Buy a vacation home or just travel? A nice problem.

[Drake3287]

I realize no one can really answer this for me but I was hoping to hear from people that may have been in the same position.

I recently retired in my 50's with a government pension and various savings that should comfortably cover myself and wife for the rest of our lives. We both love to travel and at the same time would love to be able to buy a vacation home in the Lake Tahoe area. Problem is, I can't really do both.

Currently I have an extra $2,000. a month which isn't needed for savings or any other real purpose. At this point I just use this money to fund a couple of incredible vacations a year, Europe, Hawaii, Caribbean, etc...

Has anyone given up the freedom of traveling in order to buy a vacation home? Have you been sorry after making the purchase? Unfortunately prices in the Tahoe area are in the $400,000. range for a decent place. A mortgage amount I'd hate to deal with even though I can cover it with this extra $2,000. each month.

I've heard people that say they love having a vacation home and I've heard others that were sorry they ever bought one! Any words of wisdom from others with this same predicament?

 

[Another Reader]

Rent up here a few times and see how you like it. Doing that will give you a sense of if it is something you would be content to visit often in lieu of traveling.


In your shoes, I would rent when the mood suited me in Tahoe and travel with the remaining money.

 

[NW-Bound]

You can start with traveling first, then when you are older and tired of it, you can get a 2nd home if you still feel like it. Or you may want relocate to Lake Tahoe for good.

 

[Palmtree]

About 10 years ago we built a vacation home on a lake 2 hours away from where we live. I will say that we love the 2nd home. Our plan was to retire and move there.

We just did retire and we are in the process of moving into it now. BUT,..... (you just knew there had to be a but coming.) We love to travel. We USED to travel all the time BUT between the building and maintaining the second home, it ate up a lot of our travel budget for these 10 years.

We had to postpone all the big trips we had planned. That will change as soon as we sell our old home but still, it was a decade long trade off.

I would rent as often as you could until you know the area and just cannot stand to NOT own a home there.

 

[FUEGO]

The mortgage is just the start of vacation home expenses. An extra set of utilities, furniture, maintenance, etc. To be partially offset by renting it out but still a hassle.

Vacationing is easy. I vote spend the cash on nice rentals wherever you want to visit somewhere. Maintain flexibility.

My mom temporarily thought about buying a beach house (not too expensive here - $200-300k and up for oceanfront). I crunched the numbers and showed her it wouldn't break even if she rented it all the time in the best of all possible worlds. And she would be stuck visiting the same place at the same beach whenever she wanted to go on vacation.

Fast forward a few years later, the family situation changed a good bit (grandparents are gone, my brother/her son is now estranged, etc), and she finds herself traveling across the country on the train and rarely visiting the beach. She rents when she does visit the beach 1-2x/yr and it's so much easier than owning and maintaining a place there year round. She can also get the perfect size place when she rents - 1 BR or studio or hotel room if it's just her or a 2-3 BR if my family goes with her to the beach.

 

[travelover]

Rent.

 

[Drake3287]

Thanks for the responses, living in the Bay Area we've been vacationing in Tahoe for years so there's little surprise if we ended up getting something. As for renting it out, I hope not to simply because I don't want to deal with that aspect of a vacation home if I don't financially need to.

At one time I thought about moving there full time but the big draw back is my employer paid health insurance won't cover me there. (Kaiser)

 

[audreyh1]

You can start with traveling first, then when you are older and tired of it, you can get a 2nd home if you still feel like it. Or you may want relocate to Lake Tahoe for good.

Exactly!

Rent up here a few times and see how you like it. Doing that will give you a sense of if it is something you would be content to visit often in lieu of traveling.


In your shoes, I would rent when the mood suited me in Tahoe and travel with the remaining money.

Also great advice.

 

[daylatedollarshort]

This is what the late Thomas Stanley (The Millionaire Next Door) had to say on vacation homes on his blog:

Second Homes... Part I

 

[Tree-dweller]

We had our place at a ski slope for about 10 years, til the kids had moved on and we were retiring. We sold it, and we travel on what we don't spend on the place anymore. Don't miss it much.

 

[Senator]

I evaluated another place, in a tax free state, as a future retirement home. After analyzing the cost, I decided to travel.

