Last month, we shared on Instagram that we decided to put our Historic Townhome Airbnb on the market. We’ve received lots of questions about how we decided to sell and how our short-term rentals are doing in general, so we put together a post breaking it aaall down for you. Scroll to the end of the post for a big update on where we’re at in the process and new kitchen photos!
Is covid a factor?
Yes and no. Covid has reduced our short-term rental earnings by about 25% this year as a result of cancelled travel plans and events, but we’re thankfully still cashflow positive on our properties for the year. Our rentals took a hit in the spring, then had a comeback in the summer and fall. We’re viewing Covid is a big storm that will eventually pass, and are hopeful people will begin to travel again when they feel safe.
The biggest factor in our decision is the hot seller’s market we’re currently in. It’s been strong in Columbus for several years, and has only gotten stronger this year during Covid. Inventory is very low (multiple offers over asking with waived contingencies is common) and our house is in a prime location. We know we have big goals for 2021 that could require a lot of capital, so we figured if there is a time to test the market, now’s the time.
analysis: cash now vs cashflow over time
One of the first things we looked at when making the decision to sell was how much profit we could earn now by selling vs how much we’d earn over time by continuing to rent it out. By renting it out, we earn rental income each month, pay all of our expenses, and keep the rest for ourselves. Expenses for our Airbnbs include paying our cleaning team, utilities, cable & internet, mortgage, insurance, landscaping, Columbus city lodging taxes, and misc. other maintenance. We also receive tax benefits like depreciation on our tax returns each month.
In comparing net profit on the sale to net profit on our Airbnb income, we found that what we’d earn by selling now would take 10+ years to earn by renting it out. This number was significant enough to consider selling. If we strategically invest those earnings into other projects, we can offset the rental income we’d be losing — and likely even increase it (that’d be the goal). It’d be a pivot that we’re both totally open to, but only if it makes financial sense. Otherwise, we don’t have much motivation to let it go.
personal financial goals
We have big business dreams that all require extra capital. Yes, we have investors and can get loans, but it’s important to us that we keep a good balance of cash vs debt for personal purposes, too. Focusing on our personal finances 6 yrs ago is actually what jumpstarted everything we’re doing today, from our Village Host rentals to Beginning in the Middle. More on that story here.
UPDATE ON THE SALE
We received a cash offer before officially listing from an Airbnb guest who had stayed there this fall. It felt like a serendipitous situation, but when it all came down to it, the buyer was looking to purchase our home as a fully furnished, turnkey Airbnb without accounting for that added value. As designers, we know how much work goes into sourcing & installing a full house of furniture and decor. There’s another layer with setting up a good quality Airbnb, too — everything has to be functional and comfortable, from the linens and pillows down to the kitchen supplies. It just didn’t feel right parting with a piece of our business at a discount.
We listed on the MLS with our AMAZING agent Lacey, who was so so helpful before and during the selling process. Within a few days, we had multiple offers over asking. As we worked through the inspection process with our initial buyer and backup buyer, we discovered that our basement needs some work as a result of past termite damage. The buyer ended up getting sick with Covid and backing out. Our backup buyer had an as-is offer lower than our first buyer, but came back wanting a big laundry list of things done beyond what we felt was reasonable. We ultimately decided that the offer wasn’t right for us.
We decided to take the house off the market and open up our Airbnb calendar again as we’ve been getting quite a few inquiries from people who are looking to WFH remotely for a few weeks, relocate, etc. Having this time will allow us to regroup, get some routine maintenance and basement work done, and earn money on it as a rental throughout the process. Even though this process has gone differently than expected, we’re happy we did it. Renovating the powder room and kitchen was 100% worth it – they look and feel so much better now and definitely added value to our home.
Here’s what the kitchen looked like when we bought the house almost 5 yrs ago:
And here’s what it looks like after our latest update this fall. Still need to hang that art… 😉
This is the first time that we’ve listed a house without needing to sell, and it was nice to be able to be firm on what we wanted in order to part with it. We may decide to re-list next year if the market is still really strong, but we’re going to take it one month at a time.
I hope this helps gave you a little peek into the decisions we’re making as small business owners and real estate investors. If you have any questions, leave them below!