2nd home versus money in the bank

[FIREHAPPY]

I appreciate all the great comments. Lots of good advice to consider. The area we like is near Edwards, CO. The development is private, on thousands of acres. We rented a terrific 4 bedroom home with mountain & golf course views for $12k for the month. That's actually a bargain for this area! It would be a bit difficult to find a place that would rent to us for 4-6 months since most homeowners want to enjoy the home too. We also need a place that allows a pet which narrows the selection.

The HOA maintains all the homes exteriors and lawns but you pay for the service.

What I need to find is an owner that wants the mountain home in winter and spring for skiing and I'll take the house for summer and fall for hiking!

Thanks again for the suggestions.

 

[Sunset]

I appreciate all the great comments. Lots of good advice to consider. The area we like is near Edwards, CO. The development is private, on thousands of acres. We rented a terrific 4 bedroom home with mountain & golf course views for $12k for the month. That's actually a bargain for this area! It would be a bit difficult to find a place that would rent to us for 4-6 months since most homeowners want to enjoy the home too. We also need a place that allows a pet which narrows the selection.

The HOA maintains all the homes exteriors and lawns but you pay for the service.

What I need to find is an owner that wants the mountain home in winter and spring for skiing and I'll take the house for summer and fall for hiking!

Thanks again for the suggestions.

Yes, you may want to look at a fractional ownership place.

 

[Markola]

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.

+1. We enjoy renting beautiful places all over, which we could never afford to own and maintain.

 

[Ronstar]

Having owned a second home for 17 years, the question of whether or not to buy a second home has 4 parts that come to mind:

1. Can you handle the responsibilities of being a second home owner? There's a lot of responsibilities involved even if you have someone doing the maintenance.

2. Will you feel compelled to visit the 2nd home instead of visiting a variety of places. If you want to travel extensively, a second home may not be for you.

3. Do you have things going on at your primary home that would hinder your ability to get to the second home? Family near primary home, still working, etc.

4. Financial. Purchase price and costs to keep it.

 

[Music Lover]

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...

I guess that's a pitfall if you want to travel, but not everyone wants to travel.

 

[Luvtoride]

Having owned a second home for 17 years, the question of whether or not to buy a second home has 4 parts that come to mind:

1. Can you handle the responsibilities of being a second home owner? There's a lot of responsibilities involved even if you have someone doing the maintenance.

2. Will you feel compelled to visit the 2nd home instead of visiting a variety of places. If you want to travel extensively, a second home may not be for you.

3. Do you have things going on at your primary home that would hinder your ability to get to the second home? Family near primary home, still working, etc.

4. Financial. Purchase price and costs to keep it.

Ronstar, good summary of the considerations. We have owned a 2nd home, a condo at the Jersey shore for 4 years. We aren’t retired yet but bought at 60 YO knowing full well this would impact our retirement financially.

For us, it is a resounding YES/ would do it again for buying it and checking all the boxes for the benefits it has provided for us and our family.

It’s only a little over an hour away from our primary home so distance/ getting there isn’t a consideration at all. Our kids and grandkids love coming there and spending as much time as possible during the summer. Working from home during the past 19 months has been a blessing and provided more use than we had even imagined, pre retirement.

I love the comments here comparing a 2nd home ownership to looking at brokerage/ bank statements! Not even close!

To OP, I’d say do it, if you plan/ can USE it extensively! That’s where the true value/ enjoyment will come from.

Good luck!

 

[RobbieB]

I like the Jersey shore, vacationed there every year (from Detroit) when I was a child. Lot's of people had a "little house" or bungalow out back to rent. Mostly for the whole season (summer vacation) and that would be cool me thinks.

But not cool enough to buy a place. Would be nice to have your whole "stash" there though.

 

[RetireeRobert]

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.
.

You got that exactly right! No "owned" second home for me. If I want to go stay somewhere for vacation, I rent. Plus, if I get tired of one location, I don't feel compelled to keep going to the same spot "just" because that's where my second home is and I feel I need to get my money's worth out of it.

 

[Bamaman]

When you have a second home, it takes a commitment to use it as intended. And when you're 1,500 miles from that home, it's difficult to get there to use the place. Life can get in the way, and it's so easy for time there to dwindle.

I inherited a lake house a 70 minute drive from us. At a minimum, I spend one day a week either cutting grass or raking leaves. I had to replace the heat pump this summer, and decided at the same time to rebuild two bathrooms and install new appliances. So we really didn't use the lake house this year. I hope to have the house in order by EOY.

