A Second Vacation Home a Good Thing?

[e86s54]

OK, I know this has been discussed many times, but I would like to take a different slant on the subject based on what is in the back of my brain.

I know the cons, managing 2 homes for costs, worry, etc, but then again so are kids and I can't imagine my life without them. So I feel you get what you put into it.

We do plan to travel around, but with the idea to find the perfect getaway from the cold Canadian winters in a couple of years. I've been looking into everywhere from Argentina to southern US states.

Renting then leaving with no strings does sound appealing. But rentals can be problematic (from bad beds, to noisy renters, etc). And in the time you are there, are you really only a transient and can you ever live more like a local?

So owning, setting the place up the way we like it and becoming part of the community sounds better to me. I know that's the expensive route and maybe I've got it wrong!?

Regards...

 

[Dawg52]

I'm half way considering it. I inherited a small house that I'm living in and it's not worth a lot. So I always thought I would probably upgrade at some point. But I have started given some consideration to just staying put and maybe buying a small condo on the coast. It would be a nice quick get away and I could live there for parts of the year. And maybe rent it out during snow bird season. This house would be Ok just to keep a part time residence in my old home town. The downside, insurance is still pretty high on the coast due to recent hurricanes. But there are a lot of great deals right now too. So.......who knows. I go through hot and cold periods on the idea.

 

[W2R]

I have started given some consideration to just staying put and maybe buying a small condo on the coast. It would be a nice quick get away and I could live there for parts of the year. And maybe rent it out during snow bird season.

Ah, how quickly they forget. (2005, that is) If it's not a Katrina, it's an Ivan or a Camille. The coast is beautiful, and I can understand the temptation but owning a structure there is not for me.

 

[Dawg52]

Ah, how quickly they forget. (2005, that is) If it's not a Katrina, it's an Ivan or a Camille. The coast is beautiful, and I can understand the temptation but owning a structure there is not for me.

Insurance cost makes it impossible to forget.

 

[jimnjana]

OK, I know this has been discussed many times, but I would like to take a different slant on the subject based on what is in the back of my brain.

I know the cons, managing 2 homes for costs, worry, etc, but then again so are kids and I can't imagine my life without them. So I feel you get what you put into it.

We do plan to travel around, but with the idea to find the perfect getaway from the cold Canadian winters in a couple of years. I've been looking into everywhere from Argentina to southern US states.

Renting then leaving with no strings does sound appealing. But rentals can be problematic (from bad beds, to noisy renters, etc). And in the time you are there, are you really only a transient and can you ever live more like a local?

So owning, setting the place up the way we like it and becoming part of the community sounds better to me. I know that's the expensive route and maybe I've got it wrong!?

Regards...

I would definitely recommend renting in the location you "think" you want to buy, before buying. This gives you an opportunity to get to know the area, better than if you were just visiting there. Too many other reasons as well. You may want to use a Vacation Rental By Owner (VRBO) or other vacation rental website if you have misgivings about living in a "rental". Many owners would be happy to have a seasonal rental or a monthly rental.

Jim

 

[check6]

I own one in AZ, the other in MN and follow the season. The rentals I have done have always seemed cold and uninviting. Fantanstic deals here in southern AZ.

Ck 6

 

[donheff]

DW and I have a weekend home which probably amounts to the same thing if you would spend months at your vacation home. We would consider selling the weekend place and buying somewhere warm if we could find someplace we love. But I would definitely follow Jimnjana's advice and rent first. In fact, once DW switches from PT to no time we plan to try stints in various places around the country to get a feel for what works.

 

[Texas Proud]

My first reaction to the tag line

A Second Vacation Home a Good Thing?

Was.... I will need a first vacation home before I can even talk about a second one....


But since it appears that you wanted to know about buying a second home as a vacation home... well, to me it is a question of will the plusses outweigh the minuses... I am sure this was what you thought... but I do not see a lot of plusses unless you are planning to spend a lot of time there....

If renting is cheaper (not always the case), then you could buy what you want (beds, furniture etc.) and store it the months you are not there... then rent the next season... it does add to the costs in the sense that you have to pay to move it twice and also store it, but then the total cost might be less than a full time lease... or even buying..

