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2nd home versus money in the bank
Old 09-10-2021, 11:05 AM   #1
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2nd home versus money in the bank

I'm retired and recently enjoyed a month long stay in a VRBO home rental in the Rocky Mountains. My wife and I love the mountains and would consider living in Colorado during the summer and fall seasons but are unable to move from our permanent address (Southeast US) due to family/parent care responsibilities.

We have funds available (taxable) that we don't currently utilize to pay expenses. Has anyone in retirement bit the bullet and sold out of investments, paid the capital gains hit and purchased a 2nd home? At least we'd get some enjoyment out of it instead of the funds sitting in an investment account.

What pitfalls should I consider? Any regrets out there?
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Old 09-10-2021, 11:21 AM   #2
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Pitfalls are a 2nd home will be a money drain (insurance, maintenance, property taxes, alarm system, utilities) year round, even when not using it.

You will go from earning avg 8% on 300K = $24K/yr to spending $10K/yr a difference of $34K.

How will you manage the family/parent care responsibilities at the same time you envision using the new place. Will you fly back at the drop of a hat for issues ?

We always recall how we spent 2 days getting to a place in another country, and once we were there, got a phone call about parent health issue. We had to immediately come back... but of course immediately still turned out much longer than 24 hours.

How much did the VRBO rental cost for a month ?
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Old 09-10-2021, 11:24 AM   #3
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Financially unwise and maybe even risky, but life is not only about finances.

FWIW we are starting on a new vacation home build and my guess is that its resale value will be at best 2/3 of what we'll have invested in it. But there's not much enjoyment for us in reading brokerage statements once we know we have "enough." Which we do.
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Old 09-10-2021, 11:41 AM   #4
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Why not just use that money to rent other fantastic cabins/etc? I would imagine spreading those distributions over many years sure beats paying a big 'ole cap gains bill.
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Old 09-10-2021, 11:42 AM   #5
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Real estate in Colorado is on fire right now. No telling if this is permanent or a bubble. We moved here full-time 5 years ago and our property is now "worth" 2x what we paid for it.
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Old 09-10-2021, 11:43 AM   #6
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Another pitfall, not related to money.

Once you have this vacation home, where are you going to vacation every summer ?
What about vacations to other places: Europe, Iceland, South America, USA, etc...

Will your other vacations be a week or will you do month long trips ?

We have a family cabin, and honestly it's full of memories, and is (IMHO) pretty nice, but there have been years where I felt the pull to vacation somewhere else, somewhere new for a few months during the summer.

The kids don't even use the family cabin at all, as they would rather go other places for their limited 2 weeks holidays, so it sits unused nearly 90% of the time.
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Old 09-10-2021, 12:16 PM   #7
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Another pitfall, not related to money.

Once you have this vacation home, where are you going to vacation every summer ?
What about vacations to other places: Europe, Iceland, South America, USA, etc...

Will your other vacations be a week or will you do month long trips ?

We have a family cabin, and honestly it's full of memories, and is (IMHO) pretty nice, but there have been years where I felt the pull to vacation somewhere else, somewhere new for a few months during the summer.

The kids don't even use the family cabin at all, as they would rather go other places for their limited 2 weeks holidays, so it sits unused nearly 90% of the time.
+1
I am sitting out back looking at a house in our neighborhood that has to be a million+, in 5 years I've seen someone stay there for a month this summer. There's been plenty of maintenance people there.
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Old 09-10-2021, 12:21 PM   #8
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Originally Posted by Sunset View Post
Pitfalls are a 2nd home will be a money drain (insurance, maintenance, property taxes, alarm system, utilities) year round, even when not using it.

You will go from earning avg 8% on 300K = $24K/yr to spending $10K/yr a difference of $34K.
+1

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Why not just use that money to rent other fantastic cabins/etc?
Exactly. That $34k mentioned above could buy three months of mountain cabin rentals, or rentals at various luxury properties around the world. Wouldn't you prefer to have that variety of experience and let the rental property owners deal with things like maintenance, repairs, taxes, etc.?
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Old 09-10-2021, 12:23 PM   #9
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+1
I am sitting out back looking at a house in our neighborhood that has to be a million+, in 5 years I've seen someone stay there for a month this summer. There's been plenty of maintenance people there.
Plus, when it's not yours, it's easier to enjoy. I would hate going to a 2nd home with the intention to relax and instead be bothered by maintenance/cleaning/etc. I have enough of that BS with just one home.

When we travel (often) to Isla Mujeres, we would rent the same home. Over the years, we could see the damage that was occurring with the salt water and tenancy wear and tear. Eventually, the island became too touristy so we stopped going. No need to fix up the house and to try and sell it since we didn't own it. We just moved on to a new rental home(s) in a new area.
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Old 09-10-2021, 12:41 PM   #10
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Plus, when it's not yours, it's easier to enjoy. I would hate going to a 2nd home with the intention to relax and instead be bothered by maintenance/cleaning/etc. I have enough of that BS with just one home.

....
+++++
The maintenance is a BIG issue with our family cabin, and I've heard lots of other vacation neighbors making the same complaints.

Either you are physically involved for days (or weeks ) , or you still spend days arranging some local to do the work, and all the issues that come with finding someone for a 1 time fix on something.

None of those issues apply to folks bloated with money, as they can just hire a property manager, you only have to check they are actually doing the managing
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Old 09-10-2021, 12:56 PM   #11
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... Wouldn't you prefer to have that variety of experience and let the rental property owners deal with things like maintenance, repairs, taxes, etc.?
No. When we go to our lake home, our "stuff" is there. Clothes, spices in the cabinet, wine rack in the basement, Chemex coffee pot waiting, sports equipment, our pontoon boat, art on the walls, Klipsch speakers in the living room, etc. Family and friends often nearby. DW's second church home. It is literally a second home with all our comforts. We could live there year around if we chose.

