Is purchasing a vacation home a good idea?

[45th Birthday]

Thinking more about two of the intrinsic aspects mentioned here. This didn't replace travel for us, but probably reduced it some. More a matter of time than money.

As far as not wanting to be locked into going to the same place every year, it can seem like that in concept. However, I have often thought how much the way we live here has changed over time as kids have grown, we have gotten interested in different things, etc. So while it is the same place, over the years we have found different ways of enjoying it.

One more thought I'm not sure has been mentioned. That is visits from family and friends. We have a great time hosting people (with limits) and really appreciate the chance to reconnect. Our kids, now both out on their own, love coming here.

 

[ExFlyBoy5]

I wouldn't purchase. I would say it is rarely a good economic decision. Plus, why limit your vacation options like that!? I think it's a bad idea.

I agree with your thinking. We do *not* own a vacation home and wouldn't like being tied to a single location. My DW's parents own a vacation home and a boat house and currently, the vacation home is used about 3x a year and the boat house hasn't been used in almost 5 years. Granted, both of these are a very, VERY low % of their NW, it's still a waste IMHO.

With the likes of VRBO, it has become very easy to rent a home just about anywhere and overall, the costs per day will be lower than if you "own" one.

 

[Keim]

My wife and I have discussed this since our mid 30s. Mid 40s now. We're just now in the process of buying a cabin with 1/2 acre and a nice little stream in the mountains of remote SE Washington for $50k. That's about 1.5 hours from our home. Not much compared to what many of you are discussing, but on our income, and with our financial goals, it is a modest stretch.

We don't plan to sell for a looooong time. Hope to break even if we do.

We quickly realized that while a vacation home is a major financial decision, for us it wasn't right to view it as an investment. We have trouble getting away for extended vacations, and hope to have many 3-4 day weekends there. It's a lifestyle choice that we hope to gain memories and family time with.

It is a fixer upper in foreclosure: https://www.zillow.com/homedetails/5834-Mill-Rd-Anatone-WA-99401/113768090_zpid/

 

[imoldernu]

About the nearby lake thing... We did that when we retired in 1989... Park model trailer w/400sf add-a-room and a 400sf deck... on a lake in the worlds largest family campground, Woodhaven Lakes.
For us it was 1/2 of our retirement life... 6 mo, in IL, and 6 mo in FL.
Now, with a permanent home in our Peru Il CCRC, the lake is 35 minutes away.
With kids, even better, as there are endless pools, playgrounds, ballfields, trails and organized activities all summer, and weekend ski/sliding snowmobile riding all winter. (year round campground) .

Now, it's a getaway, with all the comforts of home to be visited whenever the spirit strikes. Great for biking, boating (electric motors) and whatever bands, dances or parties that are always going on.... or just curing up in the hammock with a good book, and not a sound except for the birds.

Total annual cost... Campground fee, including water and sewer, $1250, insurance, $600, and taxes, 'cuz we own our property and the land, $500.

Up front cost w/ camper and land, from 7K, to a high of about 80K (brand new). 6000+ sites.

Heavily wooded, good roads (43 miles) walking/biking/snowmobiling trails (17 miles), two Olympic pools, dozens of playgrounds, hardware store, large camp store, restaurant, gas station and propane station. Safe, well managed, and very friendly.

Not everyone's cup of tea, for sure... not "upscale", but a wonderful retreat for adults, and an unbeatable play place for kids. Nicest part about owning in one place, no need to do a weeks worth of packing when the vacation is being planned... It's all right there.

 

[FIREmenow]

[snip]

It is a fixer upper in foreclosure: https://www.zillow.com/homedetails/5834-Mill-Rd-Anatone-WA-99401/113768090_zpid/

Boy, that's a REALLY small bathroom!

 

[Keim]

Boy, that's a REALLY small bathroom!

A little better then the pics make it look. Not much. At the price I was just pleased it had plumbing, let alone a bathroom. Place was designed as strictly a summer cabin. No heat.

