Investment Quandries

[Chantalr99]

My husband and I are 29. We will have our home paid off in ten years (or less), and by then we will have paid off our debt and saved a down payment fro another home. Our thought was to buy a southern home, which we could use for vacationing now, and eventually(about 20 years) we could use it as a snowbird house. That way the southern home would be bought and paid for and we could build our "dream home" here in NY.
Is this a goo dplan or not? There are some that think not, but I don't know why and they don't have any better ideas...

 

[Sarah in SC]

I guess it depends. Do you imagine wanting to vacation in the same place for 20 years and then retire there? Seems like there might be cheaper ways to do what you want, without tying up your money in a use-asset that isn't getting much use.

 

[ziggy29]

I just think the taxes, insurance and maintenance paid all year for something you may use only a couple weeks out of the year makes it a much worse deal than renting a vacation home, unless you have reason to think the housing market will boom there and price you out of it in the future.

At some point you may want to look into this when you'll spend a lot more of your time there, but even then I'd spend the first Southern winter in a rental home just to make sure it's something you really want to do. It may sound nice now but it would suck to buy a place, live there one season and decide it wasn't right for you.

 

[Chantalr99]

So what to do then

So, I'm getting the feeling that it's too early to make such a decision (and it would be only ten yrs of vacationing, since we can't do this for ten more years), but the whole point was to get that house paid for so we're not having to buy two houses upon retirement. Frankly I can't see that being possible. So how do people do this? And what else would we do with the money?

 

[FinanceDude]

So, I'm getting the feeling that it's too early to make such a decision (and it would be only ten yrs of vacationing, since we can't do this for ten more years), but the whole point was to get that house paid for so we're not having to buy two houses upon retirement. Frankly I can't see that being possible. So how do people do this? And what else would we do with the money?

Why would you have to buy two houses upon retirement?

 

[travelover]

.............And what else would we do with the money?

Invest it in something more diversified than real estate....like stocks and bonds.

 

[Chantalr99]

Because we want to be snowbirds

 

[CoopersBeach]

My husband and I are 29. We will have our home paid off in ten years (or less), and by then we will have paid off our debt and saved a down payment fro another home. Our thought was to buy a southern home, which we could use for vacationing now, and eventually(about 20 years) we could use it as a snowbird house. That way the southern home would be bought and paid for and we could build our "dream home" here in NY.
Is this a goo dplan or not? There are some that think not, but I don't know why and they don't have any better ideas...

Based on my personal experience, I would advise against it.

I bought a farm in New Zealand back in 2003, when DW and I were in our mid-thirties, because we fell in love with the country and planned on retiring there. We were filled with the vision of an idylic life farming an endless expanse of green pasture; fishing for trouts in the little river that runs in front of the property; growing our own crops; even running a few cattle.

Seven years on, we still love the country, but aren't so sure about retiring to the farm anymore. DW wants to retire to TX, while I am now more inclined towards a property with an ocean view somewhere else in NZ. In the meantime, due to family and work, we've only visited the farm a couple of times since 2003. And for the pleasure of occasional visit, we shell out a few thousand a year for property tax and maintenance (we bought the place with cash so there is no debt).

My point is that people's perspectives and priorities change with age and circumstances, so trying to plan so far ahead and making a large financial commitment accordingly is frankly unwise. Just because you love a place now doesn't mean you will love it 20 years down the road. In the meantime, you would be making a financial commitment that is largely illiquid and can't be easily unwound. I would advise investing the money instead for growth. As long as you have the money, you will always have an opportunity to buy in the future if you are so inclined.

For the record, my farm purchase has turned out profitably, due to a combination of rising NZ property value, and appreciation of NZ dollar vs. the US currency, even accounting for the annual expenses. But we certainly didn't plan it that way; we just got lucky.

 

[chinaco]

IMO - If you want to vacation in a home.... rent do not buy! And don't confuse it as being an investment. It is an expense! Even if you buy the home and rent it (using a property management company) at best you will likely only defray some of the cost.

If you make loads of money and have large excess after retirement preparation and all other expenses. Well all things are relative.... feed your whims.

I considered it at one time myself. I did some analysis and I do not believe it is a good idea (unless you are really well off then the cost of it relative to your wealth and may be inconsequential).

I also talked with several people who did it and a couple of them have confided they wish they did not do it and rented instead... There are too many reasons to list. But one comment always stuck with me (aside from it is just and expense)... "Every time there is a storm I feel like I need to rush down and make sure there is not some damage or a leak..."

Of course all it takes is one reason to do it... because you want to. Nothing wrong with that.


Not to pop your bubble... but on building the McMansion... most of us have more home than we need. I do. If I had it to do over again, I would not buy "My Dream Home"... It is just and ongoing expense.

That is not to say one should not have a comfortable home. But many Americans buy more home than they need (and eventually realize it is just a cash drain).

It is my intention to downsize into a home that is just 1.5x the size we need instead of 3x we have.

Words of wisdom... If this cliff notes version doesn't do it for you. You can go the Cost of a Harvard Education Route and get the experience first hand.

Seriously, think long and hard about both decisions and don't get caught up in an idea... reality is likely to not stack up to your "dreams".

 

[keegs]

I'd add to this that if you finance, you'll also be paying the interest.

We purchased a farm in Maine for cash for our retirement home. Taxes are $900 per annum. I do most of the maint. myself and relative to where we live fulltime, many services are cheaper.

We both look forward to our visits to this rural farming community. There's a winter ski resort about five miles away and there's golf as well. We enjoy the difference in the lifestyle... the stars at night, the moose that sometimes walk right up to the front door, the coyote that howl in the night after the hay fields have been cut.

Well....it's not a boat..

 

[walkinwood]

I have friends who have done what you're thinking of. However, their second property is in a place where they can rent it out by the week when they're not using it. They use a property management service and are making enough most years to cover the cost of the 2nd property.

In any case, you're thinking of something 10 years down the line. A lot can change between now and then.