Your thoughts on vacation home or second home

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ktd
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Your thoughts on vacation home or second home

Post by ktd »

I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
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HueyLD
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Re: Your thoughts on vacation home or second home

Post by HueyLD »

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Grt2bOutdoors
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Re: Your thoughts on vacation home or second home

Post by Grt2bOutdoors »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
Would you take 200k and plunk it into a REIT index fund today, if you had the cash? Why would you concentrate your risk in an illiquid vehicle such as a vacation home? How many times per year would you visit such vacation home? Let's say it's 2 times a year - $200K invested in super-safe US Treasuries would return about $5K per year, and you still get to keep your $200K. The vacation home will cost you at least $5K in lost interest, maintainance, repairs, taxes, cleaning and liabiity insurance costs. Your husband has his head on straight - for $10K, I can take two very nice vacations with my family and enjoy myself not having to worry about anything.

Don't buy a liability, buy an asset - a vacation home is a luxury item. I watch HGTV on occasion as well, frankly I think those people on the show are the exception and I also think quite a number of them are in hock up to their eyeballs. Spend your money on your primary residence - either securing outright through elimination of mortgage debt or invest the money wisely. Let the vacation home be someone elses headache. Good Luck!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Gnirk
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Re: Your thoughts on vacation home or second home

Post by Gnirk »

We have a second home, very modest but nice, which we bought in 1999. We didn't spend a ton of money, and didn't buy it for an investment, we bought it to get out of the rainy winters for 5 months of the year. However, we were both on board with the purchase.

You don't have to invest $200,000 plus in a vacation home. And remember, in most cases, you also have to furnish it.
Your husband is right. You can rent a nice home in our area for 3 months for less than the annual cost of maintenance (utilities, upkeep, insurance, taxes) on the vacation home.

We just knew we would return every year, and we wanted it to be "ours". We don't rent it out.
investingdad
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Re: Your thoughts on vacation home or second home

Post by investingdad »

My wife and I are not yet in a place where we'd do something like this. When we retire, we'd like to spend a few months during the winter in a warmer climate (Florida coast), maybe take a yearly cruise during that time, golf, etc. A 'resort' style home looks appealing, but I think we'd be better simply renting a higher end home on a golf course (with pool) for a month or two rather than making a huge investment.
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frugaltype
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Re: Your thoughts on vacation home or second home

Post by frugaltype »

If I had the money, I'd have a second home. The convenience alone, if work is being done on the first home, or temporarily having a place to stay if you have awful neighbors, as I do, who are here intermittently, is appealing. Also, I'd stay there when a hurricane is headed this way. So it would be a different home but maybe half an hour away.
an_asker
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Re: Your thoughts on vacation home or second home

Post by an_asker »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
I would not ... but then I don't have 200K in cash so I am not really in your shoes.

That said, if I had 200k in cash (and had paid off my primary residence) and did not know what to do with it, I would buy rental property (assuming that I had a decent sized retirement plan - because if I did not, then I would not have had the 200k in cash in the first place).
dickenjb
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Re: Your thoughts on vacation home or second home

Post by dickenjb »

Your husband is a smart man. I have looked very hard at purchasing a vacation home (specifically Outer Banks NC) and I could never make the numbers work.

Better to take the money (say $200K) and plunk it in VTSAX. You can buy a heck of a vacation each year based on the average 9-10% it earns. And you aren't stuck going to the same place or worried about repairs, hurricanes, etc.
sscritic
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Re: Your thoughts on vacation home or second home

Post by sscritic »

Whether it was a good idea or not, we bought a second home in the same area we lived in. One house was near work and the other near the beach. OK, so it was an hour drive, but we made it there often. After a while, my wife just stayed there all week. The second home came in handy at divorce time. :)

P.S. The timing was right. Large gains were to be had and were.
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JonnyDVM
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Re: Your thoughts on vacation home or second home

Post by JonnyDVM »

Was considering buying a beach house a few years down the road with the idea of renting it out through a management company when we don't want to be there. Anyone have experience with something like this? Is the return not worth the hassle? I rent through VRBO all the time. In June I'm staying with a group of six at a massive house in Sonoma that the owners live in and just leave when someone wants to rent it. My buddy who's going with us pointed out that a week of rental probably easily covers their mortgage payment ($850/night + tax and cleaning). Seems like a pretty sweet deal to me.
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Midwest Dave
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Re: Your thoughts on vacation home or second home

Post by Midwest Dave »

I wouldn't do it as an investment.

