My SO is full-time and I consider myself semi-retired although that varies based on how interesting and lucrative available projects are at any given time. Our work is not geographically dependent.
We are spending a substantial amount each year on vacation lodging. When we travel, it's been increasingly to the same area to avoid winter in our primary location. We've also been increasing the frequency of said trips and would like to increase them more. Short-term rents in the area have been increasing. Given all this (and more, see below) we're thinking of buying a second place.
I've long been a fan of the NYT rent-buy calculator (http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html). Although I imagine it's designed for the more typical scenario of comparing full-time living in one location using current rents and home prices, is there any reason it couldn't be used to compare second/winter type living?
For example, say we're currently spending roughly $2k/week for 6 weeks of rental in the winter location ($12K/year). I plug the appropriate numbers into the NYT calculator (including adjusting the landlord-paid utilities amount to include all expected utility costs) and adjust the purchase price until the breakeven number it spits out is $1000/mo (i.e., $12K/year).
If I could buy a place for that purchase price, then buying is financially equivalent to renting as we've usually done, except for the cost to furnish the place, right?
In an area with historically and currently high appreciation rates plus relatively high rentrice ratios, it seems pretty easy at the 6-8 weeks/yr range to break even or do better buying. Moving to 10+ weeks/year makes it even easier.
I have done a more traditional comparison of leasing (year-round) versus buying in the winter location and according to the NYT calculator, buying comes out way ahead.
Obviously a downside to the buy option is the hassle and stress of maintaining a second place including having it sit empty for possibly many months at a time. That could be partially mitigated through the type of place (e.g., lock-and-leave type condo or townhome). A risk of the buy option is that the historical appreciation rates (which I adjusted down by 20% to be conservative) don't accurately predict future appreciation rates.
Obvious upsides to the buy option are the ability to increase the frequency and/or duration of stays at little to no additional cost. Also, having our own stuff, especially work-related and recreational equipment such as cycling gear. Very few rentals have one office set up, let alone two! Bike rentals in the area are only for single-speed coaster/cruiser type bikes.
Has anyone else found themselves in a situation where vacation/winter rental expenses are effectively equal to the cost to buy? I know there have been a lot of threads about renting/buying second homes but I don't think any have had this angle. What did you end up doing and any useful tips or gotchas? Am I missing anything obvious or less obvious in terms of the math and
logic?
We are spending a substantial amount each year on vacation lodging. When we travel, it's been increasingly to the same area to avoid winter in our primary location. We've also been increasing the frequency of said trips and would like to increase them more. Short-term rents in the area have been increasing. Given all this (and more, see below) we're thinking of buying a second place.
I've long been a fan of the NYT rent-buy calculator (http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html). Although I imagine it's designed for the more typical scenario of comparing full-time living in one location using current rents and home prices, is there any reason it couldn't be used to compare second/winter type living?
For example, say we're currently spending roughly $2k/week for 6 weeks of rental in the winter location ($12K/year). I plug the appropriate numbers into the NYT calculator (including adjusting the landlord-paid utilities amount to include all expected utility costs) and adjust the purchase price until the breakeven number it spits out is $1000/mo (i.e., $12K/year).
If I could buy a place for that purchase price, then buying is financially equivalent to renting as we've usually done, except for the cost to furnish the place, right?
In an area with historically and currently high appreciation rates plus relatively high rentrice ratios, it seems pretty easy at the 6-8 weeks/yr range to break even or do better buying. Moving to 10+ weeks/year makes it even easier.
I have done a more traditional comparison of leasing (year-round) versus buying in the winter location and according to the NYT calculator, buying comes out way ahead.
Obviously a downside to the buy option is the hassle and stress of maintaining a second place including having it sit empty for possibly many months at a time. That could be partially mitigated through the type of place (e.g., lock-and-leave type condo or townhome). A risk of the buy option is that the historical appreciation rates (which I adjusted down by 20% to be conservative) don't accurately predict future appreciation rates.
Obvious upsides to the buy option are the ability to increase the frequency and/or duration of stays at little to no additional cost. Also, having our own stuff, especially work-related and recreational equipment such as cycling gear. Very few rentals have one office set up, let alone two! Bike rentals in the area are only for single-speed coaster/cruiser type bikes.
Has anyone else found themselves in a situation where vacation/winter rental expenses are effectively equal to the cost to buy? I know there have been a lot of threads about renting/buying second homes but I don't think any have had this angle. What did you end up doing and any useful tips or gotchas? Am I missing anything obvious or less obvious in terms of the math and
logic?