Keep or sell vacation rental after long, expensive renovation.

[Chris G.]

Hello, I would like help evaluating if I should keep my vacation rental after spending a fortune renovating, and advice on how I can get financing to buy out the co-owner. I'm brand new to formal real estate investing but have been long term renting a condo for fifteen years. I see now that I have made huge mistakes with this house, so please keep criticism constructive.

I have a vacation rental which I co-own with a family member. When we inherited it, it was badly out of date. Then, a pipe broke and ruined the first floor. I decided to fully restore and renovate the house without knowing how to work with contractors, budget the project, or evaluate the cost vs. income potential. After working on it for five years, I have finally finished. But the co-owner wants to cash out, so I must sell or get financing to buy them out.

Here are the rough numbers:

• $700k tax assessed value ($600k land, $100k house)
• No mortgage, fully owned
• $12k/year carrying cost when rented
• $12k - $20k/year income after carrying cost
• $160k renovation expenses paid
• $40k carrying costs paid during renovation
• $50k renovations and carrying costs paid long before this major renovation
• Everything paid in cash, no debt
• $250k to buy out the co-owner

My goals for many years have been to buy out the co-owner, rent the house forever, and have it pay back what I put in. However, the income seems too low to repay me and pay the buyout loan in less than 40 years.

Getting a loan to buy out the co-owner will be tricky. In order to work on this project, I left my job in tech, leaving me no W-2 income. I make $10k/year after expenses from a long term rental condo. I funded the renovation and my living expenses with savings and have no debt. I plan to resume W-2 work, but the economic downturn has put that at risk.

All of these numbers exclude saving for repairs from high wear and tear from weekly renter turnover, saving for problems, etc. I'm sure there are even more costs I'm not considering.

Are there any strategies which can make it viable to keep this house? Or should I sell it after making it a quality rental? How can I get a loan with so little income? Thank you for your insights.