Mike has always wanted to retire and start his own bed and breakfast. Is this the year he will finally live the dream?

Mike has heard about AirBnB and how he can list his property through this service in order to match with people wanting a place to stay. Hes heard you are a bright finance student who has just started a consulting LLP with some of your finance classmates. He has hired you to do a cost/benefit analysis of purchasing a property and then renting it out on AirBnB. His decision will rely on your opinion on whether it is a good idea to buy a place and list it on AirBnB. Assume income tax rates are 20% (and you are a sole proprietorship or partnership).

Mike wants the analyse in the report:

Investment Cash Flows How much is your property going to cost?

1. Choose a property and estimate its cost

• Hint: MLS is a great source for this

2. Calculate other purchase expenses

• Hint: there are many expenses when purchasing a property!

3. Salvage Value: Estimate how much you will be able to sell the property for in 5 years

• Hint: This should be net of any selling expenses. Selling property has many costs

4. Other investments.

• Are other investments required to bring your AirBnB online?
• Hint: People want to be feel at home when traveling.

5. Present value of capital cost allowance (CCA) tax shield
6. Be sure to document your data sources