Vacation home, do you regret it?

[Ronstar]

Quote:

Originally Posted by NW-Bound My daughter's first home is a townhouse next to a large resort, and was built by the resort original developer. Hence, it has very nice surroundings, and one can walk to the resort for golf or to dine in its restaurants. The upkeep is minimal, as the exterior is all maintained. The HOA fee is $300/month for a 1,000-sq.ft. home, which seems high but you never have to worry about exterior painting, roof leak, etc... In fact, the home insurance policy she has to get is about the same as that for renters, which only covers the home content. I suspect that many of the owners are snowbirds. Prices are about $150-175/sq.ft. Adjacent to these town homes are larger homes from 1,700 sq.ft. to 4,000 sq.ft. These larger homes are more traditional, requiring the owners to maintain the exterior.

Although I really like the condo/townhouse/HOA arrangement for its ease of maintenance, the uncertainty of future HOA fees is troubling. My HOA fees increase has far exceeded that of other expenses, going from $135 per month in 2002 to $290 per month in 2017.

But I accept it because there is no way I could handle yearly maintenance by being at the condo only during fall / winter.

[brucethebroker]

Quote:

Originally Posted by donheff +1. We had a beautiful weekend home on the water for 23 years, mortgage paid off. But the kids stopped coming over the last few years and worrying about the pool, the house, fallen trees, etc took a lot of the fun out of the place. We sold it last year cutting out a $10K annual expense and infusing a $20K annual influx (using the standard SWR rate). Now we rent nice places at the beach for a few weeks in the summer and travel a bit more in the winter. We enjoyed it for most of the years we owned it and were relieved to leave it behind.

Sounds like you have a great plan going.........

[brucethebroker]

Quote:

Originally Posted by Ronstar Although I really like the condo/townhouse/HOA arrangement for its ease of maintenance, the uncertainty of future HOA fees is troubling. My HOA fees increase has far exceeded that of other expenses, going from $135 per month in 2002 to $290 per month in 2017. But I accept it because there is no way I could handle yearly maintenance by being at the condo only during fall / winter.

That is a valid consideration. We have found that two of the usual suspects towards high HOA fees are 24/7 security guards at gates and golf courses. Many golf course (mandatory memberships) communities have great deals on used condos, but the fees can be $600 to $1000 a month. If you find a nice neighborhood, with low fees (ask owners about it-they will tell you!) and a board dedicated to keeping fees low, it is a very affordable option.
BTW, if you have pass code controlled gates, and year round owners in your area of condos (keeping an eye on things), the security can be pretty good even without guards.

[NW-Bound]

Forgot to say, my daughter's townhouse HOA fee does not include any golf privilege at the nearby resort. There's also no 24-hr guard.

Come to think of it, the $3,600 annual HOA fee is kind of high. But then, I forgot to check to see what the RE tax is. It should be lower than normal, as the city does not maintain the roads through the subdivision, and they have to pave it themselves. They also have their own garbage collection, as the city dump truck does not drive through. Sewer/water/electric are provided by the city.

[Dash man]

Some people think our $1487/qtr HOA fees are high, but a 46 year old building on the beach takes maintenance to look as good as it does. The fees also pay for 24/7 security, water, sewer, Comcast cable including HBO, a fiber optic internet line owned by the association, so no fees after next August, a pool, direct beach access, and other amenities. The only downside is the residents continually vote for no reserves, so there are typically a couple thousand in assessments each year.

[NavAir]

We have had a second home (condo on the Beach) for the past 24 years. We love it. It is 750 miles away from our full-time home, but with over 100 trips in that time, we are used to the drive. There is the issue of expense, but we knew that going in. We have a good Management team, so there is minimal maintenance for me too do each time we are there (one or two Honey-dos). It is so much nicer showing up with nothing but the clothes on your back and being at home.

We did have one large casualty (Hurricane Ivan in 2004), which kept us out of the condo for almost 4 years!

Plus, the property has appreciated significantly in that time.

[Meadbh]

Quote:

Originally Posted by Dash man Some people think our $1487/qtr HOA fees are high, but a 46 year old building on the beach takes maintenance to look as good as it does. The fees also pay for 24/7 security, water, sewer, Comcast cable including HBO, a fiber optic internet line owned by the association, so no fees after next August, a pool, direct beach access, and other amenities. The only downside is the residents continually vote for no reserves, so there are typically a couple thousand in assessments each year.

I think that many people have no understanding of how condominiums work. They often think that really low condo fees are a bargain. Just because maintenance costs are shared doesn't mean they don't exist. Unrealistically low fees will either result in deterioration of the property, and/or a multitude of special assessments.