Nice back deck, pleasant property, and nearby federal/state forest were major selling points. Size of bathroom was NOT!

 

[FIREmenow]

A little better then the pics make it look. Not much. At the price I was just pleased it had plumbing, let alone a bathroom. Place was designed as strictly a summer cabin. No heat.

Nice back deck, pleasant property, and nearby federal/state forest were major selling points. Size of bathroom was NOT!

No - I meant the title of 1 Bedroom, 0.1 Baths!!

LOL

 

[Danmar]

One more thought I'm not sure has been mentioned. That is visits from family and friends. We have a great time hosting people (with limits) and really appreciate the chance to reconnect. Our kids, now both out on their own, love coming here.

Yes, this is a big benefit. We always like to entertain friends and family at our places. Also sometimes loan them out when we are not there. Great way to create wonderful memories, both about us and for us.

 

[Keim]

No - I meant the title of 1 Bedroom, 0.1 Baths!!

LOL

Hadn't noticed that. FUNNY!

 

[LRDave]

DW's MIL owns (no mortgage) a vacation home in a popular beach vacation/island destination. It has appreciated a lot since purchase in 1986, but the monthly carrying costs in a coastal location are staggering. Not just insurance (incl. flood) and taxes, but so many other things: need to paint twice as often, AC compressors degrade quicker in the salty humid air, AC must be left on during most of the hot humid times to avoid mold outbreaks, plumbers/electricians/carpenters/landscapers/housekeepers all charge double the mainland, etc.


I've looked at the vacation rental market (which is hot), but it still doesn't come close to offsetting all the costs and COMPLETELY kills the family's ability to enjoy the place.


That said, houses and condos are going up as quick as they can be built and it looks as if they sell quickly.....

 

[daylatedollarshort]

One of The Millionaire Next Door authors had this to say: "Most millionaires rent instead of buying vacation homes."

Second Homes… Part I

It is often not a good financial decision, but I see it seems to work well for some people, especially those who live in harsh winter climates. If I had more money than I knew what to do with I would buy a vacation home in Hawaii. But I don't, so we just rent when we go there.

 

[Danmar]

One of The Millionaire Next Door authors had this to say: "Most millionaires rent instead of buying vacation homes."

Second Homes… Part I

It is often not a good financial decision, but I see it seems to work well for some people, especially those who live in harsh winter climates. If I had more money than I knew what to do with I would buy a vacation home in Hawaii. But I don't, so we just rent when we go there.

I guess that's the problem with asking a question like this. It is so dependant on the means of the individual. I think the only useful advice in these kinds of cases is to get above the "it's too expensive" response and try to generalize the pros and cons.

 

[Meadbh]

The most important thing to remember is that a vacation home is a lifestyle choice, not an investment, and therefore must be paid for with discretionary funds.

 

[DrRoy]

It ends up being a personal choice. My parents built a vacation cottage in Quebec. My sister and I spent 2 months every summer there and loved it. Since then, DW and I have become more interested in travelling to many locations, but my sister always went back to the cottage. She bought me out a few years ago. Different people in the same situation will make different decisions. You have to decide if you want to be tied to one location with the expenses of a property, to to stay flexible and spend the money differently.

 

[Danmar]

The most important thing to remember is that a vacation home is a lifestyle choice, not an investment, and therefore must be paid for with discretionary funds.

Agree. Good point re discretionary funds.

 

[kcowan]

It ends up being a personal choice.

Yes. In our case, parents had a cottage whereas we always rented summer and winter getaways but had an acreage with 20x40 pool, jacuzzi-all the toys. Now both my boys have cottages.

 

[Scuba]

Agree with others that it's not a great financial investment. In our case, it was a costly lifestyle decision which after 4 years, we decided to sell at a loss. I think if you're VERY wealthy (i.e. the money doesn't matter), it's great to have cars, clothes, toiletries, etc. in multiple places you enjoy and go freely between them as you choose. However in our case we did have to cut back on other travel as well as cut back on investing for ER in order to afford our second home. And there was always a "to do" list despite having hired help to deal with housekeeping, landscape and pool maintenance. We decided we'd rather free up a lot of cash and just rent when we go places. We enjoy the flexibility and variety more than we enjoyed owning a second home. YMMV

 

[brett]

^I can relate to that.

