I have a second "lake house" that I consider an investment. When I look at all my other investments, how should I classify this 2nd house? If my other investments are, stocks, bonds,and cash, this is real estate. Should this "investment" influenence my other investments? I like to think about it as a bunch of money waiting for me to cash it in. It would be about 1/3 value as my other investments combined, approximately $400K.
Thanks
I think a vacation home or a second home is generally just another non-financial, illiquid, personal asset, just like your main home and your car. You should include it's estimated FMV in net worth calculations, but it should not be considered in any asset allocation decisions related to your investment portfolio of financial assets.
On the other hand, I own a small rental house near a university that generates reliable positive cashflow with an equivalent pretax return of around 7%. I do consider this to be an investment and I include it's estimated FMV, along with financial assets, when I make asset allocation decisions. My asset allocation is currently 50% bonds, 30% stock, and 20% real estate, which includes some REIT and the rental house.
However, I think it is perfectly acceptable to consider certain non-financial personal assets as part of the FUTURE investment portfolio, if you know you are going to convert to cash at some point. This could include a vacation home, an extra car/boat/RV, or even a portion of your main home (if you plan to downsize and use the net proceeds for investment purposes). FIRECalc has a section on 'portfolio changes' for specifically this purpose. I think the OP fits this scenario.
My advice to the OP is: Don't consider the lake house as part of your investment portfolio and don't let it influence your asset allocation decisions until after you sell. Until then, just list it alongside your main house as a non-financial personal asset that increases your net worth but has no bearing on your current investment portfolio. But DO consider it's estimated sale value (and timing) in your future retirement income planning, including asset allocations at that time.