Dear hosts, we're back with another episode of the hosting journey where we talk all things about short-term rentals and Airbnb. And in today's episode. We're going to talk about, should you sell your short-term rental or not? Yes! The real estate market is super hot. How we do then when we get bad reviews? Yes! I know how it is. Those bad reviews just makes us go crate, crate. But the real estate market is harder than that! And now how do I know? Because in the last three months I have been buying properties for my 10:31 exchange. And doing that time, I have seen how the market has just gotten hotter and hotter. Yes! People are buying properties without inspection reports contingencies or appraisal contingencies. Yes! I know! Something that you probably would have never thought six months ago or a year ago, people are doing it now. They're also, if you're asking $200,000, people are paying two 20 to 50. I know in properties are not staying in the market
What should you consider? and what should you think when you were deciding to sell your short-term renta Airbnb or not? Let's talk about it today. Okay. so you have decided you looking at the market and you saying, “Ooh, I have $200,000 in equity from when I bought the property and to where I'm selling it”, or maybe you have more, or maybe you have less. So let's talk about the questions that you need to ask yourself and what you need to consider, when you making that big decision. Because it is a big decision! One question that I asked myself was my, “Why”. Why do I have this property? And why am I thinking of selling or not selling? So for you, is this your vacation rental that is just an investment? Or is it a property and a location that you like to go to all the time that it's a family place?
That for generations you guys have been going to. And for you like this, your second home. It was not just an investment property. So if you sell it, are you going to stay in the same market in the same space, or are you going to move somewhere else? And what would that dynamic big? So think about that as your, “why”, what is the reason for selling? Besides the money! And what is the reason for staying? Let's also talk about making money with the short-term rental?, Or can you make more than what you're currently making? During my time of looking for properties. I came across some of them that were short-term rentals already that had some, and there was selling for their own reason. And then they were going to buy another property later on. But I felt like, “Oh, this is not making as much as it could because it doesn't have professional photos”.
They just needed to do a couple of upgrades for it to just make more money. So if you seen yourself like, well, I'm selling because I'm not making as much. Do an audit on your property and find out, “Am I making the most profits from it?” Am I really just doing as well as I could to be doing with this property. Because selling and buying is costly, and we're going to talk about that. So that's one of the things that you have to think about. Is this property making as much money as it could? Please talk to your accountant CPA or tax lawyer — so that, you know, what are the tax implications of you selling the property and not doing anything and not doing a 10:31 exchange and buying another property. Because believe me, it could be surprising for me. Had I not invested my capital gains, I would have probably pay about $400,000 in taxes alone because in New York I have to pay the federal tax state and city.
So it becomes, it goes up to about 40% or not — so a lot of money. So for me, it was a no brainer to say, “Well, instead of paying capital gains, instead of paying taxes now. I'm going to defer them to the future because it's not like they're gone forever. I'm going to defer them with a 10:31 exchange and just buy more properties. Okay? But that was my decision. So you have to say to yourself, “Well, what am I doing with this money?” Because am I really getting the whole a hundred thousand dollars or not? And now let's talk about the cost of selling and the cost of selling you because people don't think about is, the money that you're not going to make when you sell the property, the money that you spending to sell the property. And then the time that your business is down.Alright, look — to sell the property for me for Eveland 1.0.
I had a buyer from October. I thought I was going to be closing by December. So on December 1st, I got my last guest out and I had to pack. I have to pack. I have to get ready. We didn't close all the way into February. So there was two months where I didn't make money from my property. Look, you might say, “Oh, I'm going to be continued taking guests all the way to the end”. And some people even take guests all the way after, and then they have to negotiate what they're going to do with those kids. They have to inform the guests that the property was sold. You don't know if the new buyer is going to do with short-term rental or not. So you have to think about how are you going to manage your guests in your business doing the transition of selling.