We recently had five years of no home ownership whatsoever after 35 years or so of ownership.

We really enjoyed not having the resposibility and the burden of ownership. We were also surprised at the increase in cash flow. We recently bought and we made our first visit to Home Depot. $96. The visit brought back memories. We renovated two homes with a great deal of Home Depot product. IF we were to consider another property in the future it will definitely be a condo type property.

 

[CoolChange]

Renting Out to Offset Some Carrying Costs

For those who rent vacation properties to offset some of the carrying costs, do you title the vacation property in your own name or hold it via an LLC or LLP?

If LLC/LLP, did you buy in your own name and then put the property in the LLC/LLP or create the LLC/LLP first and use it to buy the property?

Other than some liability protections, are there any tax benefits to holding via an LLC/LLP? Would there be any significant hassles/costs involved to convert from a vacation rental to primary residence in the future.

If you are onsite merely to supervise/inspect work being done or that has been completed, do you count that as a maintenance visit or personal use (for tax purposes)?

Thank you in advance for sharing any experience, thoughts, suggestions, etc.

You can rent the vacation home out for up to 14 days, tax free. That may make the decision easier.

A very smart friend of my wife had a vacation home built on the Texas Coast. Her rental fees paid for it in five years! It is booked solid.

She did a lot of homework on what types of houses rent the best and hired a cleaning service to keep it very clean & attractive. She runs her own business with a dozen employees so the rental business fits her personality.

They love the coast and have built a new retirement home 2 hours away and plan to spend every weekend at the beach house with family when they retire- no more renters.

 

[Ronstar]

Not a great financial investment as others have noted. But many here do not buy 2nd homes as investments. For me, our snowbird condo was initially a place where I could escape work for a while. Now 15 years later, it's a great place to spend the entire winter. I like to stay at my own place. I'm not a fan of hotels or rentals. The "burden" of 2nd home ownership is well worth it for me.

 

[kcowan]

We have a property manager to manage all our enhancements during the summer when we are back north. Best decision we ever made. (Not the enhancements, the PM!)

 

[NW-Bound]

I am posting this from our 2nd home. At 7000-ft elevation, it is the place we go to escape from the brutal 110+ heat of the low SW desert. When up here, we just park the car, and rarely leave the property. Not much around here, an unincorporated town, except for a couple of hardware stores, gas stations, and some roadside cafe's.

It's relaxing, and in the winter we also go up to watch snowfalls. It's 2-1/2 hour drive one-way from the main home, so is not too bad.

I paid more for this home than for the main home. However, ever since the housing bubble burst, home prices in this area have not recovered as well as in the metropolitan area. The latter has in fact set new highs. I guess 2nd homes are not yet back in demand, but it's ok with me as I did not do this as an investment.

By the way, I still like to do foreign travel as well as RV'ing and staying at timeshares.

 

[jabbahop]

I agree on if being a lifestyle choice not investment. We have to put in a new driveway, roof, and heat pump this year but evenings like this make it totally worth it.

 

[97guns]

We just finished the build on a custom 3 bed 2 bath house in my wife's Thailand village, it's a 3 building complex now with a 1 bed 1 bath guesthouse and a large open air kitchen with living area and another bathroom. All in for around 70k, we usually go back every year, will be going for 2 months in November/December

 

[Joylush]

We bought unbelievably beautiful mountain property yrs ago. It was very remote on acreaged lots. There were a large handful of owners that lived there yr round. The property was 8 hrs away so we had a tough time watching over it. The locals used and abused our property as it was their own while we were away. Very difficult situation. I actually started to dread even going over so we ended up selling it.

Can you say where your property was? I'm leaving tomorrow to go in search of exactly what you described. Still pondering if it's a good decision or not. Now you've got me thinking!