Buy a vacation home or just travel? A nice problem.

[Bamaman]

I've been going to Lake Tahoe the last 25 years skiing, and am very familiar with the area. You appear to be doing all right in your retirement, but owning a retirement home would be difficult unless you can pay cash for it.

I have a lake house 30 minutes from home and it's paid for. You would not believe the utilities, maintenance, property taxes and upkeep that second homes take. If I wasn't a handyman type, it would be unaffordable.

We live in the southeast, and many of our friends have condos on the Gulf Coast. Many rent out their properties most of the Summer, but they still go in the hole. And in recent years, their condos have not been great investments--with hurricanes and condo assessments.

I would tell you to go ahead and become like me--a perpetual traveler. And just rent a place in Tahoe anytime you need to go to the mountains.

 

[hesperus]

Yes, a nice problem to have but I agree with article that just being able to afford it is not enough to pull the trigger on an additional home. We already have a second place nearby (nice cabin in the san juan mtns of colorado) but we have discovered over the last year or two that as we travel we keep finding places that we love! I don't see this diminishing for at least a few more years, so we decided to rent nice homes where we go, and not have to lament being tied down to a particular place quite yet. Down the road, probably, as we age and narrow down where we would want to be and want to have that familiarity, but for now we will continue to travel and rent. Next up is austria this winter where I will fulfill my longtime dream to ski the alps.

 

[MichaelB]

When you're retired your primary home is now your vacation home - you're not working any more .

Traveling after retirement or owning a second home is not a financial decision, it is a lifestyle choice. A second home is a big commitment in time and money and a very specific and limiting type of travel - back and forth between two places. IMHO it is easy to make the case for a second home when the need really exists, but most folks don't need one and it's not a good option compared with normal travel.

 

[RAE]

In your shoes, I would rent when the mood suited me in Tahoe and travel with the remaining money.

I agree. Although you enjoy Lake Tahoe now, do you really want to spend all your leisure/travel time there (for the next xx years?)? Renting there anytime you want to and saving some other $$ for travel would retain the flexibility you want, while not really giving up anything.

 

[Sunset]

I've been going to Lake Tahoe the last 25 years skiing, and am very familiar with the area. You appear to be doing all right in your retirement, but owning a retirement home would be difficult unless you can pay cash for it.

I have a lake house 30 minutes from home and it's paid for. You would not believe the utilities, maintenance, property taxes and upkeep that second homes take. If I wasn't a handyman type, it would be unaffordable. ......

This is what I have found, either spend a lot of money each year (averaged over the years) or spend a lot of time "working" on fixing this & that because you have to (its not a hobby).

 

[Koolau]

I'll add my vote for travel - not owning a vacation spot. You can always change your mind later if you keep your powder dry. YMMV

 

[hotwired]

Try making a list of your top 5 values and filtering your choice through those values. Here's mine:

Family (immediate. wife and daughter. I'm here to serve them as purpose #1)
Freedom (Financial, but also ability to say "FI" let's spend a month in Papua New Guinea. Or maybe pursue my dream of playing acoustic guitar at Captain Tony's in KW)
Health - None of the values below are possible or enjoyable without this
Happiness -
Wealth

And so, given that money is not unlimited, I would choose renting vs buying (travling vs vacation home). This is in line with my value of "freedom" and doesn't bump up against any of the others (assuming my wife's primary purpose in life isn't waterskiiing on Tahoe!)

On the other hand, buying 2d home DOES bump up against "Freedom" -- it's a responsibility and it puts pressure on my travel choices. I'm going to feel irresponsible unless I'm spending 80% of my "away from home" time there. And of course, I can't just go online and hit the "sell" button when I change my mind.

I've had similar quandries though. We can do whatever we want as well once my daughter graduates high school and gets settled on a life direction. I get "International Living" magazine so my investor's heart says "quick! buy that oceanside 100 acres in Uruguay before it's all gone!" but I'm keeping the "freedom" value front and center to keep me on track, like a compass. We'll always own our own home here, and we also have 11 apartment buildings (48 units) so we'll always "have a place" to rest our weary bones if need be.

 

[Danmar]

We bought a vacation home in 1997 while still working. 2-2.5 hours from downtown Toronto on a nice lake. It was our weekend getaway from a very stressful job. Loved it right from the start. No effect on our travels at first. I second the idea that this was a family/friends entertaining/bonding opportunity and still is. Will never sell this place-will give to daughter and son in law who love it as well.

When we retired we bought another house in Canmore, Alberta and established our residency there. 5000 feet up the side of one of the most beautiful valleys (Bow river valley) we have ever seen. In 2012 bought a fourth house in Paradise Valley Arizona to take the edge off winter weather.

So now we have 4 places. Toronto condo is used mostly like a hotel for ourselves, friends, and family. Lake house still gets used a fair amount in summer often with family and friends. Arizona in the winter also often with family and friends.