Here in BC there is a legal requirement that at least 25% of the annual operating budget be placed in the reserve fund. Also, every condominium complex with 5 or more units is now required to have a depreciation report done by a qualified professional (engineers usually) and updated every three years, unless voted down by 75% of the owners (which would make the condos almost impossible to sell). The depreciation report is key to getting a handle on likely future costs and in justifying realistic fee schedules. The condo board, in using the information in the depreciation report, can choose one of several funding models: minimal (not recommended as special assessments are inevitable); threshold (funding a certain percentage, eg 50% of expected long term expenses are in the reserve at all times); or fully funded (reserve funds are enough to pay for any and all predictable expenses, with no special assessments). The threshold model is the fairest to current and future owners.

My condo complex has built up a very healthy reserve fund while keeping fee increases close to inflation (10% increase in 7 years). We rigorously maintain all key building systems. Nevertheless, if everything went wrong at once (roofs, boilers, electrical systems) we might need a special assessment. Failing a catastrophe, we should be able to avoid special assessments. Owners are not complaining about fees.

[Ready]

My parents bought a condo near the beach in the late 90's for $120K. It was not in great shape and there were insufficient reserves to make needed repairs. To make matters worse, several owners were in default and stopped paying their HOA fees completely, and the remaining owners had to make up the difference.

Then came the 40 year mandatory Broward County inspection, which determined that unless major structural repairs were made, the unit would be declared uninhabitable. My parents were assessed a $52,000 special assessment to make up the repairs. They could not afford it, so they sold the place for $67,000.

I watched them live through this experience and promised myself I would never put myself in a situation like this. I know some condos are well maintained and funded, but you have to be very careful when buying a condo to protect yourself from a situation like this.

[NW-Bound]

Homes can be moneypits, main or vacation homes. No ifs or buts about this.

And not all locations enjoy appreciation as in California. I never follow home prices closely, and only look at nearby home sales out of curiosity.

[ivinsfan]

I thought a lot of condo reserve underfunding had gone away with the tightening of some lending rules after the crash. My DSis was in an HOA with a lot of older owners who apparently didn't want to pay a dollar more in fees then they did 10 years ago.

One unit went up for sale and the lender flagged the property for the HOA being underfunded and wouldn't write the loan. The minute the owners heard they couldn't sell their units they were willing to pay the amount needed monthly. But without that huge stick it would have been a different story.

[imoldernu]

Ditto on the reserves...
IMHO, that's the first question to be asked about "communities". Best friend bought in to a condo... Two weeks after moving in, received a bill for $18,000 for safety upgrade to balcony. Newer construction that didn't pass revised building code. HOA had enough reserve for $2,000 of the actual cost. In larger communities, (particularly older ones)... a good look at common area roads, clubhouses, tennis courts etc... can give a clue as what to expect in the coming years.

While we were still in Florida, and considering it as a permanent home, the real estate people typically were evasive in cases where the reserves were inadequate, and quite boastful, when they were adequate.

[Scuba]

Quote:

Originally Posted by NW-Bound Homes can be moneypits, main or vacation homes. No ifs or buts about this. And not all locations enjoy appreciation as in California. I never follow home prices closely, and only look at nearby home sales out of curiosity.

While the market in CA can do well over time, it can also crash very painfully. We have made a lot of money on properties here, and have also lost a lot. I would not count on making money on a second home if it's in a popular vacation home market. When the economy crashes, people stop paying mortgages on their vacation homes, and the bottom falls out of the market, big time. Even beachfront property in CA took a huge hit in 2009-2010 and took 5+ years to recover in some markets.

[Fedup]

Quote:

Originally Posted by Scuba While the market in CA can do well over time, it can also crash very painfully. We have made a lot of money on properties here, and have also lost a lot. I would not count on making money on a second home if it's in a popular vacation home market. When the economy crashes, people stop paying mortgages on their vacation homes, and the bottom falls out of the market, big time. Even beachfront property in CA took a huge hit in 2009-2010 and took 5+ years to recover in some markets.

It depends on the location. My areas hardly took a hit, maybe 20% down from the peak at most. I know because I was waiting for a bargain that never came.