 

[headingout]

We considered a vacation home for years. Watched family members throw money and energy at them, without using them much. I was riding my bike in the mountains last weekend in gorgeous fall weather past dozens of beautiful vacation homes -- all unused.

We finally decided to buy a small RV instead and are loving that so far. Yes it's a depreciating asset, but we got a great deal on it used. The advantages for us are many: don't have to pick the "one" vacation spot, cheaper and easier to maintain than a house, no ongoing tax/rental hassles, great for integrating vacations with visiting friends and family in other locations, and we're always sleeping in our own bed, eating our own food.

 

[BUM]

Vacation home, possibly becoming the retirement home is a tempting idea for the gainfully employed. One can rationalize buying one, especially now. However it can quickly become an ER killer, or a post-ER money pit. IMO rent with wild abandon! Rent the best place, have a ball... then leave. Come back or go elsewhere next year, all the while scouting out your retirement home town, if thats your intent. After you retire sell the primary residence and buy the ER dream home. By then you'll likely have changed your mind a few times.

You can have your cake and eat it too by finding that special rental - away from the hotel strip - that you can revisit. You'll love it and the landlord will like the repeat biz. Its a pipe dream to think you'll be part of a community if you're only there a couple of weeks per year. I know, there are many absentee owners in my community. They can't vote so they don't count. They just pay taxes. Vacation homes also tend to be a time trap. The owner often spends much of the vacation fixing up the joint, and if its near the sea its going to need lots of fixing up.

ER is the permanent vacation don't mess it up with too much real estate.

 

[Walt34]

Vacation homes also tend to be a time trap. The owner often spends much of the vacation fixing up the joint, and if its near the sea its going to need lots of fixing up.

That's the reason we don't have one. Our perspective is that one house is enough work to keep up, we don't want two.

A SIL and her hubby have one in SC that they're very generous about handing out the keys to and we've stayed there a few times. But I've heard her say that since they own it they "have" to go there to justify the work and expense.

So... do they own the house or does it own them?

 

[dwk]

Real life example

Six years ago, my wife and I were in out late 40's -- we both worked, had some extra money and decided to purchase a 2 bedroom condo in SW Florida. The idea was to rent it seasonally and use it for the 14 days as a vacation home. Fifteen months later, hurricane Charlie showed up and devastated the area. It took two years, but the condo was as good as new.

I knew going in the property would be a break-even at best considering the tax benefits and rental income. I hoped the unit would appreciate over the long term to be a decent investment. Two years following Charlie -- property value increased 100% - 150%. I was being greedy and should have sold -- but hindsight is 20/20. The economy nosed dived and so did the prices. Currently, the condo is worth what it was 6 years ago when we bought. In the past five years, my wife has been battling breast cancer is now on social security disability. So the additional mortgage payment and associated expenses are stretching the budget.

So based on our experience, I would agree with renting versus owning a 2nd/vacation home.

The Pros:
-It' yours
-Have a weekend get-a-way as long as it close enough to your primary residence
-Potential for long term growth
-You can share it with family and friends
-There are tax benefits -- this benefit is reduced as your income exceeds 100K

The Cons:
-Loss of liquidity or taking on a mortgage payment
-Not your primary residence -- tax and mortgage rate is higher
-Condo fees
-Homeowner's insurance especially along the coastline
-HOA can be a pita
-Need to cover non-rental months
-There could be special assessments
-You're stuck at the same address

Over the last six years; accounting for the mortgage, taxes, condo fee's, repair/upgrades, utilities and other expenses our annual expenses have been 18,000. Since this is a seasonal rental for only 3-4 months. the rental income is limited $5,000 - $6,000.

Over the last 6 years we lost two years of use due to hurricane damage. In the next 18-24 months there was a period when property values skyrocketed -- I should have sold, but didn't. Then the market crashed and the property is valued at what it was 6 years ago.

The unit is rented from Jan-Apr_2010. The unit will then be placed for re-sale. While my wife and I love the location and the development -- financially this doesn't make sense for us. It wasn't a problem when both of use were working -- but with a single income, its a struggle. I also do not see the market in SW Florida bouncing back anytime soon. There's too much inventory, too much undeveloped land.

