Is purchasing a vacation home a good idea?

[Penny6]

Considering investing in a vacation property to enjoy for years to come. Wanting those who own or have owned a property to weigh in on the pros and cons. Travel 2-3 times a yr currently spend approx 6500/yr will be upping this to 10k. We have 3 kids 10,8,4yrs old. We own 2 timeshares which we utilize, one every other year and one yearly. Should we purchase or just continue to budget travel expenses over the years?

 

[boomer239]

Considering investing in a vacation property to enjoy for years to come. Wanting those who own or have owned a property to weigh in on the pros and cons. Travel 2-3 times a yr currently spend approx 6500/yr will be upping this to 10k. We have 3 kids 10,8,4yrs old. We own 2 timeshares which we utilize, one every other year and one yearly. Should we purchase or just continue to budget travel expenses over the years?

I thought it was a good idea to buy. We bought a condo in Marco Island Florida (Southwest Florida) 3 years ago, after looking for a few years. Went with a condo versus home so upkeep worries were minimized. Like the area very much. We are planning to retire 4/13/18 so it is coming up (I wanted to retire on Friday the 13th for some reason--and collect beginning of year bonuses!). I guess the classic argument against is that you can have more flexible travel plans if you don't commit and buy. What I found is that having something you can call your own makes you feel like you are really getting somewhere with respect to really retiring (while you are still working) and it is fun to go there 3 or 4 times a year. We live in Illinois and will keep our Midwest home also. Probably will be some type of snow birds and plan to acquire Florida residency for tax purposes. Doesn't mean you can't still travel to other places though and we plan to do that too.

 

[Philliefan33]

We bought a vacation home about five years ago. It's only 60 miles from our main home, but a world away in terms of atmosphere and pace of life. Since it is so close we were able to use it almost every weekend while we were still working. Now that we are ER, we split our time between the two places depending on our mood and desired activities.

One thing you may want to consider is how your free time may be curtailed as your kids get a little older. Both of our DDs were very involved in "travel" sports and our weekends were pretty much booked for about ten years. We wouldn't have gotten much use of our vacation house when the kids were 10-18 years old. That's what is happening with our neighbors here at the lake-- they used to be here a lot but the past two years they have been busy with the kids and sports. We didn't buy until our kids were in college.

 

[Bamaman]

Our vacation home is 18 miles across town--on a major lake. Even though it's so close, my wife really doesn't spend that much time out there. I'm there at least every other day, however.

Vacation homes require total commitment--that you'll use them. And they're so much better within 2 hours from home. Many of our friends have condos on the Gulf Coast, and they use them 3-4 times per year. 7-8 hours away is a world away.

 

[48Fire]

Considering investing in a vacation property to enjoy for years to come. Wanting those who own or have owned a property to weigh in on the pros and cons. Travel 2-3 times a yr currently spend approx 6500/yr will be upping this to 10k. We have 3 kids 10,8,4yrs old. We own 2 timeshares which we utilize, one every other year and one yearly. Should we purchase or just continue to budget travel expenses over the years?

Doesn't make economic sense if you are only using that infrequently. And you are 17 years from retirement? Sorry, but does not seem to be a good investment.

 

[CaliKid]

Considering investing in a vacation property to enjoy for years to come. Wanting those who own or have owned a property to weigh in on the pros and cons. Travel 2-3 times a yr currently spend approx 6500/yr will be upping this to 10k. We have 3 kids 10,8,4yrs old. We own 2 timeshares which we utilize, one every other year and one yearly. Should we purchase or just continue to budget travel expenses over the years?

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.

 

[Nemo2]

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.

One's idea of vacations often changes over the years....was a time I'd always hit the beach, now it has almost zero interest.......

 

[Meadbh]

You already own two timeshares. Buying a full time vacation property on top of that is a big financial commitment. Are you sure you will get value from this additional investment? You have limited vacation time. Will you spend all of it at the vacation home(s)? Are you willing to rent it out when you are not there? How will you handle maintenance?

