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Purchase a vacation home ?
Old 11-25-2018, 08:44 PM   #1
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Purchase a vacation home ?

I respect the thoughts of forum members so I am looking for thoughts on this opportunity.


DH and I have an opportunity to bid on a foreclosure SFH that could be a vacation home (about 2 hours from our home).
We saw it today and see that most repairs are updates etc that we have done on a previous home. So we know we can handle the work.


But it would require use of ROTH $$ or $$ out of an established HELOC.

We LBYM but this purchase would probably add $700 /monthly expenses (we can afford it) but I want to RE by 2020 or at least work part time.



DH is retired and can do all the repairs but the roof.

There may be VRBO potential but I don't think we should count on it.


We could Blow that Dough ! or live with current budget and rent vacation homes when we choose to.



Has anyone else bought a vacation home just before RE ?

Thanks for your thoughts.
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Old 11-25-2018, 08:57 PM   #2
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I have thought about doing the same thing but I can't justify it, it just doesn't make financial sense (for us). I like real estate and we have a good number of rentals but we've passed on the vacation home.


Unlike most here(?) we went with a timeshare and we absolutely love it, when we purchased I thought we would regret it but it's been a great purchase (for us) and a good compromise.
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Old 11-25-2018, 09:06 PM   #3
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Could be a money pit and huge PITA. Id save the bucks and vacation when I want, where I want. I barely want to maintain one home, much less 2. That's just me though. Sounds like youre not totally convinced this is the perfect plan for you..
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Old 11-25-2018, 09:12 PM   #4
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Since we’re in Minnesota, we have a cabin. It’s the Minnesota thing to do. There is no way it has been a smart move financially, but without question, THE best friends I have are my cabin neighbors. That’s worth something.

If the vacation home is in an area where you know people will be there for the same reason as you, it’s worth considering.
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Old 11-25-2018, 09:14 PM   #5
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I rebuilt a second home that was 10 miles from our home. It needed everything and we did all the work except new roof, new siding, and outside painting. Took about 6 months total.

This stuff takes a LOT of TIME and effort.

You are two hours from this place? That will make working on it difficult as it will be 4 hours driving each time you go there to work. And hope there is a Home Depot near by.

What about security for theft, etc when you are not there?
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Old 11-25-2018, 10:39 PM   #6
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I'd say forget it. Put the $700 a month into a vacation fund and use it for VRBO / AirBnB getways. At a second home, you'll spend all your time there maintaining it, not having fun.

My solution was to buy a more expensive only home with enough land so I didn't feel like I needed to escape to a vacation home on the weekends. In retirement I follow the same strategy with occasional rental vacations.
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Old 11-25-2018, 11:18 PM   #7
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Please buy mine....

I have one, it has been in the family for 100 years... it was great as a child going there all summer long.

As an adult, it is seriously like a millstone.
I have to pay approx $4,000 per year for it, even if I don't use it. Actually not using drives up costs as I'm not there to fix a small problem before it becomes a huge problem.

Every year I have to check did someone break into it ?
What needs fixing/painting this year.

All I do at it, is work work work work... local contractors are lousy and don't even show up for a $7,000 job.

The yearly costs, and capital invested in it, could easily fund a couple of weeks or more vacations elsewhere in the world.

One child does not want, has not used it for over 10 years, not even to visit it when we are there.
The other child uses it as a party spot for about a week during the summer, as punishment I told her, she gets to inherit it.
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Old 11-26-2018, 04:36 AM   #8
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I'd say forget it. Put the $700 a month into a vacation fund and use it for VRBO / AirBnB getways. At a second home, you'll spend all your time there maintaining it, not having fun.
+1
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Old 11-26-2018, 05:12 AM   #9
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My family has had a vacation home since before I was born. I always thought I would never want to give it up, but after our mother died, I let my sister buy me out. My wife and I prefer to travel to new and different places instead of going to the same place all the time, and to not wand the expense and responsibility of upkeep. My sister however, could not even conceive of not having the cottage. It is a personal choice.
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Old 11-26-2018, 05:33 AM   #10
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Buying a second home is a very personal decision. Opinions will vary. I suggest you separate the lifestyle decision of owning a second home from the investment decision of owning a VRBO. The worst financial decision we ever made was the purchase of a water front lot for a potential second home. I called it an "investment". I doubt we would have bought it had we looked at it as only a second home. And clearly we would not have bought it as a standalone investment. Something about the combination told me this was a good idea.

Yes, the income can help defray costs. But, it will cloud your decision about the level of desire for a second home. IOW, would you buy it without the income potential? Would you buy it as an investment if it were not a second home?
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Purchase a vacation home ?
Old 11-26-2018, 06:21 AM   #11
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Purchase a vacation home ?

