A Second Vacation Home a Good Thing?

[tryan]

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Maintenance was half of what the rent makes each month, so I guess there`s earnings made if proper research is done, instead of losing money.

I would caution you that if HALF of rents are going to a rental agency for fees and maintenance, you'll be losing plenty of money. The remaining rents will not cover: insurance, taxes, vacancy, water/sewage, major repairs, and (god forbid) a mortgage.

FWIW, I own, manage and rent out a lake front vacation rental. Grossed 33k in rents and paid 37k to operate the place last year. The 4k negative cashflow works for us given that we have access to the place ~7 months/year (all the rents are made July, August, Dec, Jan, Feb). I would love to say the upkeep will be less this year (stained it last year) ... but I already spent 2k maintaining the geothermal heat pump (so it doesn't look good).

[SEC Lawyer]

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Originally Posted by Meadbh I didn't say that all second homes are money pits. I said that second homes that sit idle are money pits. And of course, some people are happy to own a money pit. But you can't own a money pit and be LBYM at the same time.

This is simply not true. I own a second home, it sits idle most of the time (was used less than 50 nights last year), and I still spent only about 10% of my gross income. Even with a third home I would live beneath my means, and I currently have in storage all the furnishings for a third home, which probably will be acquired later this year.

I could retire tomorrow morning if I wanted to.

[Meadbh]

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Originally Posted by SEC Lawyer This is simply not true. I own a second home, it sits idle most of the time (was used less than 50 nights last year), and I still spent only about 10% of my gross income. Even with a third home I would live beneath my means, and I currently have in storage all the furnishings for a third home, which probably will be acquired later this year. I could retire tomorrow morning if I wanted to.

Good for you. Obviously as an SEC lawyer your income is indeed gross!

[SEC Lawyer]

Won't be apologizing for my success in life. My point was that it's absurd to claim that the expense of ANY item precludes "living below one's means" without consideration of what those means might be. There is a middle-class orientation on this board, clearly. But the reality is that high earners who spend little relative to their means are every bit as thrifty as middle-class folks in their RVs. I know people -- and I'm not one of them -- who spend millions a year on themselves and yet continue to accumulate riches because they earn ten times what they spend.

[Meadbh]

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Originally Posted by SEC Lawyer Won't be apologizing for my success in life. My point was that it's absurd to claim that the expense of ANY item precludes "living below one's means" without consideration of what those means might be. There is a middle-class orientation on this board, clearly. But the reality is that high earners who spend little relative to their means are every bit as thrifty as middle-class folks in their RVs. I know people -- and I'm not one of them -- who spend millions a year on themselves and yet continue to accumulate riches because they earn ten times what they spend.

Sure there's a middle class orientation......you've heard of the normal distribution?

Normal distribution - Wikipedia, the free encyclopedia

The people who are obviously up there over the 95% percentile for income include Danmar, Katsmeow, Global1 and yourself. I salute you all! But I admit to having a greater admiration for people on the 5th percentile of income who manage to FIRE through ingenuity and LBYM.

[Martha]

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Originally Posted by SEC Lawyer Won't be apologizing for my success in life. My point was that it's absurd to claim that the expense of ANY item precludes "living below one's means" without consideration of what those means might be. There is a middle-class orientation on this board, clearly. But the reality is that high earners who spend little relative to their means are every bit as thrifty as middle-class folks in their RVs. I know people -- and I'm not one of them -- who spend millions a year on themselves and yet continue to accumulate riches because they earn ten times what they spend.

I suppose technically that would be thrifty. But it isn't impressive. My personal feeling is if someone can spend millions a year on themselves and still accumulate riches they have a moral duty to be philanthropic.

[CuppaJoe]

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Originally Posted by Martha I suppose technically that would be thrifty. But it isn't impressive. My personal feeling is if someone can spend millions a year on themselves and still accumulate riches they have a moral duty to be philanthropic.

You are so right, Martha. I was thinking along the now PC idea of a duty to be green.

[ziggy29]

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Originally Posted by SEC Lawyer This is simply not true. I own a second home, it sits idle most of the time (was used less than 50 nights last year), and I still spent only about 10% of my gross income. Even with a third home I would live beneath my means, and I currently have in storage all the furnishings for a third home, which probably will be acquired later this year.