 

[Senator]

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

 

[Hyper]

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.

 

[lwp2017]

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.

 

[Scrapr]

we bought a 2nd home in a vacation area 13 years ago. Last year we sold our main home and moved into our 2nd home. We love it. But...it was 3 hours away from our main home. 5 hours if snow hits. Or holiday/weekend traffic occurs.

We hoped to be over monthly. And that mostly occurred. We probably did 8-10 weekends there. Mrs scrapr would spend most of the summer there. We did let friends stay there at no charge. We tried a rental weekend 1x for a neighbor family. It was a disaster and we never rented again. I guess we used about 70 days a year. But there are always projects to do. Lawn mowing, snow shoveling! cleaning and fix up. Worry about losing heat in a cold snap. (happened 2x's) It helped that i was in a flexible job and we had good neighbors

It was a commitment. We used to love the Caribbean. After purchasing the house we could never go. We "had" to go to our 2nd home. We have a ton of family memories there and it has been great for us. But we also gave up a lot.

We just remodeled to give us some outdoor living area and spruced up the kitchen. After touring local homes I still love our place and would not trade for any of them

 

[joeea]

Considering investing in a vacation property to enjoy for years to come. Wanting those who own or have owned a property to weigh in on the pros and cons. Travel 2-3 times a yr currently spend approx 6500/yr will be upping this to 10k. We have 3 kids 10,8,4yrs old. We own 2 timeshares which we utilize, one every other year and one yearly. Should we purchase or just continue to budget travel expenses over the years?

We purchased a second home 5 years ago. It's less than 2 hours away on the ocean. We spend every weekend and most vacations there. And we babysit our grandchildren there every Friday. It's a wonderful life!

But, it's a rather different set of circumstances.

It's in an over-55 community. And it will likely become our permanent retirement home once my wife decides to give up the working life in a few years.

We would never have purchased such a place with young children - there are far too many other things to do.

Kids' needs change drastically over the years. When very young they need more attention and assistance. There are many different places that you'll want to visit that will take time away from a second home. In a few years, weekends may become dominated by their sports and other activities. And as soon as they become young drivers, they'll want to be on their own and not in Mom and Dad's place.

Everyone I know who has purchased a second home with the thought that their kids would be with them has sold it after a few short years. Many did okay, but a few sold at a significant loss.

If it were me, I'd just budget the vacations with the kids while you can and save the second home purchase for later in life.

 

[brucethebroker]

Have owned 2 condos near (20 min.) the beach on the gulf coast. Kids were college age when we purchased the first. We needed to sell it when the market crashed and made a small profit because we bought it right ("profit is made when you buy, not when you sell").

We rented it out during the winter for 90 day periods and earned about 40% of total ownership costs (it had a mortgage). It was in an upscale development with high fees. We used it for an occasional weekend or week long get away during the year. Also let friends and family use it, all with good experiences.

Four years later, we purchased a more modest unit in a lower cost development. The HOA is very frugal, and our costs are about half of the previous place. We now snowbird at that condo. Our adult children and grandkids fly down for spring and winter breaks.

 

[brucethebroker]

(sorry, hit the wrong button.)
Yes, we sometimes feel that we own a condo and should vacation there instead of taking a cruise, touring Europe, etc. But, we love snowbirding and having a place where you can fly down at a moment's notice, and not even take a suitcase. Can cook your own food in your own kitchen also.

Personally, I would not want a vacation place that wasn't a condo. Who wants to handle lawn work and repairs from 1,000 miles away?

I also agree that it would be hard with small children and trying to anticipate their needs/wants as they become teenagers.

Just a few thoughts...........

 

[flintnational]

Considering investing in a vacation property to enjoy for years to come.

One of the worst "investments" we ever made was in a resort property. The mistake we made was mixing our investment decisions with our life style choices. IMHO, a second home can be a fine lifestyle choice, based on you and your family's travel desires. But, a second home may or may not be a good investment. To clarify the decision, you may want to consider the following:

1)Would you still consider it a good investment if you did not want to use it as a vacation home?

