The first thing that jumps out when we look at our Net Worth and Expense Comparison  is that we start to have problems when we begin to pay for Emma's college.
 
In this scenario, we’ll have two mortgages to juggle. Our current home mortgage is roughly $1,500 a month, and adding the second home mortgage of an estimated $1,800 would bring the total monthly mortgage payments to $3,300.
Our combined take-home pay is $140,000 annually or $11,667 per month before taxes and deductions. With our existing expenses—including the mortgage on our primary home, bills, and contributions toward savings and college funds—we’d be stretching ourselves to make ends meet without Airbnb income. We would actually be pulling from savings every month if we chose to maintain the status quo and continue to fund all of our goals. Furthermore, we would have to make changes elsewhere to afford to send Emma to college. We have not even begun to test whether or not we could sustain a job loss or any other unexpected expenses. This is not sustainable. We will not prioritize our second home over our children’s college.
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Scenario 1: Modest Rental Income After a 1-Year Runway

Now let’s assume that it takes one year to get the Airbnb business off the ground. After that, we can expect a modest rental income of $1,500 per month (assuming a rental rate of $150/night for about 10 nights each month). While this won’t fully cover the second home mortgage, it significantly helps.

As we expected, we will be in good shape if we can get the AirBnb in order in a year and then consistently pull in $1500 a month to contribute to our mortgage and other costs. We still need to analyze this a little bit deeper. We have to assume that some things will go wrong and we need to add some costs to running the AirBnb. Our last step is to stress test this scenario by adding expenses, reducing investment income, and accounting for the possibility of one of us being out of work for an extended period of time. Let's see how this scenario looks after a stress test.
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​Scenario 2: Stress Test: Market Downturn, and Job Loss

Given the expenses on our AirBnb, 1 year unemployment for Lisa, and 2 years of losing on investments, we will still be able top fund our college goals and make our retirement. We feel confident that we can navigate any financial situation as long as we have our home and our children's college is covered. This stress test scenario is not a likely scenario and we still anticipate raises for both of us before we retire. In other words, we are being conservative in modeling this and we believe that it is worth the risk given the analysis provided by StartingOutPlan.

Key Takeaways

The baseline scenario shows that we’re in a strong financial position, and we could definitely afford to take on a higher mortgage for a second home. However, without any Airbnb income, our finances would be stretched thin, and we’d have to cut back on savings for retirement and college to make ends meet.

Scenario 1, where Airbnb doesn’t work out, paints a picture of manageable but slightly risky financials. We’d still be able to afford the second home, but it would come at the cost of our long-term goals. Reducing contributions toward savings would delay our retirement and college goals, but we could still make it work if needed.

Scenario 2, with Airbnb income starting after one year, is much more favorable. Even with a modest rental income, we’d be able to cover most of the second home mortgage, leaving us with more flexibility to save and invest. The stress test scenario also shows that we’re in a strong enough position to weather financial difficulties like a job loss or market downturn.
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Making the Decision

After modeling these scenarios, we feel more confident in our decision-making process. Buying a second home and using it as an Airbnb is financially feasible, but it requires careful planning. We need to be prepared for potential setbacks and adjust our savings and expenses as needed to ensure we’re not overextending ourselves.

The Importance of Comprehensive Planning

This case study presents a simplified financial scenario. In a more detailed personal financial scenario, we would incorporate specific expenses, financial goals, and the details of all debts and assets to ensure a more precise and tailored financial plan.

The Role of Professional Advice

While we’re confident in the numbers we’ve run, we recognize the importance of consulting with a financial advisor. StartingOutPlan has given us a solid understanding of our financial situation, but having a professional advisor validate our plan will give us peace of mind and ensure we haven’t overlooked any critical details.
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