Dilemma: sell vacation home or not

[Dries]

Long story short: I have my own company and for fiscal reasons my company has bought a nice penthouse with frontal seaview back in 2009. It's quite small, but has some unique characteristics. In fact, we've been hosts on AirBnb for over two years and  always got raving reviews from our guests. And my wife adores the place.

So emotionally, there's every reason to hold on to the place.

However, rationally, the yearly costs are around $6000,-. And if I (my company) would sell the place and reinvest the amount in an index fund, we would be more or less FI.

Maybe someone has a fresh perspective on this?

PS Here are a few photos of the place:

[seemsright]

You are talking about $500 a month. If you are that close to FI I am not sure it truly matters.

How much does the AirBnb make a month on it? If it is close to $500 I say keep it. Your wife adores the place. That is something right there.

Since you own your own company...you could in theory just make the $500 a month to counter what your yearly costs are.

There is more to this question than do I sell a piece of property.

[boyerbt]

Long story short: I have my own company and for fiscal reasons my company has bought a nice penthouse with frontal seaview back in 2009. It's quite small, but has some unique characteristics. In fact, we've been hosts on AirBnb for over two years and  always got raving reviews from our guests. And my wife adores the place.

So emotionally, there's every reason to hold on to the place.

However, rationally, the yearly costs are around $6000,-. And if I (my company) would sell the place and reinvest the amount in an index fund, we would be more or less FI.

Maybe someone has a fresh perspective on this?

How much would you make and then invest if you sold the house? Without selling the house, what is your timing for FI? If you were able to hit FI, what would that mean for your company? Are you looking or planning on being done in the short term?

Personally, if I was in your scenario (without the knowledge on the timing aspects) I would keep the house if you really like it.

[Jouer]

Another question: how often do you use it? Do you get $6000 of use out of it? i.e. what would it cost per year to rent a place like that every time you go to use it?

[zolotiyeruki]

Yearly costs are $6000?  Is that maintenance/taxes/utilities, or does it also include the opportunity cost (from investing the equity elsewhere)?  Is the $6000 cost include all AirBnB revenue as well?

How much do you use it, and how much would it cost to periodically rent the same kind of place?

Just as a thought experiment, let's say it's worth $300k and it's paid off, and the $6k is your cost of upkeep (maintenance, taxes, etc).  That's $12k/year in foregone gains, plus $6k/year in maintenance costs.  If you flip the situation on its head, $18k/year will pay for a lot of time in some other AirBnBer's cabin.

[Dries]

Thank you all for your feedback, I really appreciate it while embarking on the FI idea.

How much would you make and then invest if you sold the house? Without selling the house, what is your timing for FI? If you were able to hit FI, what would that mean for your company? Are you looking or planning on being done in the short term?

Personally, if I was in your scenario (without the knowledge on the timing aspects) I would keep the house if you really like it.

Part of the plan is to stop my consulting company as the country where I live is not the most entrepreneurial friendly. In that case, the penthouse (and the yearly $6000 costs...)  would become my own property. Selling the penthouse would bring FI pretty close. I don't have a precise timing yet, I'm just considering all the scenarios.

Another question: how often do you use it? Do you get $6000 of use out of it? i.e. what would it cost per year to rent a place like that every time you go to use it?

We don't use it enough to get $6000 out of it. With $6000, we could go to much sunnier countries.

Yearly costs are $6000?  Is that maintenance/taxes/utilities, or does it also include the opportunity cost (from investing the equity elsewhere)?  Is the $6000 cost include all AirBnB revenue as well?

Just as a thought experiment, let's say it's worth $300k and it's paid off, and the $6k is your cost of upkeep (maintenance, taxes, etc).  That's $12k/year in foregone gains, plus $6k/year in maintenance costs.  If you flip the situation on its head, $18k/year will pay for a lot of time in some other AirBnBer's cabin.

$6000 is the total cost of ownership (taxes, utilities, maintenance, shared costs with other tenants in the residence...). It does not included the opportunity cost and does not take into account AirBnb revenue.

And yes, the opportunity cost of foregone gains is what bothers me most.

[A Fella from Stella]

FI is not everything. You love this little place, your wife loves it, but also is cool with using it to make money by having strangers do god-knows-what in it.

I vote to keep the place. Also, please send me your AirBNB listing. I might just want to stay there myself!

[Car Jack]

Sell it now.

When the wife wants to go there for a few days of vacation, rent it via air bnb.  Or some other place that's as good or better.

[frugaliknowit]

To give you an intelligent answer, we would need to know:

1.  What you would net if you sold it (opportunity cost basis).
2.  What your net profit/loss average is over a period of years to establish an ROI (+ or -).

Generally, vacation homes are "emotional investments" (not the optimal use of capital; a THING/not an investment).

[Dries]

To give you an intelligent answer, we would need to know:

1.  What you would net if you sold it (opportunity cost basis).
2.  What your net profit/loss average is over a period of years to establish an ROI (+ or -).

Generally, vacation homes are "emotional investments" (not the optimal use of capital; a THING/not an investment).

1. A sale would probably result in around $275k.
2. If net yield (after taxes, costs, fees) of the property is somewhere between 5% and 7% (not bad now that I'm writing it down) This obviously requires a lot of work as most people stay only for two or three days.

You're absolute right: although it was originally meant as an investment, my wife and family became emotionally attached to it because the place is nice.

[socaso]

The pictures are really nice. Are you still in the hole for the $6k due to lack of rental some times of year? I wonder if a rental agency in the area might be able to keep it more consistently rented. They generally have their own teams to take care of cleaning and turnover for new guests. If you really want to keep it then it might be worth it to seek out an agency like that and see what they can do for you versus what they charge.