Negotiating a Private Sale for Purposes of AirBnB

[Robert Newcombe]

Here's an overview of my situation:

-Neighbour of my mother-in-law is looking to sell privately, his children/family aren't interested in his house.

-The house in question is on a beautiful oceanfront property with private beach (just outside Halifax, Nova Scotia) but is an old house (80+ years).

-He's had some interest from others to sell to them. They would buy the property, tear the house down, and build a million dollar home. We would keep the house as is for purposes of STR since the structure is solid, it has a nice cottage feel, and also has 4 bedrooms.

-Fortunately, he wants to sell to my wife and I first with the close connection but is asking a lot (since realtors have told him he can get a lot - $550-$575k for a house that many would tear down). Unfortunately(?), there's no great comps for that type of house on that type of property.

My wife and I would love to eventually retire there and it's such a good opportunity for a short-term/vacation rental for years/decades. Any advice for negotiating on a private sale? Would getting the lawyers involved to negotiate for us be a good play? Is there a target average daily rental rate that we should be aiming for to make a selling price like $550k work? 

Thanks in advance,

Robert

[Julie McCoy]

@Robert Newcombe I'm not familiar with the STR market in Nova Scotia, but with a price point like that, it would have to be pretty robust for that purchase to make sense from an investment standpoint. @Luke Carl is right on with his numbers, which is possible in year-round markets, but something tells me Nova Scotia is seasonal. :)

Now, plenty of people use short-term renting as a way to offset costs vs. actually make money - if it's a place you think you'd buy anyway, then it might be worth considering STR as a means of helping cover the costs. But from an investment perspective, I don't think it makes sense.

The age of the house is another concern - maintenance on it will quite possibly be more intensive than you expect, especially by the time you retire, and it'll be something you'll need to stay on top of in order to succeed as an STR.

Re: negotiating, since the reason you have access to the house is because of the close connection, I think you'd be hurting yourself by getting lawyers involved - then you're taking away the relationship aspect and just making it a transaction.  Lean on your relationship with the seller and your roots in the area ("We've been coming here for years, we've always admired your house, we'd love to retire there" etc) and hope he's more taken with the idea of someone enjoying his house vs. making top dollar from someone who will tear it down.

Good luck in making your decision!