If it is is a place you love, that may be different. We bought a 4 year old condo when the market tanked for 40% less than it sold for when it was new. We love the area and use it year round. It was under 100k and furnished. Association is also very well managed and financially sound. I'm sure we could rent a place there for a month in the summer for less than our annual costs, but it wasn't a straight up investment. That being said, it is nice to go to your own place. We also make it available to our children, friends, and (some) relatives ;-) We are happy we did it.
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chead
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Re: Your thoughts on vacation home or second home

Post by chead »

In my experience, it is very hard to make a vacation home both economically beneficial and enjoyable for personal use. They can feel mutually exclusive at times. If you rent it a lot, you need to set up your home primarily for renters (e.g. indestructible furniture, cheap kitchen items, personal items sequestered in an owners closet). As a result, your second home might not feel very much like your "home" at all.

If you aren't renting it a lot, then the costs pile up pretty quickly. It's particularly expensive on a per night basis if you aren't using it more than a week here and there. For example, say you buy a $200k house, your property taxes alone might be 1% or 2K a year. Think about how many nights in a hotel you can get for 2K. Now add in heating, electrical, cable, internet, mowing/plowing, general maintenance, furnishings for the house, one time real estate closing costs and you start to see that you can be paying quite a bit per night in the home.

That said, if you've got a big family and need an excuse to get them all in one place once a year, it can make a lot of sense.
trees
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Re: Your thoughts on vacation home or second home

Post by trees »

I think it really depends on
1) how far it is to the vacation home
2) how often you expect to use it
3) Whether you're willing to rent out
4) How it relates to your overall net worth.

For what it's worth, I bought a second home 2 years ago and love it. However, I intentionally bought one that was less than an 1 1/2 hours away (and most of that on a ferry). Having less than 30 minutes of driving time to get there is critical, as it means that I can easily go out for a day, and use it on average 2 weekends a month. It's on the water, which I LOVE, and can literally feel the stress leaving my body as I get there. For me, that's been more than worth it. My personal home is also small, so combined I spend on both houses what many spend on regular housing in our area. It's also in an area that will be easy to rent out on VRBO (after some updating I'm currently doing) if I decide to, but it's not critical to my cash flow.

I know others who have bought homes further away, and for anything over 2 hours I've noticed that people never make it out there as often as they plan, as it's just too much work to get there. For longer distances, unless you spend on going there for month(s) at a time, I don't think it's worth it - just rent out places, you'll have much more variety, less stress / hassle, and probably save money in the long term.
ubermax
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Re: Your thoughts on vacation home or second home

Post by ubermax »

We're from Connecticut and when our kids were younger we always went to Cape Cod in the Summer ( 2-4 weeks) and the White Mountains in the Winter , couple of weeks - we came very close to buying a second home on the Cape but didn't want to stretch - now we regret that decision , i.e not to stretch, and with hindsight would have bought on the Rhode Island shore instead - it's more than an hour closer.

Living so close to Rhode Island we could have used the house a great deal if you count weekend trips in addition to a chunk in the Summer - initially we would have had to rent the house out a large percentage of the time but that would gradually diminish as our ability to carry it got better - ideally you OP could afford to buy it and carry it from the get go ; then you don't have to rent to strangers.

Personally I think the decision to buy a second/vacation home when you're young should be mostly an emotional decision - now my wife and I are retired and it would be mostly an investment type decision , i.e 3 grandkids in Vegas & 2 in Boston - they'll probably carve out their own family vacation traditions :( .

Now we like to escape New England in the Winter and rent down South for a few months - it works out now but if we had bought on the Cape or R.I. we probably would have done a 1 for 1 in South Carolina :happy

And finally I believe it's ideal if the house is within comfortable driving distance or you have someone ( family member) who lives very, very, very close to it.

My Two Cents , my Opinion !! Good Luck , I say go for it !!!!!!
Last edited by ubermax on Tue Mar 18, 2014 2:39 pm, edited 6 times in total.
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SnapShots
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Re: Your thoughts on vacation home or second home

Post by SnapShots »

frugaltype wrote:If I had the money, I'd have a second home. The convenience alone, if work is being done on the first home, or temporarily having a place to stay if you have awful neighbors, as I do, who are here intermittently, is appealing. Also, I'd stay there when a hurricane is headed this way. So it would be a different home but maybe half an hour away.
:annoyed We have to go home to get away from awful neighbors where we have a second home. You can't get away from them.

If you are still working think about how much time you will actually spend in a second home? While working there were years we could not go; and then there years we couldn't leave fragile parents for very long. During those periods we spent only 2-3 weeks each year. Now that we are retired we spend 3-6 months in our place.