2)Would it still be a good lifestyle choice for your family if it turned out to be a poor investment?

FN

 

[45th Birthday]

As far as intrinsic factors go, others have weighed in so I won't comment.

The word "investing" in your opening sentence caught my attention. I've been running numbers lately because we are selling a second home we bought almost 20 years ago (bought its replacement two years ago-it took a long time to sell this one).

We are selling for a huge gain. That's good, although it will come with a big tax bill. However, the price appreciation just barely covered our expenses from owning and maintaining the property over the years. The tax bill will put us in the hole a few hundred thousand.

We were there roughly eight to ten weeks every summer, with very infrequent long weekend trips. It is 1,000 miles from our primary residence, fairly remote, and in a very high cost area. We did not rent it.

So while it might look like a good "investment" it depends on how you look at the numbers. Would we have had some of those costs anyway if we only stayed in the other house all year? Some, but not a lot. Taxes, insurance,
interest, maintenance are all extra. Maybe a bit of savings on utilities by not living in the primary house all year.

Would we have made a different decision knowing these numbers in advance? No, but a big gain in appreciation was offset by expenses to own over the years. Clearly a lifestyle decision that has a cost to it.

 

[Danmar]

All our homes could be viewed as vacation properties as we are retired and simply move around between them. It's a lifestyle decision. Control vs flexibility. Agree it rarely makes sense from a financial point of view. I don't view any of our places as "investments" although eventually we will sell them (all but the lake house that will go to our daughter).

Lots of things to consider. Affordability, maintenance, age of kids, will you rent out when not there, will you still travel other places, etc.

It is nice to have your clothes in the closet, your cars in the garage, your furniture and art, only take carry on, etc. But these certainly come with a high price. Only you can decide if it is worth it. Best to rent a while before you buy.

 

[Danmar]

As far as intrinsic factors go, others have weighed in so I won't comment.

The word "investing" in your opening sentence caught my attention. I've been running numbers lately because we are selling a second home we bought almost 20 years ago (bought it's replacement two years ago-it took a long time to sell this one).

We are selling for a huge gain. That's good, although it will come with a big tax bill. However, the price appreciation just barely covered our expenses from owning and maintaining the property over the years. The tax bill will put us in the hole a few hundred thousand.

We were there roughly eight to ten weeks every summer, with very infrequent long weekend trips. It is 1,000 miles from our primary residence, fairly remote, and in a very high cost area. We did not rent it.

So while it might look like a good "investment" it depends on how you look at the numbers. Would we have had some of those costs anyway if we only stayed in the other house all year? Some, but not a lot. Taxes, insurance,
interest, maintenance are all extra. Maybe a bit of savings on utilities by not living in the primary house all year.

Would we have made a different decision knowing these numbers in advance? No, but a big gain in appreciation was offset by expenses to own over the years. Clearly a lifestyle decision that has a cost to it.

Similar to us. I doubt we will break even on any of our places after we take into account all maintenance and income taxes. If you want to make an investment, there are much better choices. It's a costly lifestyle choice more akin to jewelry, clothes, cars, than stocks and bonds. But nevertheless, for many people, it's worth it. I wouldn't change anything we have done at this point.

 

[kcowan]

We owned a 3-week timeshare purchased by FIL and used the week's every year. When we retired, we considered buying and concluded that break even was 4 months. We never considered renting it out because we did not want to be landlords. We finally bought after our parents had passed on. Children had moved on as well.

Obviously using it for family weekends and shorter getaways makes the math work better. But we consider it a lifestyle expense. If it makes any money, that will be an unexpected bonus! YMMV

 

[OldShooter]

25 years ago, we bought a second home on a lake about 3 hours north. IIRC we paid about $90K and the assessor says it is now worth about $380K. So that's about 6% appreciation on the sticker price. Taxes now about $4K/year however and other expenses too. So as a good investment, not so much. But traveling, going out to dinner, etc. aren't good investments either. So what?