A vacation home will cost every bit, and more, of the $2,000 you are saving. And you always have a vacant place subject to being broken into.

 

[soupcxan]

For the cost of one vacation home you can rent a lot of very nice homes all over the place on airbnb/vrbo.

 

[Gumby]

Every July for the past 15 years, the young wife and I have rented the same house up in Maine. It is on a freshwater lake, with a dock and a boat and a screen porch. As soon as we walk in the door the first day, it feels like home, and we are able to relax. We swim and walk and read books and cook. It is a really great two weeks and I expect we'll continue to do it for years to come.

And yet, I would not want to own the house, lovely as it is. As the situation stands now, we enjoy the best part of the summer in a comfortable place, while someone else has to deal with the plumbing and the septic and the new roof, etc., etc.

 

[NW-Bound]

About 10 years ago we built a vacation home on a lake 2 hours away from where we live. I will say that we love the 2nd home. Our plan was to retire and move there.

We just did retire and we are in the process of moving into it now. BUT,..... (you just knew there had to be a but coming.) We love to travel. We USED to travel all the time BUT between the building and maintaining the second home, it ate up a lot of our travel budget for these 10 years.

We had to postpone all the big trips we had planned. That will change as soon as we sell our old home but still, it was a decade long trade off...

Make it a high country instead of the lake, and the drive 2-1/2 hours instead of 2 hours and you have my situation. I am sure that in the past 10 years, you got to use it as your weekend getaway quite often, so it was not for nothing.

I also bought the 2nd home 10 years ago when we were still working. We continued to travel after getting the home, but certainly not as much as before. And the cost for upkeep is indeed quite a bit. I paid more for it than what the main home was worth at that time. The home is in the boondocks, so not suitable for a permanent residence due to lack of healthcare and various amenities.

I have no plan to sell it for now. And I certainly do not regret getting it. My son who is 26 now was growing up then, and we spent so much time riding our dirt bikes into the forest exploring miles and miles of trail. When that time passed, there is no amount of money that could buy it back.

Now that the yard improvement project in the main home has reached a breakpoint, we are going up there to enjoy the cool air in a couple of days.

 

[Ronstar]

Our vacation condo is running around $7k per year to maintain. Sure we can rent a place a couple of months for less than that. So our vacation home may not be a sound investment. But I'm not looking at it from an investment viewpoint. I wanted a place that was always there for us whenever we want to go. A place that feels like home. Sure we could travel more on the $ we could save by not having the vacation condo. But I could also save more by downsizing our main house. We will downsize our house and possibly sell the condo at some point, and probably redirect $ toward travel.

My advice to the OP is to rent for a while until you find an ideal location and then search for a place if you find that you still want to buy.


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[fishnfool]

Love Lake Tahoe!
If you bought on the Nevada side and lived there 51% of the year you might avoid state income tax on your government pension.

 

[Terryjm51]

This is what the late Thomas Stanley (The Millionaire Next Door) had to say on vacation homes on his blog:

Second Homes... Part I

Excellent post!!! It hit the mark for me. I have been battling the same thing. Do are do not buy. Sounds like rental is the plan



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[Terryjm51]

Let's throw one more in the mix? I have wanted to buy an rv to travel, but "hear the but" it cost lots to insure and store. Thought about first year to rent and try it out this way a for a few months Thoughts ??


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[NW-Bound]

My earlier suggestion to the OP to delay buying until he is done with traveling still stands.

But depending on the individual circumstances, I also say that buying may make sense for some people. Consider the following.

This is what the late Thomas Stanley (The Millionaire Next Door) had to say on vacation homes on his blog:

Second Homes... Part I

The above article concludes with these observations.

Most millionaires who own vacation homes are family oriented and are purchasing a second home for family vacations including children, grandchildren, etc. Buying is more a function of doing for others rather than for oneself. Those who purchase a vacation home want it to be accessible and easy to reach for the entire family. ​

A 2nd home abroad or across the country would be underused and not make economic sense. In contrast, my 2nd home is so close that when still working I occasionally stayed up in the high-country home during the weekend, and left early on Monday morning to get back in town to go to work. And yes, not just my adult children are still enjoying it with us, but I also have my siblings' families visiting.