If your live close, you'll likely use it more. We have friends who bought a second home on a lake about 3 hours from their primary home. Wife doesn't work and stays there all summer, DH is able to go back and forth on the weekends.

My DIL parents moved to their second home after retirement, keeping the first residence. Now in their 80s they are moving back to the primary home where most of the children live, and will sell the second home to reduce expenses. They are from the NE and it seems most people from there move to Florida during the winters...if they can afford it.

A second home is not an investment, it's something that you enjoy and makes you happy. Hopefully, you will be able to get some or most of your money back or you can leave it to the kids.

Beware of HOAs. Know what you're getting into.

We are here in the Rocky Mountains now and the grandkids have come to ski. Would we do it again? I'm not sure. We enjoy it but the reasons for the purchase 11-years ago have changed. OTOH ... There are lots of memories for the us and the kids.

Some people have an itch to travel a lot; we are not in that category but do enjoy going other places. I like to travel by RV but because of the second home we haven't used it very much.

It's more comfortable coming to our second home and staying for extended periods, than running from motel to motel. However, I would NEVER move here. Too much snow. Summers/Fall: June through October are the best!!!

The KEY is buy something you can very easily afford in the good and bad times.
If you have to rent out the second home -- I would not buy one.

Instead, rent a second home on a yearly basis in the area you like.
the best decision many times is the hardest to do
WhyNotUs
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Re: Your thoughts on vacation home or second home

Post by WhyNotUs »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
+1, been there done that
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RadAudit
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Re: Your thoughts on vacation home or second home

Post by RadAudit »

Rent your fantasies.

I've seen many a home on the Outer Banks with a For Sale sign in front of them for years before they were sold.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Old Guy
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Re: Your thoughts on vacation home or second home

Post by Old Guy »

We bought a condo on the 18th floor of a building in Chicago on 2009. We have a direct view of the Trump Tower and during the summer we can see some of the fireworks over the Navy Pier. It is a two and half-three hour drive from our place in Wisconsin. I knew that we would lose money on it, but I didn't really care. We will be selling it shortly and I'm sure that we will be out $30,000-40,000 or so. It was something we wanted and could afford.

We go to the dance performances (saw the Hubbard St. Dance company at the Harris Theater last Saturday night, http://articles.chicagotribune.com/2014 ... ce-chicago; to comedy clubs, Second City the weekend before; and to the theater, saw the Heartbeat of Home at the Oriental Theater, the week before that, http://www.chicago-theater.com/theaters ... f-home.php. We go out to eat in the many restaurants and shop. We watched the city dye the Chicago River green, and just seeing all the the people celebrating St. Patrick's Day in Chicago by poisoning themselves with alcohol was interesting. We go to museums, toured the Robie House and walked across the street to wander around the stunning University of Chicago campus. We've been to Oak Park to see the Frank Lloyd Wright home and workshop. In the warm weather we go to the Oak Street Beach. Having the place makes using ORD for travel very convenient as opposed to our 12-gate airport at home.

I'm not sure I really would want to live in Chicago, but for 2-4 weekends a month it's great. We had the money, the desire, and a feeling we deserved it. so we did it.
Last edited by Old Guy on Tue Mar 18, 2014 1:47 pm, edited 1 time in total.
mlipps
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Re: Your thoughts on vacation home or second home

Post by mlipps »

I think for me the main hesitation is your husband's concern about going to the same place for all your vacations. And the idea of weekend house sounds nice, but I need my weekends to get errands done, clean my first home, and do some cooking for the week. When we're gone for one weekend, I always spend the next playing catch up. If I were retired I would consider it, but I would probably just permanently move somewhere rural & cheap & vacation in the city instead!
whomever
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Re: Your thoughts on vacation home or second home

Post by whomever »

We saw a house we really liked a couple of years before retirement in the town we plan to retire to, and so are maintaining two houses right now. Just some things to consider:

1)Costs: property taxes, utilities (the second house, for example, has a $60 a month minimum water/sewer charge), upkeep (you now own two shingled roofs/water heaters/etc that age whether you are in the house or not), insurance, taxes. If you want cable/internet when you visit the second house, there is that. If you have an alarm, there are fees for that. If you're in house two very much, you will want a washer and dryer. Many places will require lawn service, lest the neighbors object.

