Vacation home purchase, how old is too old?

RAE said:
We have a lake cabin here in the Upper Peninsula of Michigan, so not too far from you. I actually have the cabin up for sale right now, as we don't use it as much as we used to, and I'd like to use some $$ from the sale of the cabin to do some improvements to our new Florida house.


Our house is in west-central Florida, on the Gulf. Great place for kayaking and fishing, which are two of my favorite things to do. Always a little tense at this time of year during hurricane season, so I keep a close eye on the tropical storm updates from down there. It's way too hot and humid down there now for me, but I'm hooked on spending winters there. We also drive, and I also haul plenty of tools with me, for house projects.
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RAE,
My cabin is only an hour away from my Minnesota home, so a short drive.
I own it with my cousin, and it works out very nice. I'm up there every other weekend in the summer, and I have a partner/friend to help me maintain and fix up the place. We also split all of the costs. I have no plans to get rid of it, unless I choose to stay in Florida full time.


I'm hoping that I enjoy my new Florida place as much as you enjoy yours.



I'm also located on the gulf side, and have plans to be very active in the winter. This sounds much better to me than sitting around inside my house during a long Minnesota winter.


Take care, JP
 
OP again. I'm jealous of you guys with the different cabins and Florida second homes. I watch all those different House Hunter real estate shows and see these people buying great vacation homes for $300k or so. I'd jump at that chance!

If I stretch it I'm looking at $500k and that's for a non-lake cabin or condo. Prices in California are unreal plus add in huge California property taxes and it's nearly impossible to buy anything.
 
Drake3287 said:
OP again. I'm jealous of you guys with the different cabins and Florida second homes. I watch all those different House Hunter real estate shows and see these people buying great vacation homes for $300k or so. I'd jump at that chance!

If I stretch it I'm looking at $500k and that's for a non-lake cabin or condo. Prices in California are unreal plus add in huge California property taxes and it's nearly impossible to buy anything.
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Drake,
My old cabin is basically a shack. We purchased it very cheap a few years after the 2008 recession, when the property values hadn't gone way back up yet.


My new Florida place is not fancy. It is in an older, but nice, town home community. It was maintained well, has low association costs that maintain the grounds and beautiful community pool, and it has a beautiful screened in porch with a private outdoor patio. The porch and patio are the highlight of the town home.



It was under $250K. That was a big purchase for me, but I've been reading the "Blow That Dough" thread for awhile now, and I'm in a can't take it with you mode.



I also decided that I'm just diversifying my retirement assets. Kind of funny.



If I run low on cash I'm going to purge my long time Minnesota home, and live in a trailer and my MN cabin for 5 months each summer.

Travel around visiting friends, and quit working at maintaining my old house. This is crazy talk on my part.



I don't think that will be necessary for financial reasons, but you need a plan B. I sort of want to do the trailer thing regardless of my financial situation.


JP
 
Long story short: Our (former) upstairs neighbors purchased their condo before retirement. Their kids used it some and they vacationed there on occasion. When fully retired, they moved in for a couple of years and totally rehabbed it. Their kids moved to Chicago, so they sold their condo, bought a condo in Chicago AND in Florida. Now they sort of split their time between Chicago and Florida.

My take away is that you really need to know yourself (our neighbors could not stand to be away from their adult children) before you buy a vacation home (or move "away" for that matter.) Of course, YMMV.
 
OldShooter said:
FWIW I wouldn't consider buying in any of the states with serious financial problems like CA and IL. Far too risky.

More: https://www.pewtrusts.org/en/resear...fs/2019/06/the-state-pension-funding-gap-2017 and many other places.
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I found a slightly newer report for 2018 on their website. Illinois remains in the worst group, but California is in the middle group with a 70% - 79% funding level. Of possible interest to retirement home buyers is the fact that two states which are often mentioned as destinations to retire to, Colorado & S. Carolina, are in the worst group with pension funding levels below 60%.

https://www.pewtrusts.org/en/resear...fs/2020/06/the-state-pension-funding-gap-2018
 
I don't think it is the age part.

It is the requiring a 30 year mortgage to buy a luxury.

If your finances prevented you from doing it up to 60, chances are finances are still preventing you from doing it today.

I would not buy if it will dent or stretch or limit your retirement prospects. If the amount does, then renting for the weeks you can spend there is a better use of funds.
 
I had a vacation house in South Lake Tahoe for about 10 years. I spent half of my work time in the Sierra mountains so it suited me to split my time 50/50 between my main house in the Bay Area and Tahoe.