Still travel internationally about 20-30 days per year.

I value the control that ownership bestows. I like my clothes in the closets, my cars in the garages. Like the flexibility that ownership gives, eg can go to any of our places whenever we want. Don't ever rent them, but often loan to family/ friends. Many people would view this as the opposite of freedom, we do not.

Obviously this is expensive and not everyone can swing it. Nor would many (most?) wish the responsibility, etc. of this lifestyle. I realize we are an extreme example of this approach.

Getting back to OP, a second home can widen your opportunities for interaction with family/friends as well as opening opportunities for new friends. This has certainly been our experience. Travel can eventually get tiring but multiple homes take a lot of time and money to maintain. Certainly a second home need not totally preclude travel. Really a very personal thing with a large component of financial constraint added in. I would never use debt to buy a second home unless I was still working. Our personal use real estate represents about 20% of our net worth and maybe 20-25% of total after tax expenses. What would it be for you?

 

[kcowan]

My Dad had a vacation property and we loved spending the summers there. We developed a whole new set of friends. It was 90 minutes from home. After 15 years, all the families we knew started to move on. It was fun to meet their kids but we never made the solid social contacts that we desired. (Even though some of them lived in the same city as we did.)

So we bought a timeshare (fixed unit, fixed time) and developed the same kind of social relationships there (same time next year), but after 15 years, many of them are now moving on.

We travel twice a year, one local and the other to Europe, usually 6 weeks in total.

Five years ago, we bought a snowbird property, and we really enjoy it. There is upkeep for sure, taking either time or money or both. But I expect that we will love it for at least another 10-15 years.

But given the choice of 2nd home or travel, travel would win for us. We also do not rent out our second home owing to tax implications. We do let friends use it.

 

[Sittinginthesun]

I own a vacation home that generates significant income via short term vacation rentals (VRBO). Minimal headaches, great return on initial investment and we love it there so we use it often. I like travelling but hate hotels and resorts. Would always prefer to rent a house and just got back from renting a private island on a lake for a week which was great fun and enjoyed by my family. Also planning to take the family to Hawaii in the next year and again will rent a nice home rather than a hotel.

 

[NW-Bound]

... Our personal use real estate represents about 20% of our net worth and maybe 20-25% of total after tax expenses. What would it be for you?

My two homes are 25% of my net worth. Over the last 5 years, when I started to track expenses, the home expenses are 28% of total after-tax expenses. It is indeed the largest category on my Quicken screen.

I expect the expenses to be lower for the next 5 years (knock on wood), as we just had several expensive home improvement and repair projects on both.

 

[48Fire]

In my opinion, it depends on a lot of information that the OP has not really given. A big factor is how often you stay at a second home. For us, we could not rent for as much as we use it. Our break-even point is at 16 days annual use.

Appreciation $7,200
Principal $5,300
Value of Use $15,400 (154 days at $100 per Day)

TOTAL VALUE $27,900

Cost of Owning $7,500
Cost of Capital $6,600

TOTAL COST $14,100

NET VALUE $13,800 (138 days equivalent)

 

[Drake3287]

Thanks for all the suggestions and idea's, I was afraid it would be like 50/50! Most of the pro and con reasons I've thought about and they all certainly make sense.

I hear a lot about people not using the second home enough to justify it, in my case my wife still works from home and could simply take her computer to the second house and work from there as long as we had internet.

What kills me is watching all these House Hunter/Beach House TV shows on HTV. Everywhere else in the country people are buying these beautiful vacation homes for $200,000. or $300,000. and that same amount of money in Tahoe buys an old starter home or small condo. If I'm going to buy something I'd rather have something nice and of course that brings the price way up.

Wish me luck!

 

[NW-Bound]

OK. Good luck!

You made me look on Zillow out of curiosity. There are a heck of a lot of listings in Incline Village, but boy, they are pricey! A cursory look all around the lake shore shows the same thing. So many with 7 figures. Below $500K, you can only get a 1000 sq.ft. condo.

How do so many people have this kind of money? Or perhaps they don't, hence the numerous listings?

What kills me is watching all these House Hunter/Beach House TV shows on HTV. Everywhere else in the country people are buying these beautiful vacation homes for $200,000. or $300,000. and that same amount of money in Tahoe buys an old starter home or small condo...

Well, you can always leave California and join them, where there's not as much money chasing after the homes. But if you have your heart set on Lake Tahoe, well, there may not be a comparable location.

 

[Drake3287]

The Bay Area is to full of wealthy people! Tahoe is where every goes unfortunately. Although I'd love a place next to the lake, even Truckee which is a few miles away is still expensive.

Like everyone else I should have bought during the low point in the market a few years ago.