IMO, it would not make sense unless you would enjoy it to the point where you spent at least one third of your time there. The decision doesn’t rest on the cost, but rather on the enjoyment factor.

I bought a snowbird condo 12 years before I retired. I only spent about a total of a month or two a year there before I was retired. Now we’re there 3-4 months a year and we really enjoy it.
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Old 11-26-2018, 08:07 AM   #12
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We bought a second home seven years before I FIREd, and still own two homes today (three and four for a short time). I say second homes because they are far apart and we live in one for months at a time, then move to the other. No back and forth.

For us, it was a lifestyle decision more than a financial one. The first second home appreciated a great deal, and covered all costs when sold. Not sure whether the second second home will pay off similarly.

The way you describe this as an "opportunity" to bid on a foreclosure, and that you are considering tapping into a Roth to do it tells me you are trying to justify something you really can't afford, and are mixing the financial decision with the lifestyle one. Especially during a time of transition, RE in 2020, I would say no.
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Old 11-26-2018, 08:16 AM   #13
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Has anyone else bought a vacation home just before RE ?
We purchased a second home/vacation home/potential retirement home almost seven years ago. It's worked out wonderfully.

Our house is about 1.25 hours away from our primary residence on the beach. It is in a town where we had vacationed for most of the prior 20 year. The house hasn't needed much in the way of a refurb so far, although we are having the entire interior painted this winter. We bought it when the house prices in that area were far lower than they are now, and got a good deal on it.

For us, we wanted something close enough that we could go there most weekends, as well as most vacations. We didn't want anything we would need to rent out to afford. And we would never have withdrawn money from our retirement accounts to pay for it. We had sufficient down payment money in the bank, and could easily afford the 3.875% mortgage.

We also didn't want to have to spend our time maintaining the property. It's in an HOA where all the landscaping and plowing are paid for. So we can mostly just get there and enjoy ourselves. Occasionally I have to drive up there and meet a contractor or deal with a house issue. Since it's only a little more than an hour away, it's not a big deal. It's been more work (and of course more money) maintaining two homes for the past seven years, but for us it was worth it.

Shortly after we purchased, our first granddaughter was born. Since then, we have been picking her up on our way there on Thursday nights, babysitting on Friday, and taking her back home. We've done the same when our grandson was born two years later. It's been good for our son and daughter-in-law saving them the cost of a day of daycare each week, it's been good for our grandchildren having family play with them, and of course it's been wonderful for us.

Fast forward - we are planning to sell our primary residence and move there full time late next Spring. We have come to love the community, the neighbors, the house, and the lifestyle. We got very lucky - it all worked out even better than we had hoped.

The only big decision we'll need to make is if we should use the money from selling our paid-off primary residence to pay off the mortgage on our retirement home. We can easily afford the mortgage and it doesn't keep me awake at night - currently our plan is to simply invest the money and keep the mortgage. We'll keep any eye on things over the next months and change our decision if conditions warrant.

You need to consider how often and for how long you will be there. For $8400/year you can buy a lot of vacation in a lot of nice places. Unless you are sure this is the right place, you may want to wait a while. Bargains will always come along when you are ready.
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Old 11-26-2018, 09:09 AM   #14
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Between 2013 and 2017, I did beach vacations with friends at the NC Outer Banks. Great home, oceanfront, about a 3.5 hour drive from the Triangle (Raleigh and vicinity). I booked through Homeaway.

This home was to be a retirement home for the owners, who I got to know pretty well and are great people. I decided to skip 2018 in favor of a “staycation” and got in touch with them to let them know (since I was kind of a “regular”).

They were appreciative of the heads-up and said they were planning to contact me to let me know they’d decided the maintenance and hassle of costs and upkeep had led them to put the home on the market (it has since sold). The wife said they’d do fine being vacation renters like me.

So, one less option for me but I think the right choice for them. I feel the same way about things like boats: I enjoy but am not avid so am happy to rent. That, however, is a very personal decision. I know boat owners who really get the most from them.
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Old 11-26-2018, 09:15 AM   #15
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We have thought about this for the past six years. A second home in a warm climate where we could spend five months in the winter. We have looked in the US, Mexico, Costa Rica, and even considered SE Asia. We were more enthusiastic about this when we were renting our primary residence for four years. Now that we are home owners again I am not so sure that we want to own two properties.