[audreyh1]

Quote:

Originally Posted by Meadbh Some years ago, during a very stressful period of my life, I had really wanted "my" vacation home. But I was not interested in the upkeep and maintenance, nor did I feel that the cost was justifiable, given that most vacation homes are occupied for weeks, not months, per year. Enter fractional ownership. No, it is not the same as a timeshare. It's like owning a piece of a condo. You have a schedule, and you always get to use your own condo. You pay a fraction of the condo fees, the owners' association fees (covers insuite maintenance, upgrades, marketing) and property taxes. Just like a regular condo, you can be on the HOA. If you need ~4 weeks per year, you might purchase a 1/12 fraction (which I did). If you can't or don't want to use your time there, you can send close friends, put the time in a rental pool, or exchange it with other properties. I made great use (close to 100%) of my fractional ownership for 5 years, and it was an absolute lifesaver. Then I decided I really liked the area, and moved there. Now I put high season weeks in the rental pool (which covers most of my expenses) and I put low season weeks in an exchange program. The result is that for the past decade I have had access to luxury vacation properties worldwide at a fraction of the cost I would normally incur to stay in them independently. The accumulated savings easily cover the initial cost of my vacation property, which I still own. It has been an excellent lifestyle investment for me. No regrets! I think the key is that I always understood it to be a lifestyle investment, not a financial investment. People who bought larger fractions than they needed have discovered that over the years.

When you say "moved there" do you mean you bought another condo or property in the same area? Which you rent/exchange for most of the year? So where do you live if the property is exchanged out - other properties? And where do you live when it is rented? Sounds fascinating, but I got a little lost.

[Meadbh]

Quote:

Originally Posted by audreyh1 When you say "moved there" do you mean you bought another condo or property in the same area? Which you rent/exchange for most of the year? So where do you live if the property is exchanged out - other properties? And where do you live when it is rented? Sounds fascinating, but I got a little lost.

I bought another condo in the area, and I now live in that condo year round.

I retain ownership of my vacation property, but I no longer use it for my own vacations. I put high season weeks in the rental pool (generating income) and low season weeks in a vacation property exchange program (generating luxury vacation accommodation for me, see below).

https://www.theregistrycollection.com

[capjak]

Timeshares work for us and some others (see full-time link below of some people that are doing this full time).

I bought all mine on the resale market for a fraction of the developer price and get unlimited weeks via II getaways at around $500-$1000 per week in 2 bedrooms. Maintenance fee including reserves is $1,000 per week.

http://fulltimetimeshare.com/blog – Mike and Edie's adventures travelling from time share to time share for 2 to 5 years

[audreyh1]

Quote:

Originally Posted by Meadbh I bought another condo in the area, and I now live in that condo year round. I retain ownership of my vacation property, but I no longer use it for my own vacations. I put high season weeks in the rental pool (generating income) and low season weeks in a vacation property exchange program (generating luxury vacation accommodation for me, see below). https://www.theregistrycollection.com

You originally had ~4 weeks in that condo, 1/12 right? So you had a mix of high season weeks and low season weeks? Or did you end up with more weeks? If it takes that few weeks to generate income to cover the coast AND sufficient weeks in an exchange program, that's pretty amazing!

[Meadbh]

Quote:

Originally Posted by audreyh1 You originally had ~4 weeks in that condo, 1/12 right? So you had a mix of high season weeks and low season weeks? Or did you end up with more weeks? If it takes that few weeks to generate income to cover the coast AND sufficient weeks in an exchange program, that's pretty amazing!

In my vacation condo, I own a 1/12 fraction, and the schedule is a weekly rotation. Therefore, every twelfth week is mine. Usually this means four weeks in a calendar year, but if the first week is early in January, there may be five that year.

Because this is a fractional ownership of what is essentially a very well managed condo building with a fully funded reserve (I've been on the board) costs are very reasonable, currently just over $1000 CDN per year. There are no extra charges for using my condo except for a $70 (CDN) housekeeping fee for each week.

When my condo is in the rental pool, I get a fraction of the total rental pool revenue. In the past couple of years, that has covered my costs.

When I use my weeks to exchange with another property in the Registry Collection, I pay an exchange fee of ~$300 US. The type of accommodation that I get in return usually would cost 8-10 times that if booked independently.

[street]

I will throw in my 2 cents even if my second place isn't a vacation home but a very rural cabin.
There was some very good advise from the posters and it is for some not for others. If you desire one and want to buy it that isn't all bad. You can always sell the property and may even do better then what you paid for it.
My cabin is a place of paradise for me and a few friends and son. It is my get away and it has everything I have a passion for like fishing, bow hunting, hiking and working the land and being close to nature. My place doesn't cost really anything for up keep because it is a small cabin I built and is nothing fancy or has any provisions. I don't even insure it but still I can stay there for 3 of the seasons.

[NW-Bound]

Another alternative is an RV parked semi-permanently at the desired location. In my RV travel I have seen a lot of "seasonals", as they are called, in commercial campgrounds. In Nova Scotia, I chatted with an older man who lived in a nice 5th wheel that he rented a yearly spot to park to be close to the sea. When the CG closed down for the winter, he went back to his apartment in town, which was just a few miles away.

The drawback is that some CGs may be crowded, and the scenery may not be ideal.