Buy, Refurbish, AirBNB, Sell (in a foreign country)

[Andrew A.]

Seeking Feedback on Property Investment Partnership: Tbilisi, Georgia

Context:

My family and I live in Europe but have several AirBNB properties in Tbilisi, Georgia, where my wife grew up. We’ve had great success with our listings, regularly achieving 5x the market average ADR on Airbnb and receiving frequent offers from local realtors to purchase.

We’re now considering scaling up with a new project and have been approached by a friend who’s interested in partnering with us, providing financing for renovations. Here’s the situation:

Key Project Details:

• Property Size (pre-renovation): 250 sq. meters (2500 sq. feet)

• Purchase Price: 250,000 EUR (1,000 EUR/sq. meter)

• Renovation Costs: 750 EUR/sq. meter (includes kitchen, appliances, quality furnishings)

• Loan costs (during renovation and renting): 350 sq. meters (due to attic expansion)

• Property Size (post-renovation): 350 sq. meters (due to attic expansion)

• Post-Renovation Layout: 2 separate apartments

• Airbnb Income (24 months): 2,500 EUR/month/apartment (= 5,000 EUR/month)

• Other running costs: 600 EUR/month

• Projected Sale Price (after 2-3 years): 850,000 EUR (approx. 2,500 EUR/sq. meter)

• Closing Costs: Negligible in Tbilisi

• Real Estate Agent’s Fee: Typically 3%, but negotiable based on who hires them

Financing Setup:

• Property Purchase Financing: 100% bank financing at 5.9% interest (bank has even financed 150% to cover some renovation costs in the past)

• Renovation Financing: Our friend is offering to finance 250,000 EUR in cash for the renovations

Proposed Partnership Structure:

• Work Involved (on our side): Full renovation (10-12 months to complete), furnishing, and property management through Airbnb until the sale (2-3 years)

• Profit Split Proposal: 60% (us) / 40% (friend providing renovation financing)

Questions for the Community:

1. Does the proposed profit split (60/40) seem fair, given the work we would handle (renovation, furnishing, property management)?

2. Are there any potential risks we might be overlooking with the financing setup or local real estate market? For example, this deal does not seem to "fit" based on the 70% rule calculator which was new to us.

3. Any suggestions on how we could negotiate better terms with either the bank or real estate agents?

4. Should we consider holding onto the property longer than 2-3 years, given the potential AirBNB cashflow, or stick with the tax-free sale strategy after 2 - 3 years?

5. Any other advice on structuring the partnership?

6. If the bank would finance the whole thing including renovation costs, should we even consider such a partnership?

Thanks in advance for your insights!