We keep coming to the same conclusion. For us, at this time in our lives, it is better to rent. It allows us to travel to different destinations and not feel that we must return every year. We may feel differently in a year or perhaps a few years. So far, Puerta Vallarta is the only location that we would consider for a second home in the sun.
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Old 11-26-2018, 09:21 AM   #16
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I could have written the exact same question! I've been going back and forth for a couple of years. Our family likes water sports and I would love a lake cabin, but I can't seem to take the leap. My husband is neutral on the idea. He wouldn't mind the cabin itself, but doesn't like dealing with the weekend traffic. We always rent one for a week in the summer, but it would be nice to have a weekend place for the summer that already has all of our stuff in it and didn't require us to board our pets.



I like the idea of having one in retirement because we could go up there on weekdays and avoid the weekend traffic. I'm still actively looking at listings. There was one I looked at this summer that we almost pulled the plug on. The only problem was that it was in WI and I think the property taxes are a little high.
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Old 11-26-2018, 09:37 AM   #17
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Originally Posted by Octogirl View Post
I respect the thoughts of forum members so I am looking for thoughts on this opportunity.


DH and I have an opportunity to bid on a foreclosure SFH that could be a vacation home (about 2 hours from our home).
We saw it today and see that most repairs are updates etc that we have done on a previous home. So we know we can handle the work.


But it would require use of ROTH $$ or $$ out of an established HELOC.

We LBYM but this purchase would probably add $700 /monthly expenses (we can afford it) but I want to RE by 2020 or at least work part time.



DH is retired and can do all the repairs but the roof.

There may be VRBO potential but I don't think we should count on it.


We could Blow that Dough ! or live with current budget and rent vacation homes when we choose to.



Has anyone else bought a vacation home just before RE ?

Thanks for your thoughts.
It all depends on how much of a discount you are getting from market value and the location of the property. Consider that you are buying at the peak of a market cycle now. If you plan to rent it, check what a similar home can rent for in the area. We faced a similar situation back in 2011 with properties in South Florida. However, real estate was at a historical cyclical low back then. We ended up buying a fairly new condo (3 years old) in a modern high rise in a coastal area for about 22 cents on the dollar on short sale to the bank. It was an all cash transaction that currently adds about $1000 per month to our expenses for property tax, condo fees, insurance, and utilities. This is up from $750 per month when we purchased it. However the property has almost quadrupled in value since our purchase in 2011. Similar units rent in our building for about $2400 per month, unfurnished. Real estate can be a solid investment if the location of the property is good and there is potential for appreciation or steady rental income. My advice would be to look at the comps in the area and look where you are in the overall cycle and the trends over the past 20 years.
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Old 11-26-2018, 09:47 AM   #18
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I'd say forget it. Put the $700 a month into a vacation fund and use it for VRBO / AirBnB getways. At a second home, you'll spend all your time there maintaining it, not having fun.
+1

My parents have owned a vacation home for over 20 years now, and even though they do spend a lot of time there and seem to enjoy it, it is a CONSTANT maintenance and upkeep headache. If my dad were not as handy and DIY as he is, I'm pretty sure they would have sold the place long ago.

Also, as others have pointed out, $700/month ($8,400/year) could fund several nice vacations at various desirable spots around the globe each year. Unless one has the means to afford an expensive (time-wise and money-wise) vacation home AND to vacation at other locales via AirBnB etc., I'd lean towards using that money to travel around and see the world at your leisure.
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Old 11-26-2018, 09:54 AM   #19
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While I know there are exceptions, generally vacation homes are not great financial investments. As others have said, it’s more of a lifestyle decision. I would definitely not take funds from my retirement accounts to buy a vacation home.

It sounds like this has come up as an opportunity, rather than being a long-term goal that you’ve put a lot of thought into. A decision like this will impact your life for many years, so I would analyze market trends and vacation rental income potential. Don’t forget to consider extra costs involved in owning a vacation rental (WiFi, cable TV or streaming service, housekeeping, grounds and pool maintenance, etc.).

DH and I used to own a vacation rental home in a desirable area in So CA. Even in this real estate market, we decided to sell it at a loss rather than continuing to fund the ongoing costs of ownership. Selling that property was one of the key enablers for our ER. It also gave us much more flexibility on where to vacation. When we owned our vacation rental, we felt we should use it since we were already paying for it.

Having a second home can be great if you prefer to vacation in the same place frequently. Just don’t expect a great financial return.
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Old 11-26-2018, 10:20 AM   #20
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Could be a money pit and huge PITA. Id save the bucks and vacation when I want, where I want. I barely want to maintain one home, much less 2. That's just me though. Sounds like youre not totally convinced this is the perfect plan for you..

+1. We retired to do less - owning a second home doesn't fit that requirement.
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