In our case, insurance is $100 a month, utilities are $100 a month and taxes are $95 a month. It's not too bad of a financial drain.

But since we can spend so many weekends there, the memories are very much worth it. We have a boathouse with a 24' boat and a Waverunner. And 10 & 13 year old grandchildren have a ball when there. If we had to come a long way to get there, we'd have to sell. But there again, it's worth 10x what we have in the place.

 

[Surewhitey]

We have friends who live in Pagosa Springs and have a vaca-rental / management business. They tell clients to expect 4-5% returns if they take care of everything, cleaning, maintenance, etc. They manage 150 properties in multiple states and countries.

This may be something to offset expenses from ownership. We just visited them & they've been in this business for 10+years. Covid was a scare, but they were insulated a little from multi-state offerings. Colorado, for example, banned all rentals for a while, while TN did not.

 

[Markola]

We have friends who live in Pagosa Springs and have a vaca-rental / management business. They tell clients to expect 4-5% returns if they take care of everything, cleaning, maintenance, etc. They manage 150 properties in multiple states and countries.



This may be something to offset expenses from ownership. We just visited them & they've been in this business for 10+years. Covid was a scare, but they were insulated a little from multi-state offerings. Colorado, for example, banned all rentals for a while, while TN did not.

4-5% return on a turn-key operation is a good ballpark to know. I’ve wondered about that and it’s not enough to entice me, as I’m sure there are still plenty of headaches, paper work and checks to cut.

 

[RetiredHappy]

I would suggest timeshare instead of second home. Buy resale into better brands like Marriott which includes Westin. We own enough to vacation 2 to 3 months a year in a 2BR to places that we love to go to - Hawaii, Palm Desert, Scottsdale, Hilton Head etc. We pay a good chunk in maintenance fees but it is only a fraction when compared to what Marriott/Westin charge. We usually invite friends to travel with us because we book 2-bedroom villas and we always have so much fun. No 2nd home maintenance issues and costs to worry about.

 

[OldShooter]

... 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 ? ...

I guess that's a pitfall if you want to travel, but not everyone wants to travel.

I think this idea that if you have a second home you can't or won't travel is a false choice. We have always had a second home and since retirement we've probably been in 40+ countries.

The lake home tends to get used in the summer when the hordes take over Northern hemisphere vacation destinations and when many of our nearby family are also "at the lake." We're sort of in a family compound.

Non-lake travel time tends to be Sept-April except December. Northern hemisphere shoulder seasons and Southern hemisphere spring/summer/fall. It works. Lake time is also the weekend after Thanksgiving and the week between Christmas and New Year. Beautiful and calm

Yes, we are fortunate to be able to do both.

I don’t see the arguments about a second home being not financially wise. That's not the tradeoff. ... and how did the value of your car do compared to your index funds last year? ... and all that maintenance, fuel, and insurance expense? Maybe you should just rent a car. Maybe a different one every month?

 

[Music Lover]

I don’t see the arguments about a second home being not financially wise. That's not the tradeoff. ... and how did the value of your car do compared to your index funds last year? ... and all that maintenance, fuel, and insurance expense? Maybe you should just rent a car. Maybe a different one every month?

Exactly. The OP said they can both afford and want a second home so all the comments about it not being a wise financial choice as compared to investing or renting don't tell them anything they don't already know.

 

[ncbill]

I would suggest timeshare instead of second home. Buy resale into better brands like Marriott which includes Westin. We own enough to vacation 2 to 3 months a year in a 2BR to places that we love to go to - Hawaii, Palm Desert, Scottsdale, Hilton Head etc. We pay a good chunk in maintenance fees but it is only a fraction when compared to what Marriott/Westin charge. We usually invite friends to travel with us because we book 2-bedroom villas and we always have so much fun. No 2nd home maintenance issues and costs to worry about.

Even though they live at the beach the above is what my wife's sister & her husband do for vacations...many times to other beach resort areas!

 

[38Chevy454]

I like this discussion because it gets to the issue of quality of life questions. We can't always do everything that is the pure best financial option. There are things that you spend on because you want to have it. So if that is a second vacation type home, or a snowbird home, or a luxury or expensive sports car, or whatever. If that thing gives you enhanced quality of life, then go for it. You can't live your life just to maximize returns on your portfolio; your heirs will be happy for your sacrifice.



As for the OP's question, I say go for it and enjoy your new place. Yes it may have cost in reduced portfolio income, and some ongoing maintenance costs as well. But you also have *your* place that is available whenever you want to go there (assuming not renting out VRBO or similar). OP has the funds and it doesn't affect the normal everyday living budget.