2)On alarms: this depends on location and so on. Depending on how observant the neighbors are, you may or may not have to worry about people breaking in and stealing the plumbing and wiring. If you're in a freezing climate, you need to worry about the furnace going out and the plumbing quietly freezing. Unless the plumbing has been carefully designed for draining, even draining it will leave residual water in low spots in the pipes. If you move in a household of stuff, then you may have regular burglaries to worry about.

3)It's really not fun to have the alarm company call and say the power went off and the freeze alarm is alerting, and getting to drive for hours over winter roads to investigate.

4)You get twice as much of the usual homeowner honey-dos.

Don't get me wrong - we expected all this and would do it over - it's only for a couple of years, hopefully. But don't underestimate the costs and hassles. And a lot depends on the neighbors - if the immediate neighbors are old friends, that's different than if they are strangers.
Dandy
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Re: Your thoughts on vacation home or second home

Post by Dandy »

I never seriously considerd a vacation home but a lot of people are very happy owners of vacation homes.
1. too much of a cheapsake - would have crimped my retirement savings
2. have enough trouble keeping one house up to snuff -painting, landscaping, appliances etc.
3. didn't want to vacation in the same spot every year
4. didn't want to work on vacation - clean house, shop, make beds, cook - rather spend time enjoying
things with family.
5. wasn't interested in being a landlord by renting it out
6. live in the northeast - can basically only use a nearby vacation home for the summer - unless you ski
7. didn't want to own property out of state or far away.
8. enjoyed Bermuda, Aruba, Florida, Virgin Islands, Jersey shore, some cruises - probably wouldn't have
done much of these if I had a vacation home.
beachplum
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Re: Your thoughts on vacation home or second home

Post by beachplum »

My husband and his sister inherited a seasonal beach cottage (no mortgage) literally over a marsh/water that overlooks the CT side of Long island Sound. We love it for sentimental reasons and spend as much time as possible there from may to October. However, I would never ever buy property that close to the water. Hurricanes/tropical storms are always a threat along coastal areas. Luckily we were only flooded once in the 20 years we've owned it, and we were lucky that the house does not have finished floors/walls or heating system. But the clean up was not fun, replacing mats, beds, fridge, and couch and chair pillows all adds up. I'm concerned about rising water levels into the future. The expenses are property taxes, home insurance/flood/utilities only in summer (no luxuries like washer/dryer, cable tv, don't need an alarm). in the past we've replaced roof, deck, drop ceiling, repaired plumbing, painted outside, pay for someone to mow. Oh and it means having to clean 2 homes and removing all the debris that washes up and underneath. We are lucky that the expenses are split between 2 otherwise we couldn't afford this little luxury or might be forced to rent. If didn't have this home, I would be perfectly happy renting somewhere else for a few weeks during the summer and not have the responsibility of another home.
Sconie
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Re: Your thoughts on vacation home or second home

Post by Sconie »

My wife and I have a 'vacation' or 'second' home up in northern Michigan, directly on the shores of Lake Superior. Although it has been and is now very much a "labor of love," it did turn out to be one of our very best investments. Additionally, it did----inadvertently---serve to prevent us from purchasing (investing?) in a larger main home in the small city in northern Wisconsin where we lived at the time----a location where the property values declined precipitously over time.
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SeattleCPA
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Re: Your thoughts on vacation home or second home

Post by SeattleCPA »

Sometimes this idea is useful: Total up the annual costs for the property... (go ahead and adjust for any rental income)... then divide that total cost by the nights you'll use the property to get a nightly "rental" rate...

E.g., if you'll fork out $30,000 a year (not that far fetched) and you'll stay 30 nights ( a couple of two week vacations and a couple of weekends), you're paying $1,000 a night.

Once you have this nightly rate, it's sometimes easy to assess the "goodness" of the idea. E.g., you can compare that implied nightly rate to what you think is reasonable, what your traditional vacation budget has supported etc.

BTW, as someone who has had a second home, I would also share this observation: The experience is a lot more like spending the weekend hanging around the house doing chores, etc., than a kicked-back resort vacation in some hotel or condo. I.e., with your own place, your vacations become (at least partly) chores and housekeeping...
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Peter Foley
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Re: Your thoughts on vacation home or second home

Post by Peter Foley »

I will add geography and stage of life to the list of considerations. We live in St. Paul and there are $200,000 lake homes within a couple hours. When our children were young we wanted to have, and offer them, the lake home experience. We purchased a 3 season cabin and it worked out well for about the first 20 years we owned it. Yes, there was work, but we went most every summer weekend when our kids were in gradeschool and high school. As such, the chores were well spread out and we had a lot of quality time with our kids. With kids now grown and married, the cabin does not get much use. For about the last 6-8 years we have used it infrequently 6-8 weekends per year. Because we are not there as often, every time we are there, cabin maintenance is the central activity. For the cost of the real estate taxes and insurance we pay, we could have a half dozen very nice long weekends at a resort.

