: We purchased a log cabin in Vermont in November 2020 for $440,000 with a 2.75% interest rate. It is now valued at about $700,000, so we've built up a significant amount of equity (we currently have about $365,000 in equity). We are primarily using it as a STR, and it is also a vacation home for us. The property cash flowed well and covered our expenses in 2021 and 2022 with short-term rentals and about 80-85% business use, but it did not rent as well in 2023 (oversaturated rental market, change in travel restrictions, weather etc...) and dropped to about 65% business use and a negative cash flow of about $15K. Although with tax write-offs, depreciation, and equity growth, this property is still a positive of $15-$20K annually to our net worth. (I'm a full-time real estate agent and my husband is a W2 employee).

Our two kids will graduate from college in May 2025, and we will have about $290K in parent loans for them that we would like to pay off. If the cabin were cash-flowing, we might use the excess cash to continue paying the loans over time and bet on the equity growth to continue to be a positive for us. But, with a negative cash flow and student loans around 7%, the math isn't working.

We are considering selling the property (probably a private sale, so no real estate commissions) and paying off the student loans. Even after capital gains tax, we'd come out about even. We love the place and hate to let it go, but we also love the idea of wiping out this debt for the kids, and for us.

Our question- are we missing anything??? Would love your thoughts. Thank you!