Let's throw one more in the mix? I have wanted to buy an rv to travel, but "hear the but" it cost lots to insure and store. Thought about first year to rent and try it out this way a for a few months Thoughts ??

A used motorhome can be bought and resold for less outlay than the rental fee.

 

[NW-Bound]

Our vacation condo is running around $7k per year to maintain. Sure we can rent a place a couple of months for less than that. So our vacation home may not be a sound investment. But I'm not looking at it from an investment viewpoint...

One should add the opportunity cost of the purchase in addition to the upkeep. And if you buy 10 years ago, most RE markets trail the stock market in that time frame. In my case, I lost money as the market here is very soft for 2nd homes. When I bought it, the market was so hot there were very few homes in the market in that area. Now, there's plenty.

No, the 2nd home should not be looked at as an investment, or one would be sorely disappointed.

 

[Sunset]

I vote rent and travel as you can do both vs owning.

We have an ancestral cottage, and I've seen a lot of others with them over the years. Its a lovely dream when written in a book, but reality is families have changed, many will move and not use it much so forget about children using it a lot.

They are more expensive than you think, and nothing kills the joy of a vacation than to go there to mow, trim, repair, fix, deal with local contractors who want to overcharge since who you gonna call instead?, local gov't folks who resent the rich folks who think they are better than a local....

If you buy, you will find you are trapped, unable to afford that trip to Europe/Hawaii/etc...

 

[Ronstar]

One should add the opportunity cost of the purchase in addition to the upkeep. And if you buy 10 years ago, most RE markets trail the stock market in that time frame. In my case, I lost money as the market here is very soft for 2nd homes. When I bought it, the market was so hot there were very few homes in the market in that area. Now, there's plenty.

No, the 2nd home should not be looked at as an investment, or one would be sorely disappointed.

Yes one should add the opportunity cost if one is weighing the options from a financial aspect.

 

[jabbahop]

we have a small cabin on the lake about 30 minutes from home. We have spent the month of June and July here so far and it is the best "vacation' I have ever had. Even though places here rent for $1500+/week, from a purely financial standpoint we are probably spending more. From a life enjoyment perspective it has been fantastic. Easy for walking the dog along the lake. Riding the bike, going for a swim, napping in the hammock, tubing with the kids all right outside the door. This is my first year of retirement and this "stay-cation" has been my best vacation of my life.

We are incredibly fortunate that it wasn't an either camp or vacations decision. If it were I would probably vote travel but if you can swing it, a family vacation home that you will use and love A LOT is fantastic.

 

[NW-Bound]

When I was RV'ing in Nova Scotia, in the small town of Pictou, I talked with a man who owned a 5th wheel that was permanently camped at that RV park, which was on the shore of a bay. This retiree volunteered that he was a local, in fact lived only 5 minutes away in town. He called the 5th wheel his summer cottage, and had been spending his summers here, rather than in town. When the campground closes down in mid October due to frost, he goes back to his apartment.

This arrangement of having a permanently placed RV as a summer place is quite common in some parts of the US and Canada. The owners are called "seasonals". And not all RVs are occupied the entire summer. Many are owned by residents of nearby towns who just want a weekend place. Some RV parks do not seem to have much to offer, other than being in a rustic setting, with a pond or a stream in the property surrounded by corn fields.

It seems like people have an innate desire for a change from their daily living surrounding. That can be satisfied by traveling, or by having a 2nd place. Or some just want to get out of the house and go hang out in town.

 

[folivier]

We also had a nice 2nd home on 180 acres with 10 acre lake on a river. We used it quite a bit on weekends when the 2 boys were younger. However when they started high school sports we drifted away from it. Eventually sold it (for a very nice profit). This summer we are in our 2nd month of renting cabins in Colorado. Really dislike being in Louisiana in the hot humid summers. We've thought about buying a cabin in the Colorado mountains but the boys would only get to come out 1-2 weeks a year with work and other obligations. We still plan to rent during the summers but may buy a fishing camp on a lake within an hour or so from our home next year. I'm hoping they would use it on weekends if it's so close. And I'd enjoy it during the milder weather. But we still plan to travel.