If you're set on a second home then I guess you will go ahead but don't expect to do anything but lose a load of money on it. I worked in Finance and so kept good money records. The total cost of ownership including maintenance, mortgage interest, taxes and insurance was approximately 30k per year over the 9 years. Mine was a new build and so I didnt have to put a lot into it at the beginning. I did sell it for about 50k more than I paid and I was really lucky to sell at a good time - bought in 2009 and sold in 2018. If you dont keep tabs on the pennies or if you listen to the realtors, I made 50k on the investment. Of course the truth is it cost me 270k to make the 50k so I really lost 220k. This is how it is with vacation homes. It was fun owning it but for an elderly person it had lots of stairs and the winters are 5 months long and you will have to shovel a huge amount of snow. For about 3 months of the winter the place is covered with sheets of ice on the frozen ground so expect to fall a few times. Not great if you have brittle bones.
 
bloom2708 said:
.... If the amount does, then renting for the weeks you can spend there is a better use of funds.
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Many people don't recognize the real costs of a vacation property, especially the opportunity cost of money. When I look at the places on our lake, a modest property costs $300-400k, so that's $15-20k a year at a modest 5% opportunity cost. Add in 2% of value for property taxes, insurance and maintenance and you're probably at $23-30k a year of all-in cost.

Meanwhile you can rent a place for $1-2k a week. Now the nice part of owning is that you turn the key and all your stuff is there, but the cost is significant if it is just a financial decision.
 
pb4uski said:
... the cost is significant if it is just a financial decision.
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Exactly. Viewed as an investment I doubt that very many second homes are attractive and certainly they are high risk. But for most of us, the cost is a lifestyle expense just like travel, hobbies, charitable donations, etc.

For someone who has to break even or make money from a prospective second home purchase, it is probably better to invest somewhere else.
 
REWahoo said:
Apparently they is. :)
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If you own a home for 9 years and PITI is $30k a year and you sell for what you bought for have you "really lost" $270k? No, not at all since you got 9 years of use of the property.

I guess if one ended up buying a second home and not using the place at all then it is arguably $270k wasted.... but not lost. The $30k a year cost of ownership is something that you knew or should have known about when you bought.
 
Koolau said:
Long story short: Our (former) upstairs neighbors purchased their condo before retirement. Their kids used it some and they vacationed there on occasion. When fully retired, they moved in for a couple of years and totally rehabbed it. Their kids moved to Chicago, so they sold their condo, bought a condo in Chicago AND in Florida. Now they sort of split their time between Chicago and Florida.

My take away is that you really need to know yourself (our neighbors could not stand to be away from their adult children) before you buy a vacation home (or move "away" for that matter.) Of course, YMMV.
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Yes one of the factors for us buying in PV was that it is 4.5 hours flying time from Vancouver and 5 hours flying time to Toronto where kids and grandkids live. Or course that assumes that flying again becomes practical and affordable?
 
pb4uski said:
Many people don't recognize the real costs of a vacation property, especially the opportunity cost of money. When I look at the places on our lake, a modest property costs $300-400k, so that's $15-20k a year at a modest 5% opportunity cost. Add in 2% of value for property taxes, insurance and maintenance and you're probably at $23-30k a year of all-in cost.

Meanwhile you can rent a place for $1-2k a week. Now the nice part of owning is that you turn the key and all your stuff is there, but the cost is significant if it is just a financial decision.
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Depending upon location (remote, tranquil) sometimes you turn the key and find some local "person" has broken in and stolen some of your stuff.
So there is the extra cost of fixing and replacing stuff. I personally estimate it to be $300/yr.

I can go years without trouble, and then the next Spring, find the door broken open and find anything of value is gone.

I cannot store any tools beyond a $5 hammer in the place, in the past from my place and neighbors stolen things included:
guns, outboard motors, generator, wood stove (these are extremely heavy), installed shower enclosure (someone had to un-install it), propane lights, canoe, aluminum boat, etc.

It's always a potential surprise on the first Spring trip to the cottage.
 
Drake3287 said:
Has any purchased a vacation/second home after retirement and later felt they shouldn’t have done it simply because of being at an older age? At 60 I realize I probably won’t live long enough to pay off a 30 year mortgage but like many people I’ve always wanted a place but financially couldn’t do it.

With money no longer being a real concern I’m now thinking about it. Any of you others have a strong feeling one way or another on such a purchase? Admittedly I would have gotten more use out of it when my kids were younger but like most parents with a family I couldn’t afford it.
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I have never purchased a vacation/second home, even though I could easily afford it, because I don't see the point (for me). And of course, at age 72 keeping up with two homes would be a challenge I suppose.

It probably makes more sense for those living up north who need/want to snowbird. But me, I'm here living in my paid off Dream Home which is exactly the home I have dreamed of owning all through my life. Every morning when I awaken and realize where I am, it is a huge thrill. Not only is my Dream Home perfect for me, it is set up exactly the way I want it, too. I can't imagine why I would ever want to leave and go live in some other home, even briefly. There is so much to see and do in New Orleans that even pre-COVID19 we never felt bored with living here.

I have occasionally thought of buying a home a few hundred miles north of here for hurricane evacuation usage, like many New Orleanians do. But really we have only had to evacuate once in the past 15 years since Katrina, and that was only for two nights so it doesn't make sense to me.
 
We live in a fairly dense neighborhood near the hospitals - plenty of sirens, homeless people, restaurants, stores, city park and zoo nearby. There's a condo in our complex, almost a mirror image of ours, that seems to be a shared family vacation home. Vacant most of the time, then around holidays, folks open it up, put the patio furniture out, and congregate for a week or so. Assuming Grandma bought it in the early '90s at half the price we paid for ours, and willed it to the kids without triggering a reassessment, they are paying minimum $2500/year in property taxes, $679/mo for the HOA (elevator building with pool, tennis courts and garage parking), plus a massive $33,000 plumbing replacement assessment in 2016. We live here full-time and don't really think of it as a vacation spot, so I can't imagine pouring that much $$$ into it as a second home. Maybe they find it relaxing compared to where they're coming from? :confused: Remind me not to move there, wherever it is!
 
