SELL VACATION HOME NOW OR AirBNB/VRBO IT?

[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.

[Nathan Gesner]

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.