You also might inconvenience them with open houses, with getting your new buyers in to get appraisals or inspections and things like that. So think about that! What is the cost of selling? What's it cost? Are you using a realtor? How much are you paying that realtor? Because you gonna negotiate those rates, but normally it's 3to 6%. And that could add up. And also, what is the cost? What do I have to pay the city to sell? For me to sell Eveland 1.0, it costs me about $130,000. You want to say “that's a lot of money”. Yes it is!
And if you don't reinvest a property, that profit, you're going to have to pay capital gains on it in New York, it's almost 40% between federal city and state. So it's a lot, it could be a lot of money or nod, but then if you do an a 10 31 exchange, this rules and regulations. So that is something that you have to decide. And you have to decide when you're selling, because you need to get all the ducks in a row to make sure that your 10 31 exchange is up to code. And it's, it's, you'll abide by the law. Okay. And then you also have to decide, well, what am I doing with the furniture? Am I selling the property with the furniture? Am I going to buy another property? Do I have to furnish that property? Or what is the cost of moving that furniture to the new property is a worth it.
So think about all of this, and this is just the cost of selling. We could talk about the cost of buying a property, because then there's costs like the appraisal fees, because you will always want an appraisal. The cost of the inspection. Because believe me, I have paid for inspections and not bought the properties. And now let's say, for example, if you're buying a property that has a septic, you want to inspect the septic. You just want to make sure the things are proper in your home before you go ahead and buy it. So you're going to have inspection fees. You're going to have appraisal fees, all of those costs. And you're going to have closing costs to buy that new property and closing costs could be a couple of 3% or sometimes more in New York. It's a lot more than 3%. So, you know, just make sure that you know, that this is what's going on. And then this, the time that your not running your business.
Yeah. Sometimes We don't think about that! Time! Because from the time you sell to the time you're up and running the new business, you could take a couple of months. Look, for me — I sold in February we are in May, and I'm still not up and running. And I closed Eveland 1.0 in December. So I have not earned income since December, It's may. And we might be up and running in June. I'm hoping, because I'm pushing, I'm doing some construction, this also design and all of that. So, this are all the costs that you have to think about when you're doing this. So the numbers are not just like, “Oh, I have this much money on equity. Okay? Think about that. Another question to ask yourself is, “Is the city where I'm at changing regulations?” Because that might push you out. You might say, “let me sell now, instead of later when the regulation is here, because their might just be a better opportunity to sell, because if you're not going to be able to do short term rental, or you're going to be, have to do 30 day rental, like to travel nurses of corporate.Yyour income is going to change from what you used to make before with shorter stays with vacationers and travelers.
Okay? And a lot of cities right now are doing that. So think about “Is my city doing that”. Or “Am I in a place where short-term rentals are a subset and they were allowed and they are good”. If you have an HOA, how do they feel about short-term rentals? Can they change it? This happened to my friend, Donna. She's been on the hosting journey podcast a few times where she had a condo, it was legal to rent. Then the change it to 30 day minimum. And then they changed it to a year minimum. So she sold that property. She made some money and she just got out of it because she'd be now, want a yearly long-term tenant. So see what's happening in your city. See the, like be informed and know and be aware. And another question is this, “Did you want to do this anymore?”
Or are you saying like, “I want a different life”, but think that if you don't want to host any longer, could you have someone manage the property for you? Can you have be a remote host and have a team? So you're not cleaning and you're not involved because look, I was cleaning my own properties for a long time. Eveland 1.0 I was the one cleaning it. And it got to point that I just couldn't do it anymore. Could I do it physically? Yes! Emotionally, No! So I hire a cleaning team, but hiring a cleaning team means I'm making less money. But then I changed my style of hosting and I was making more money, but as I was spending more money. So whatever you do think about what kind of life do you want to live? Think about all of the answers to this questions when you're deciding to sell or not. I hope you found value in this video and if you like it press like and subscribe and get notify for more tips and tricks on the short term rental world. I am your host. Evelyn, Badia wishing you a happy hosting journey.