30k cost of ownership for 9 years =270k
Then sell it for 50 more than you paid so thats 50k profit against the 270k loss which is 220k loss.

You should use a different logic for second homes. Your primary home is your cost of living and if you didnt own it you would be renting something so its part of the cost of living.

But noone needs a second home. Its all just extra money out the door that you didnt need to spend. Everyone likes to use different logic to try to justify it, but the truth is instead of that second home you could just go on a cruise every year. On a cruise you are also getting the use of the ship during the holiday but few of us would say you are investing in the ship.

I only point this out because there is an entire industry out there trying to convince you that a second home is just like your first home and is an investment. Lots of my friends have second homes and they nearly all think of them as investments. But the only ones who make a profit are the ones who dont track their expenses.

Lake Tahoe where the OP was asking about requires an outlay of 500-600k to buy a 3 bedroom house on a small lot. Its a harsh climate at 6300 feet with nearly a hundred feet of snow a year. You are looking at repainting your house every 10 years and replacing the roof every 15. The driveway and decks need to be redone every other year. Property taxes are close to 10k a year. Utilities are expensive as you need to keep the heating running all year and even a small garden needs water. 30k was about as low as I could do it with doing most work myself except for painting and roofs that require ladders.

My neighbor bought a bigger and pristine house for 700k and then didnt do a lot of maintenance. After about 10 or 12 years the whole place was looking pretty tired and he grew tired and put it on the market. It only went for 500k and the new owner put about 200k in to bring it back to how it was originally. These houses need to be fed money and are going to get it one way or the other.

I am not trying to dissuade anyone but at least go into the transaction with your eyes open. I often thought the shack approach was the way to go for a summer home but in the winter it needs to be comfortable. If its not more comfortable that your primary home you wont visit.
 
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OldShooter said:
FWIW I wouldn't consider buying in any of the states with serious financial problems like CA and IL. Far too risky.

More: https://www.pewtrusts.org/en/resear...fs/2019/06/the-state-pension-funding-gap-2017 and many other places.
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This is really a great point. I live in Illinois and would not consider a cabin or lake home simply because you truly don't know what they will hit you with next as far as taxes and other regulations. The cost for plates on my 4'x8' trailer jumped 555% this year. I understand that you probably wouldn't be registering vehicles at a second home but that is just an example of the craziness that we see here. Today it may be an increase for plates but tomorrow it might be some form of non-resident home fee to cover our crippling debt.
 
Puravida1 said:
30k cost of ownership for 9 years =270k
Then sell it for 50 more than you paid so thats 50k profit against the 270k loss which is 220k loss. ...
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But when you bought it you knew, or should have known, that owning it would cost you $30k a year.... right? And you presumably thought that your enjoyment of the use of the property was worth $30k a year if you bought it... so there is no loss.

It is no different that if you made a decision to spend $30k a year on travel for 9 years and then stating that your travels were a $270k loss.

WADR, totally silly.

Puravida1 said:
..... a second home is just like your first home and is an investment. Lots of my friends have second homes and they nearly all think of them as investments. But the only ones who make a profit are the ones who dont track their expenses. ...
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WADR, neither are investments.... your principal residence is where you live and if you don't rent you pay property taxes, insurance, and perhaps mortgage payments instead of rent. A vacation home is a lifestyle choice and not an investment. That said, I've had both homes and vacation property that I have sold for more than what I had invested (original cost and cost of capital improvements) and others for the same.

You are totally ignoring the value of being able to use the property... most people consider that the cost of use in lieu of rental or lease costs. If you had the property and chose not to use it then that is on you.
 
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Bought one

I inherited some surprise money from my father that I used to buy a vacation home in Western North Carolina, an area we love. We bought it fully furnished and found a fantastic property manager who keeps it in great condition and rented when we aren’t there. We may well end up retiring there. We knew NOTHING about this kind of stuff, but boy have we been happy with the purchase. We have not only a beautiful place to go in these awful times, but also a new source of income
 
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Our first condo that we purchased in 2007 was built in 1987, so we expected to pay every year to maintain/upgrade it. When we sold it, we took a capital loss of $30k after all expenses, so that ended up being $3k a year and we spent 5.5 months there every year.

We considered it to be a winning decision financially.
 
When I worked, I would head for the lake house early on Fridays--getting there just in time to take in that incredible 6 mile sunset view to the west.

My father was sitting on the 36' screened porch and he'd say, "I've been looking at this view my whole life."

Well, now I sit on the screen porch in the same chair, and I think about the five generations that have enjoyed our place. And I also think "I've been enjoying this view for the last 70 years." And it all makes keeping the place worth every penny.
 
If you haven’t thought about renting Out the place you buy through airbnb/vrbo, it’s a lot easier than we ever thought.
 
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