We are happy to rent, usually AirBnB when we travel, but these are temporary stopping places not second homes.

Financially, its not such a great deal as has been pointed out. But in 25 years of ownership after an original cost of $85K, it would now net over $450K on a sale. So all the numbers are not negative.
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Old 09-10-2021, 01:03 PM   #12
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Another pitfall, not related to money.

Once you have this vacation home, where are you going to vacation every summer ?
What about vacations to other places: Europe, Iceland, South America, USA, etc...

Will your other vacations be a week or will you do month long trips ?

We have a family cabin, and honestly it's full of memories, and is (IMHO) pretty nice, but there have been years where I felt the pull to vacation somewhere else, somewhere new for a few months during the summer.

The kids don't even use the family cabin at all, as they would rather go other places for their limited 2 weeks holidays, so it sits unused nearly 90% of the time.
This I can relate. We can but never pulled the trigger for a 2nd house. Just love the flexibility. DW will always ask me "do you really want to come back here every year" my answer is always no.
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Old 09-10-2021, 01:08 PM   #13
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No. When we go to our lake home, our "stuff" is there. Clothes, spices in the cabinet, wine rack in the basement, Chemex coffee pot waiting, sports equipment, our pontoon boat, art on the walls, Klipsch speakers in the living room, etc. Family and friends often nearby. DW's second church home. It is literally a second home with all our comforts. We could live there year around if we chose.

We are happy to rent, usually AirBnB when we travel, but these are temporary stopping places not second homes.

Financially, its not such a great deal as has been pointed out. But in 25 years of ownership after an original cost of $85K, it would now net over $450K on a sale. So all the numbers are not negative.
And that $85K would be worth a little over $500K today of invested in a S&P500 index fund.

How much money has been spent on maintenance, taxes, insurance, etc.?

Not saying that owning is terrible, but for us...it would not be worth it.

DW's family owns a very nice "mountain home" that is fun to visit, but it has been a headache for them since they have owned it. DW and her siblings plan to sell it if the parents don't divest themselves of it in their lifetime.
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Old 09-10-2021, 01:17 PM   #14
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... Not saying that owning is terrible, but for us...it would not be worth it. ...
If you're only about money, you're absolutely right.
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Old 09-10-2021, 01:19 PM   #15
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This isn't the kind of decision you make basking in the afterglow of a nice vacation.


A pitfall could be the continuing care of the parents as bad things never happen to suit your schedule. It would be sad to have paid for a second home and be so tied down you couldn't fully enjoy it.
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Old 09-10-2021, 01:21 PM   #16
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If you're only about money, you're absolutely right.

And like most things in life the concept of worth isn't usually just about the money...
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Old 09-10-2021, 01:22 PM   #17
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FB5 can you elaborate on the "headache" part for your in-laws as I think this is what the OP is asking about?
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Old 09-10-2021, 01:28 PM   #18
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Im planning on purchasing a 2nd home in Colorado very soon. I know its probably not the wisest financial decision. But we want it.

Ive no doubt about the critiques listed in responses above. As for feeling like we always have to vacation at the 2nd home, Ive already decided we wont get locked into worrying about that. Weve even already joined a vacation home club that allows us to stay at all kinds of interesting places. We will go with both. We are fortunate to be able to afford it. BTD mode on steroids I suppose.

OP, where in Colorado are you considering? We are looking near the Breckinridge area.
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Old 09-10-2021, 02:24 PM   #19
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FB5 can you elaborate on the "headache" part for your in-laws as I think this is what the OP is asking about?
I sure can but a little background. The house is about 2500 SF and sits on several hundred acres (quite remote). It is next to a church camp that is on land that is also owned by the family (they lease it to the church). It is also adjacent to a large national refuge of several thousand acres. FIL is out there pretty much every weekend dealing with something, but it is "his escape" (I think it's an excuse to get away from MIL). We have family get togethers out there about 3 or 4 times a year. Other times the kids will go out on their own for a weekend or to just get away. Now...the not so great parts:

-Maintenance. Lots of maintenance. HVAC system seems to work only 1/2 the time even though it's only a few years old (lack of use IMHO). Plumbing can be a pain when not used often.

-Rats/mice/other wildlife; no matter how many traps/treatments/etc...rats. They tear up stuff.

-Vandals. Although this is rare, it has happened and they can be very destructive. Yes, there is an alarm but response time from the sheriff can be anywhere from 30 minutes to never. "Country living" at its best, right?

-Wild Fires. One destroyed many of the beautiful trees years ago. Thankfully, the volunteer FD was able to keep it from taking out the house. Many houses in the area didn't make it.

-Trespassers. Hunters, fisherman, campers. They come around often and are a nuisance.

-Always worried when there is a big freeze or lots of rain. The house sits within 100 yards of a small creek that can get carried away if it rains too much. No flooding as of yet, but water has gotten to within a few feet of the front of the house.

Just a sampling of the issues they have dealt with.

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If you're only about money, you're absolutely right.
The money is but a very, VERY small part as far as I am concerned.
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Old 09-10-2021, 02:49 PM   #20
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It is a highly individualized decision and each person will see it a different way.

We have rented the same house on a lake in Maine for the past 21 summers in a row. We love going there and it feels like home. But I'm glad we don't own it. When the water heater springs a leak, not my job. When the dock needs rebuilt, not my job. When the house needs repainted, not my job. When the road needs regraded, not my job. The way I see it, we get all the benefits and none of the burdens.
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