Frankly, if this were the case for me -- especially if I didn't rent it out for income when I wasn't using it -- it seems like it would be much more cost-effective to use vacation rentals. Plus you'd have the advantage of being able to vacation anywhere you wanted instead of being tied to a single location.

[donheff]

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Originally Posted by ziggy29 Frankly, if this were the case for me -- especially if I didn't rent it out for income when I wasn't using it -- it seems like it would be much more cost-effective to use vacation rentals. Plus you'd have the advantage of being able to vacation anywhere you wanted instead of being tied to a single location.

I think this way sometimes but for now I am sticking with my second home. It is less than 90 minutes away (I can go down for the day or for weekends and guests don't find coming a hassle) and it feels like being in a resort (comfort, beautiful views). We built it 17 years ago and expect that we may sell it in about 10 unless the kids/grandkids make heavy use of it.

[MichaelB]

SEC Lawyer, you are entitled to and owe no apologies for your second and third homes.
And yes, this board leans toward less expensive lifestyles. Nonetheless, a second home that sits idle much of the year is a luxury.

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My point was that it's absurd to claim that the expense of ANY item precludes "living below one's means" without consideration of what those means might be. There is a middle-class orientation on this board, clearly But the reality is that high earners who spend little relative to their means are every bit as thrifty as middle-class folks in their RVs. I know people -- and I'm not one of them -- who spend millions a year on themselves and yet continue to accumulate riches because they earn ten times what they spend.

Sorry, but not so. This would mean that Bill Gates’ 66000 SQ house is “thrifty” because he has billions and lives beneath his means. It is instead a public display of opulence and conspicuous consumption.

Like you, he too is entitled to the house(s) of his choice and need make no excuses. But don’t call it thrift – especially when bragging.

[Alan]

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Originally Posted by ziggy29 Frankly, if this were the case for me -- especially if I didn't rent it out for income when I wasn't using it -- it seems like it would be much more cost-effective to use vacation rentals. Plus you'd have the advantage of being able to vacation anywhere you wanted instead of being tied to a single location.

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Originally Posted by donheff I think this way sometimes but for now I am sticking with my second home. It is less than 90 minutes away (I can go down for the day or for weekends and guests don't find coming a hassle) and it feels like being in a resort (comfort, beautiful views). We built it 17 years ago and expect that we may sell it in about 10 unless the kids/grandkids make heavy use of it.

I can absolutely see and appreciate both approaches. We are in the demographic that use vacation rentals as we happen to like to travel, and much prefer to live in a house rather than a hotel. We very much appreciate those folks who either rent out vacation homes full time or in the off-season when they are not using them. We have rented vacation homes direct from the owners many times now and have never had a bad experience.

... and if you can afford to have a 2nd vacation home without ever renting it out, then I see no problem in that either. DW has an aunt and uncle that bought a vacation house in Devon and used to travel down and stay quite regularly from where they lived and worked in Cheshire. They got to know the area and neighbors very well and moved there permanently when they ER'ed.

[ziggy29]

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Originally Posted by MichaelB SEC Lawyer, you are entitled to and owe no apologies for your second and third homes. And yes, this board leans toward less expensive lifestyles. Nonetheless, a second home that sits idle much of the year is a luxury.

True.

I'd add that think it's silly for people to criticize someone's spending when they can very easily afford it *and* it enhances their quality of life. We're not all wired to value the same things or to all find the same things "wasteful" and "frivolous."

To one person, eating out a few times a week may not add much enjoyment to life and to them, it therefore seems wasteful and spendthrift even if they could afford it. For some people it adds a lot to enjoyment of life. Beyond a certain level of thrift, refusing to spend on things you enjoy even though you can very easily afford it goes beyond frugal and begins to approach miserly.

One can live well below their means and still have discretionary spending that others would consider "wasteful." Still, I tend to follow the Dave Ramsey philosophy on this one -- there's nothing wrong with spending in and of itself; there's something wrong with spending you can't afford. And if someone can very easily afford a second home (even if vacant 85% of the time) and it improves their quality of life, more power to them. But yeah, it's not something I would call "thrifty" or "frugal."

Living below your means shouldn't have to mean "living as far as possible below your means," not unless that's what someone happens to value.