The other problem is the distance from our primary home to the SW Florida home -- it's just too far to be practical.

So I'll pay the $6,000 - $8,000 a year to be snowbirds; and be able to pick where I want to stay, not have the headaches of ownership --living on a boat is looking better all of the time.

 

[bizlady]

Can you afford it, will you love it, will you use it enought to make it worth while? If yes to all, then go for it-- great time to buy now...

Ck6-- where in MN?? We have a weekend home 30 minutes east of Walker....

 

[W2R]

Vacation homes also tend to be a time trap. The owner often spends much of the vacation fixing up the joint, and if its near the sea its going to need lots of fixing up.

So true.

Assuming that you do not have an excess of leisure time, then why assign it to vacation home maintenance, cleaning, and repair? That sort of defeats the idea of a vacation in the first place. Even if you hire people to do this, I would think that someone has to oversee them and that is not my idea of a great vacation.

If you are going to a vacation location because that location appeals to you a lot more than where you live and work at present, why would you spend a lot of time inside the vacation house anyway? You will want to be out and about most of the time. You might as well just sleep at a motel or rental and then get out immediately upon awakening to enjoy the beach/mountains/whatever that you traveled there to experience.

To me a vacation home equates to work, worry, expense, and zero spontaneity in one's vacation.
Right now, I could choose a house in my planned retirement location and pay for it in cash without batting an eye. That would make the move next year a lot simpler in SO many respects. I probably won't, though, because the idea of owning and maintaining two homes in two different states seem like such a huge PITA to me. Still on the fence on that one.

 

[LARS]

--living on a boat is looking better all of the time.

Carefull, that sounds an awful lot like out of the frying pan into the fire! After all, there's a reason people describe boat ownership as throwing money into a hole in the water.

But seriously, thank you for your detailed post. It highlights that "I'll buy it and rent it out" approach isn't always (I suspect usually) what it's cracked up to be.

 

[W2R]

Right now, I could choose a house in my planned retirement location and pay for it in cash without batting an eye. That would make the move next year a lot simpler in SO many respects. I probably won't, though, because the idea of owning and maintaining two homes in two different states seem like such a huge PITA to me. Still on the fence on that one.

AAAaaagh!

After writing the above, I did a search on Springfield real estate and found that a house that I liked 13 months ago (at an open house), is now back on the market and marked down to $129,900. I checked and it never did sell, probably due to the previous list price of $134,900. This is a 3 BR, 2 BA, 1650 sqft, 2 car garage brick house on 1/4 acre with a new-ish roof and nearly new HVAC, near everything (mall, gym, groceries) in a peaceful, clean residential neighborhood. In other words, a great house for someone like me.

Not only that but there are THREE other houses for sale within 350 yards of it. And that isn't even unusual for this part of the country. This is killin' me. I would make the seller so happy, and me too.

 

[CoolChange]

W2R,

You can probably get your dream house even cheaper than it is currently listed if you do decide to grab it in the next few months. (The winter months are traditionally a very slow time for real estate transactions in Missouri.)

 

[W2R]

W2R,

You can probably get your dream house even cheaper than it is currently listed if you do decide to grab it in the next few months. (The winter months are traditionally a very slow time for real estate transactions in Missouri.)

That sounds very logical! Also, even if it isn't winter, prices seem to be very negotiable in Springfield. One that Frank really liked during another open house 13 months ago, was listed at $129K as a FSBO and we noticed that it was reduced to $124K with a realtor by January. If the appraised (not assessed) value listed on the tax assessor's website is to be believed, it finally sold for $93K early last summer. Many sellers in the area seem to be motivated, and we have noticed that houses tend to stay on the market for a very long time.



I just don't know about owning two houses at once in two different states! Sounds like a recipe for disaster (or even worse, too much work!) to me.

 

[Texas Proud]

Some one told me today that the best day to make an offer on a house is Christmas... not many people buying in the winter and people feel good...

Now, just get your RE agent to make that offer!!!