We have enjoyed the place much more than we would have enjoyed some sterile timeshare or rental condo. We have an exceptionally nice stereo system (Klipsch LaScalas, for those who care), we have a stock of "lake" clothes, many, many books, furniture that suits us well, etc. It is "home" as much as our city house is "home." If hasn't replaced travel (which cost us a new high of $40K last year) but it is a pleasant part of our life style. Yes, we are fantastically lucky.

So the answer to the question has to be: "It depends." Our place works for us.

 

[sengsational]

I have no experience with a second house, but it seems a completely different animal than "traveling". True, in both, you're not sleeping in your primary residence, but the similarities end there.

The idea of a timeshare never appealed to me, but owning a second place does because of what's been mentioned in this thread: you can just go, know exactly what to expect, and have your "stuff". Renting the second place would make it less "yours" and it wouldn't have the same feel; it would become more of a timeshare where you had to block time for yourself.

So, for me, the decision comes down to "Is it worth it to have my very own spot that's exactly the way I left it, with my stuff, where I know the neighborhood, and know what to expect when I go there."

 

[brett]

I think that this is really a lifestyle decision. Make that decision and then move on to the location/investment decision.

But, as others have said, rent before you buy.

Prior to early retirement we were fairly certain that we wanted to buy a second vacation home somewhere warm. After retiring and downsizing our preference for several years turned out to not owning any real estate. We rented a condo. We looked in Florida, Texas, Carolinas etc. and decided that at this point in time a vacation home was not for us. Perhaps it will be in a year or so. But the investment return component will only come into play once we have made a decision to buy somewhere.

 

[BeachOrCity]

I think that this is really a lifestyle decision. Make that decision and then move on to the location/investment decision.

But, as others have said, rent before you buy.

Prior to early retirement we were fairly certain that we wanted to buy a second vacation home somewhere warm. After retiring and downsizing our preference for several years turned out to not owning any real estate. We rented a condo. We looked in Florida, Texas, Carolinas etc. and decided that at this point in time a vacation home was not for us. Perhaps it will be in a year or so. But the investment return component will only come into play once we have made a decision to buy somewhere.

We owned a 3-week timeshare purchased by FIL and used the week's every year. When we retired, we considered buying and concluded that break even was 4 months. We never considered renting it out because we did not want to be landlords. We finally bought after our parents had passed on. Children had moved on as well.

Obviously using it for family weekends and shorter getaways makes the math work better. But we consider it a lifestyle expense. If it makes any money, that will be an unexpected bonus! YMMV

+1. Lifestyle
As an investment there are better options, but if there is room over and above retirement financials in your budget this can be a great lifestyle for you and your family. I would note that you will still want to do some travel to other places, so bottom line is if plenty of room in the budget go for it, but dont think of it as a financial invetsment

 

[timemoveson]

25 years ago, we bought a second home on a lake about 3 hours north. IIRC we paid about $90K and the assessor says it is now worth about $380K. So that's about 6% appreciation on the sticker price. Taxes now about $4K/year however and other expenses too. So as a good investment, not so much. But traveling, going out to dinner, etc. aren't good investments either. So what?

We have enjoyed the place much more than we would have enjoyed some sterile timeshare or rental condo. We have an exceptionally nice stereo system (Klipsch LaScalas, for those who care), we have a stock of "lake" clothes, many, many books, furniture that suits us well, etc. It is "home" as much as our city house is "home." If hasn't replaced travel (which cost us a new high of $40K last year) but it is a pleasant part of our life style. Yes, we are fantastically lucky.

So the answer to the question has to be: "It depends." Our place works for us.

Very similar scenario and sentiments for us. 15 years in. Bigger dollars, but that is just a relative thing.

If it's driveable and reasonably close, and you can really afford it, it's a potentially great lifestyle choice. If those conditions aren't true, rent!!