[Bestwifeever]

Every time I see this thread title--"A Second Vacation Home a Good Thing?"--I think why in the world would someone need a second vacation home--isn't one vacation home enough ? Now I realize SEC Lawyer does need two vacation homes. Have at it, I say. I have a friend who has four vacation homes, so go for five!

[REWahoo]

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Originally Posted by Bestwifeever Now I realize SEC Lawyer does need two vacation homes. Have at it, I say. I have a friend who has four vacation homes, so go for five!

I agree. The real estate market needs the boost and hiring the services to maintain all those places will provide employment for many middle class types.

[Danmar]

OK I don't think the SEC guy said any of this was thrifty or frugal-just that it was within his means. Let's give him that. Living at or below your means is absolutely required. But there does appear to be a tendency on this board to brag about how little money can be spent. I don't see the point of that unless it is required. Somebody said spending a lot is only "wrong" if you can't afford it. Aside from appearances in the case of conspicuous consumption I guess. I would go on to say that spending small amounts is only "right" if it is necessary in the short term or part of a longer term strategy to save funds for future spending. This may be controversial and I can think of several exceptions already.

[kcowan]

I have several friends who have multiple vacation homes. One has a cottage in the Gulf Islands. It is pretty hard to rent one there. It is totally off-grid. He rents in PV but will buy when he starts spending five months here.

Another has a condo in PV, a 58 foot yacht and a 38 foot RV. Both of them live frugally even though they acquire assets. I think at a certain level, owning property is much more satisfying than having a larger portfolio and it represents a store of value in normal times.

[donheff]

I forgot to include my regular guy bonifides -- my weekend home is not a second vacation home, it's a first.

[fisherman]

As a second home / vacation home owner I think some folks might be confusing LBYM with Frugal. I do live below my means even with the second home but I do not consider it Frugal at all. We do a lot of thinks to cut costs but owning that home is not one of them. It also may prove to be a half decent investment if we ever sell it but I do not consider it an investment either as better returns can be had. We own it for pleasure plan and simple.

It is 60 miles away and we use it from 90 - 150 days a year. We also allow select friends to use it some. We did rent it out some one year and the money was quite good but it was a nuisance for us to use it also so we do not do that anymore. We love to boat and spend time on the lake or enjoying the views when we are not RVing somewhere. It is also a storage spot for our RV.

[Westernskies]

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Originally Posted by Martha I suppose technically that would be thrifty. But it isn't impressive. My personal feeling is if someone can spend millions a year on themselves and still accumulate riches they have a moral duty to be philanthropic.

You can't legislate morality...

[haha]

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Originally Posted by Danmar Aside from appearances in the case of conspicuous consumption I guess. I would go on to say that spending small amounts is only "right" if it is necessary in the short term or part of a longer term strategy to save funds for future spending. This may be controversial and I can think of several exceptions already.

Our country was founded by Puritans- or at least the dominant moral and intellectual religious themes came from the Puritans. Self denial in and of itself was considered a virtue. Clearly that is no longer a popular theme, but it lives on in "alternative groups". The 60s drop outs who became hippie farmers were in some aspects descended from the Transcendentalists of New England. This board is another of these alternative Puritan descendants. The Wealthy Barber and Your Money or Your lIfe are our religious texts and are fundamentally Puritan documents that might have been written by Cotton Mather himself. Our Divines are Bernstein and Bogle, and their acolytes are found at bogleheads.com.

So we really are not dealing with material reality, we are dealing with attitudes.

The other day I was walking along and I realized that even if a person intellectually rejects this moralistic approach to what might seem an ethically neutral decision matrix, being moralistic and judgmental about it can be practically useful. I have been trying to reduce sodium in my diet, which is not a totally fun thing. But after a week or so I noticed that high sodium foods had taken on some aspect of evil in my mind, which makes it easier to shun them, even though I think it is mildly delusional to feel this way.

Same with frugality. When we embrace it as a virtue, not just a restricting and annoying genuflection to hard reality, we reframe our behavior from tacky poverty to a perhaps noble calling. Makes it go down easier.

It takes something strong for a person with a million and a half in invested assets to try to live on $40,000 a year. It really goes against ordinary human nature.

Ha