 

[Midpack]

One of my employees just retired, we're in NW Indiana near Chicago. His house was on the market at $140K for 2 years without a single offer despite a brand new roof and few other costly fixes. Then about a month ago someone stepped up and offered $110K, but he had to be out in 30 days. He was disappointed, but he took it, and his last day was Monday. But he took a $30K bath selling the home he lived in for over 30 years...it is a good time to buy real estate in most places, not that the buyers market won't last a while.

 

[W2R]

One of my employees just retired, we're in NW Indiana near Chicago. His house was on the market at $140K for 2 years without a single offer despite a brand new roof and few other costly fixes. Then about a month ago someone stepped up and offered $110K, but he had to be out in 30 days. He was disappointed, but he took it, and his last day was Monday. But he took a $30K bath selling the home he lived in for over 30 years...it is a good time to buy real estate in most places, not that the buyers market won't last a while.

So true! But the reverse side of that coin is that once one buys such a home, it is nearly impossible to get rid of it. So, for example, if I bought a house in Springfield then I would be stuck with it even if my plans changed for some unexpected reason.

Decisions, decisions. Right now I am thinking of waiting at least until Frank and I both have our houses all fixed up and on the market, and we can both move up there. We could rent unless this (or another) great opportunity presents itself. I really hate the idea of owning two homes in two different states, though, and the real estate market here isn't all that great, either.

 

[traineeinvestor]

As an expatriate, I intend to continue living in Hong Kong after I retire but spend 2-3 months a year in my old home country. I looked at buying a house v invest and renting apartments for the 2-3 months I would be back home. The numbers obviously depend on expected rates of return on the investments, cost of the property at time of purchase and a number of other variables, but even with a conservative ROI assumption of 4%, the property would have to appreciate at around 2.4 % pa to break even. If the investments did better than 4%, the ROI would need to be higher.

Add in the loss of flexibility, the time needed to sort out maintenance and the implied cost if I spend less time there in any given year and it ended up being a no-brainer to go with renting.

While I do know some people who purchased holiday homes in Thailand during the Asian crisis (significant capital appreciation and significant currency appreciation), most people I know who buy holiday homes spend a lot of time complaining about the bills.

 

[Meadbh]

By definition, a vacation home is used only part of the time. If it's an ER home, then it's not a vacation home. All the evidence suggests that owning a second property that sits idle is a money pit. If it's rented long term, you can't go there on vacation. If it's rented short term, you need to keep investing the time to market it, in addition to the extra wear and tear.

IMHO the only cost effective way to own a vacation property is to own a fraction of it. The fraction should be no more than you expect to use yourself. Don't see it as a financial investment, just a lifestyle choice. That's what I do, and I have no money pit, but I save thousands of dollars annually on what would otherwise be expensive accommodation. I am always amused by the other fractional owners at my resort who own several fractions of several homes and are surprised that they are not making money.

I repeat, a vacation home is a lifestyle choice. Period. And that can be a very good thing!

 

[audreyh1]

I vote for a rolling condo! (RV)

It's wonderful taking our "home" to various places across the country.

Also, having an RV makes it easier to relocate in general as you can spend time in an area to thoroughly check it out, and have something to live in between houses.

Audrey

 

[jimnjana]

By definition, a vacation home is used only part of the time. If it's an ER home, then it's not a vacation home. All the evidence suggests that owning a second property that sits idle is a money pit. If it's rented long term, you can't go there on vacation. If it's rented short term, you need to keep investing the time to market it, in addition to the extra wear and tear.

IMHO the only cost effective way to own a vacation property is to own a fraction of it. The fraction should be no more than you expect to use yourself. Don't see it as a financial investment, just a lifestyle choice. That's what I do, and I have no money pit, but I save thousands of dollars annually on what would otherwise be expensive accommodation. I am always amused by the other fractional owners at my resort who own several fractions of several homes and are surprised that they are not making money.

I repeat, a vacation home is a lifestyle choice. Period. And that can be a very good thing!

2nd home a Money Pit? Not everyone feels that way. Just as some people find they can't afford a time share, some people can't afford a 2nd home. For many people a vacation home or 2nd home is a life style choice that is well worth the cost.

Jim