Is purchasing a vacation home a good idea?

[brucethebroker]

Lots of variables in the original question. Some like to rent for the flexibility. Some like to walk in the door of their "home" without suitcases and relax. Many rentals are purchased as investments during down markets, rented out for a few years, then sold, leaving renters who really like the area scrambling for a new place at higher rents.

If purchased right, it is possible to own a place (cash) and then snowbird or "summerbird" while the rents saved pay most of your ongoing costs each year. We have friends who jump around from place to place, and never spend 2 years renting in the same unit. That would drive me crazy. Our "winter neighbors" down south are another reason we enjoy owning. But, as DW says, "it's not for everybody".

 

[Dawg52]

In my case it has been a good thing. I have family near my condo so it is a way to stay in touch with them better. My condo is only a 3 hour drive and I go virtually every month for a 5-7 day stay. If I ever get to the point where I get tired of it and only go 3-4 times a year, I will sell it. I would rather just rent.

 

[97guns]

View attachment 26616

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.

That's the great thing about putting money into real estate as a "lifestyle choice" , it's literally putting money in the bank whether it be a new purchase, new build or building bigger on existing property. The build we just finished appraised at $120k , on paper we picked up an instant $50k mainly through cost of labor, total cost of labor to complete the whole property was less than $20k

 

[REWahoo]

That's the great thing about putting money into real estate as a "lifestyle choice" , it's literally putting money in the bank whether it be a new purchase, new build or building bigger on existing property.

Actually it isn't like putting money in the bank, even if you ignore the lack FDIC insurance.

If you were around this forum during the 2000-2010 time period you'd note the growth then rapid decline in the number of California posters who had plans to "cash out" their home equity, move to a lower COL location and live the good life. Real estate, like the equity market, doesn't only go up or always hold its value.

 

[Danmar]

That's the great thing about putting money into real estate as a "lifestyle choice" , it's literally putting money in the bank whether it be a new purchase, new build or building bigger on existing property. The build we just finished appraised at $120k , on paper we picked up an instant $50k mainly through cost of labor, total cost of labor to complete the whole property was less than $20k

It sometimes works out well, as you describe, but I don't think you can count on it. We have a significant amount of money tied up in our properties and I basically have written it off as ithey don't provide cash flow. Quite the contrary. Nice lifestyle though.

 

[Meadbh]

I own a 1/12 fraction of a vacation home. It has been a great lifestyle investment and the time I put into the rental pool means it pays for itself.

 

[Sittinginthesun]

I've owned two. Just sold one early this year primarily to capitalize on profit but had also grown weary of managing it from 1,500 miles away. We are back to renting vacation properties and here is the BIG difference for me... I can actually relax at a rental. When at my own vacation home I am always in "fix, replace, clean, paint, repair" mode. I am always looking around wtih a critical eye and what needs my attention. When renting, I am able to relax, read my book, drink my beer and think about what I am going to throw on the BBQ for dinner. If doctors did some tests on me I can guarantee you my blood pressure is lower and the quality of sleep higher when at a rental.

That being said I plan to buy another place in Florida to spend the winters in 7 or 8 years once I am retired and kids are off to University. I think if I was there for longer periods I would get the place in tip top shape and finally relax the way I never can if its just a week or two.

 

[W2R]

It isn't for me. Honestly the added stress and responsibility of taking care of a second home that is far away from me, sounds worse than going back to w*rk. This is NOT what I wanted for retirement. Not one bit. YMMV

Besides, we have absolutely no desire to travel to and from a vacation home or anywhere else. Double yuck! It has been almost five years since the last time we traveled more than 5-10 miles from home, and that time it was a hurricane evacuation. I enjoy being right here in my dream home, where everything is exactly the way I want it. My home is my castle. Again, YMMV.

 

[Scuba]

Actually it isn't like putting money in the bank, even if you ignore the lack FDIC insurance.

If you were around this forum during the 2000-2010 time period you'd note the growth then rapid decline in the number of California posters who had plans to "cash out" their home equity, move to a lower COL location and live the good life. Real estate, like the equity market, doesn't only go up or always hold its value.

+1
Even our beachfront condo declined in value significantly during the 2008-2011 period. Took 4-5 years to come back to what we paid for it. Now worth 20-30% more than original cost but I am glad we didn't count on cashing out continued appreciation.

 

[97guns]

It sometimes works out well, as you describe, but I don't think you can count on it. We have a significant amount of money tied up in our properties and I basically have written it off as ithey don't provide cash flow. Quite the contrary. Nice lifestyle though.

It might not provide cash flow but it in theory should hold value, just curious.. have you lost any of that "significant money" on paper through equity loss?

 

[97guns]

+1
Even our beachfront condo declined in value significantly during the 2008-2011 period. Took 4-5 years to come back to what we paid for it. Now worth 20-30% more than original cost but I am glad we didn't count on cashing out continued appreciation.

Another example of my "holding value" theory, RE is a buy and hold investment, hold long enough and your sure make money, the stats prove this

 

[Danmar]

It might not provide cash flow but it in theory should hold value, just curious.. have you lost any of that "significant money" on paper through equity loss?

One of my properties is down about 25% after 10 years. This doesn't bother me much as we still enjoy using it. In total they are up a bit I think.

As a portfolio my equities are significantly up. I think I have one (insignificant size) equity position that is down.

In retirement its cash flow that counts. My equities provide cash flow to support my lifestyle. My properties are part of that lifestyle. Ie expense not income. Big difference in my "humble" opinion.

 

[Scuba]

Another example of my "holding value" theory, RE is a buy and hold investment, hold long enough and your sure make money, the stats prove this

This is not true if it is an "investment" property. We bought an SFR in a resort town as a rental that we would also use occasionally. The expenses to keep it including mortgage, property taxes, insurance, yard service, housekeeping, utilities, pool service, etc. we're over $50K/year. Max rental income was far less than the ongoing expenses. Rental losses compounded year after year. Appreciation would have to be huge to make up for all the rental losses. After a few years of this, we decided to sell. I'm sure if we had held onto it, we would still be working to fund the losses.

If a property is your primary residence, I agree that usually if you hold it long enough you can make money on it.

 

[FlaGator]

Another example of my "holding value" theory, RE is a buy and hold investment, hold long enough and your sure make money, the stats prove this

"In theory there is no difference between theory and practice. In practice there is"

Suggest you do a little more research before committing substantial sums based on "the stats".

One can always find numbers to back up a particular argument, but the long term price series I've seen on residential real estate (S&P/Case Shiller) indicates the long term return is about inflation plus a point or two at best. Timing on purchase and sale can swing that either direction as experiences posted in this thread indicate.