 

[pb4uski]

We bought a lakefront home in 2005 that was 30 minutes from our then main home. A first it was an idyllic getaway.... no tv, no internet, no phone.... just a radio and the lake. After a year or so we were enjoying it so much we decided to live there the summer so we added tv, phone and internet. We kept moving in earlier each year and moving back home later. In 2010 we demolished and rebuilt and moved in in 2011 and sold our main home later that year. While I love where we live and the lifestyle, there are days that I miss that old "camp" with no tv, no phone, no internet and only a radio.

We are now retired and in the same predicament as the OP. We rented a condo last winter in Florida and actually looked at a lot of condos. Owning makes sense if we were in Florida 4-6 months a year, but it seems that renting makes more sense for 2-3 months whcih is where we are at right now.

The thing I can tell you if you ever own two homes... if you are working on something and need a tool... it will inevitably be at the other home.

 

[Elbata]

I live in So Cal and had a cabin in Big Bear. Even though it was paid off, I just didn't like the dealing with constant problems.

Since selling, I can still use the cabin for free anytime I want, and haven't used it once. Kind of like my membership at a local country club. Once I sold my membership, I realized I liked visiting and playing other golf courses.

 

[EastWest Gal]

Use your extra cash for travel. With that kind of money you could seriously see the world...from the Amazon to Antarctica, from Europe to India. It's enough work to keep up one home without the burden of keeping up two.


Sent from my iPhone using Early Retirement Forum

 

[kcowan]

The thing I can tell you if you ever own two homes... if you are working on something and need a tool... it will inevitably be at the other home.

Or worse, you spend 10 minutes looking for it until you realize it.

 

[NW-Bound]

Don't worry. After a while, you will build up two sets of tools. At least the ones that do not cost too much money.

 

[Brat]

We had a place at Sunriver, OR when the kids were little. We used it several weeks a year and rented it when we couldn't be there. Once the kids were older we used it less and less. Sold it when the kids were in high school... it really helped with college tuition.

Tahoe is a great place and frankly I don't think property values will go down. That said it would be smarter IMHO to buy a small vacation house in a nearby community if you buy anything.

I agree with others who recommend traveling while you both can do that. Rent a couple weeks each year at Tahoe to scratch that itch.

 

[brett]

This has been our dilemma for three years. Actually double because we sold our home, travelled, came back and have since lived in a rented condo though we may purchase at some point.

We wanted something warm for 4 months in the winter. The closest we have come so far has been either Thailand or Costa Rica. But once we ran the numbers it no longer made sense. And even if they did, we are not certain that we want to be tied down. We like the flexibility of going where we want. So this is what we are doing. Last winter it was three months in Thailand/Malaysia/Austalia/NZ.

We have a Jan. wedding in Cancun and we may zip over to Puerto Vallarta and rent something for a month or do two separate one month rentals in different parts of that area. It is an easy plane trip for us-direct.

At some point, IF the numbers are reasonable, and we find a spot that we can enjoyably spend 5 months, then we may bite. Otherwise it will be rentals. Lots of interesting places to visit.

 

[Danmar]

This has been our dilemma for three years. Actually double because we sold our home, travelled, came back and have since lived in a rented condo though we may purchase at some point.

We wanted something warm for 4 months in the winter. The closest we have come so far has been either Thailand or Costa Rica. But once we ran the numbers it no longer made sense. And even if they did, we are not certain that we want to be tied down. We like the flexibility of going where we want. So this is what we are doing. Last winter it was three months in Thailand/Malaysia/Austalia/NZ.

We have a Jan. wedding in Cancun and we may zip over to Puerto Vallarta and rent something for a month or do two separate one month rentals in different parts of that area. It is an easy plane trip for us-direct.

At some point, IF the numbers are reasonable, and we find a spot that we can enjoyably spend 5 months, then we may bite. Otherwise it will be rentals. Lots of interesting places to visit.

Owning second (or more) personal use homes seldom makes sense financially. It is the other intangible aspects that drives people to do this. Like people often say, "a lifestyle choice, not an investment"

 

[Midpack]

I would rather have the flexibility to vacation in many locations, so I'd travel instead of buying a vacation home anywhere. We're all about holding fixed expenses down too, a vacation/second home locks in a lot of costs whereas travel costs can vary as needed, more in good years and less in lean years or when other unexpected expenses crop up. In the OP's case the only way we'd buy at Tahoe would be if it became our primary/only residence - and then travel from there. Win-win? YMMv

 

[Sojourner]

I would rather have the flexibility to vacation in many locations, so I'd travel instead of buying a vacation home anywhere. We're all about holding fixed expenses down too, a vacation/second home locks in a lot of costs whereas travel costs can vary as needed

+1

Exactly my outlook. Whenever I start to think about buying a place somewhere (usually because I really like the area or would love the convenience of an "always ready, all mine" vacation home), this is what holds me back.