 

[pb4uski]

Yes, second homes are an expensive proposition.

Let's say that you have $500k in a second home. The opportunity cost alone is, say, 5% so there is $25k, but the property appreciates, say 3%, or $15k a year... so that is a net of 2% or $10k a year. Add $8k for property taxes and $2k for maintenance and your economic cost is ~$20k a year. We're there 6 months so that is ~$3k a month.

It is expensive, but we're used to it, we can afford it and we enjoy it and can have friends and family over.

 

[Luvtoride]

Pb, yes very true that it is an expensive proposition! But it’s not purely a financial calculation vs having the money used to purchase and maintain it, invested.

The enjoyment you get from using it with friends and family can’t be measured in $ and that benefit alone is worth every cent we’ve put into it for us!

But on top of that, it can be a good financial investment. Based purely on the appreciated market value in 4 years (per Zillow and supported by recent sales in our community) the increase in our equity vs our down payment for our 2nd home, is a return of over 130% already!
Buying in a desirable location has an economic benefit!
YMMV

 

[street]

I would leave the financing out of my decision, if I was to make the choice to own a second home. You said the money isn't a concern.

I think you should buy, if you really want it. Yes, there are costs involved with owning but ownership to me is a better choice.

You also will most likely get your money back out of it if you decide to sell. I just don't like renting but that is me, and I'm not saying renting is a bad thing.

If it is something you want and money isn't an obstacle my advise is have fun and buy that vacation home.

 

[ivinsfan]

I would leave the financing out of my decision, if I was to make the choice to own a second home. You said the money isn't a concern.

I think you should buy, if you really want it. Yes, there are costs involved with owning but ownership to me is a better choice.

You also will most likely get your money back out of it if you decide to sell. I just don't like renting but that is me, and I'm not saying renting is a bad thing.

If it is something you want and money isn't an obstacle my advise is have fun and buy that vacation home.

How do you figure out if you really want it or you are basking in the glow of a great time away...that's the question. Owning a home can't compare to walking into the door of a 12K rental and knowing you don't have a care in the world.

I'm not sure of the answer but always go back to the realtor we talked to in Southern Utah.


We were at a development in SGU and the guy casually remarked that the vast majority of his buyers would buy on the first visit. I wonder how much buyers remorse developed in that group.

 

[skyking1]

When it is no longer a financial consideration, I look at the upkeep decisions and added complexity of the thing.
My longer term goal is to simplify, so for me it would be a hard hill to climb on that basis.

 

[RetiredHappy]

How do you figure out if you really want it or you are basking in the glow of a great time away...that's the question. Owning a home can't compare to walking into the door of a 12K rental and knowing you don't have a care in the world.

Except that with a 2nd home, you may walk in and find out that the HVAC had died or some other appliance had stopped working while you were gone.

These happened to us at our 2nd/retirement home which we visited 2 to 3 months a year:
- In a hot summer we just arrived in the evening after being away for months and the HVAC had died.
- Thousands of tiny mostly dead bugs covered the floors and most of them near the front french balcony door.

We could not call front desk for for a room change as in a timeshare.

 

[OldShooter]

How do you figure out if you really want it or you are basking in the glow of a great time away...that's the question. Owning a home can't compare to walking into the door of a 12K rental and knowing you don't have a care in the world. ...

For you, maybe. Not for us. In this thread we are hearing from many who are speaking from theory, never having owned a second home. The difference between theory and practice is that, in theory, they are the same.

 

[ivinsfan]

For you, maybe. Not for us. In this thread we are hearing from many who are speaking from theory, never having owned a second home. The difference between theory and practice is that, in theory, they are the same.

I meant as far as the hassle factor....do you disagree on that point...


I don't have to buy a second house to know it's not a simple as renting..

 

[Chuckanut]

2. Will you feel compelled to visit the 2nd home instead of visiting a variety of places. If you want to travel extensively, a second home may not be for you.
.

A friend of mine bought a boat (nice one with galley, sleeping accommodations for 4 people, bath, etc.). He sold it after a few years telling me - We felt that having spent so much money on the boat we had to use it. The boat began telling us where we could go for vacation. One day we were bored and hot while bobbing around at a certain lake and suddenly realized we didn't want to be there. We went there because we had a boat and felt obligated to use it.

They ended up buying a small wind powered catamaran which they could tow to a lake and use for fun, but was cheap enough that if they let it sit covered in the side yard for a year, they didn't care.