So - we've lived through a few stages of life with the cabin and have another potential one (grandchildren) in front of us. In my own mind I think we had a good experience with the cabin but should have sold it 6-8 years ago when our kids' interest wained.
Owning a vacation home is part "right place" and part "right time".
btenny
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Re: Your thoughts on vacation home or second home

Post by btenny »

I have always had a second home/condo. I think they are great but there are issues. Two homes are expensive. They need repairs, sometimes a lot. They need upkeep and you can never keep up so something is always in need of repair or updating. This can be bothersome if you are a Type A person.

Today in retirement I own one home in Arizona and rent a second in the mountains. We have a vagabond lifestyle and go back and forth between the houses as our mood and the climate suits us. We ski and swim and boat and golf etc.. We also vacation to other places as well for fun and entertainment.

Back when I owned a condo for 27 years while I was working and raising a family. It was in the cool SW Colorado mountains so it let us escape the hot Arizona summers and go to the snow each winter. Since it was in a big condo complex at a ski resort it rented OK. But it never made much cash flow above rental income less expenses. It was paid for completely so there was no mortgage because we bought it very cheaply way back when. I don't believe bargains like that are available today so I probably would not buy a second home today. If you were buying back in 2009ish you could have done OK, but not now IMO. My kids and wife and I loved that condo and had a ball doing stuff while we were there. We made tons of memories. But since it was 9 hours away and 450 miles it was too far for weekend trips or lots of summer trips. Since the condo was not a big cash drain due to renting it regularly we were able to take lots of other trips besides just going there. We also did trips to the beach, Disneyland, National Park, etc. as vacation allowed. So owning a second home did not limit that stuff.

If I were buying today and still working and raising kids I would want the home or condo to be much closer to my main home. Say 150ish miles so we could go lots of weekends and use the place more often. Going back and forth easily is a big issue for a good vacation place. But that may not suit your needs or desired location depending on where you live. So select carefully. So I suggest you rent a place full time (yea it is expensive but so is spending $200K to buy) for a year or two first to make sure you like where you are planning to buy. That insures you get it right before commiting big $$$.

Good Luck.
TRC
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Re: Your thoughts on vacation home or second home

Post by TRC »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
NOT WORTH IT!

We paid off our primary residence in 2009 and I too was bit with the bug of "let's buy a beach house". So we did. We loved it....initially. Then the reality set in of:

- furnising it
- driving to it every weekened (2 hour drive each way)
- Family & friends wanting to use it
- DUPLICATE COSTS for everythign you have now (insurance, utilities, cleaning supplies, etc).
- Maintenance, wear & tear
- Our kids sports and friend's social events getting in the way

Long story short, after our first summer, we started renting it out...thankfully. Now we get $3,300 a week for it in the summer. We rent it about 7 weeks in the summer and save a week for our family's use, and then use it a lot in the off season. We break even / cash flow (barely), but my wife loves it. On paper I wish we owned index funds instead, but when we're there, we love it.
Professor Emeritus
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Re: Your thoughts on vacation home or second home

Post by Professor Emeritus »

:D A Muslim friend of mine said that owning a second home was like having two wives. :D

NOT A GOOD IDEA
dowse
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Re: Your thoughts on vacation home or second home

Post by dowse »

We've owned a vacation home for over ten years. For about the first 5-6 years, we rented it out, then reached a point financially where we no longer had to, so we gladly stopped that. We own it mortgage-free, so expenses are mainly taxes and utilities. It is about a 3-hour drive from our primary home in an area we have always loved to vacation. We keep it in pristine condition, and it is a refuge from clutter and family stress at home. Overall, we love having it and would do it again in a heartbeat. However - things do go wrong. Within the first two years, we had a water line connection inside the house blown out by the water dept. repressurizing after repairs. Then we had to replace the water line from the street and found immediately that we would be compelled to bring in a special contractor who could chisel down through 6 ft. of ledge in order to bury the water line at the required depth. Also, whichever place we are, we tend to worry about what's going on at the other place. We do have a caretaker, which allow us to sleep at night. Also have grown kids near primary home who can check on it for us. Lots to consider. It's not really a financial decision, but a lifestyle one, and it is quite a luxury to be able to have it.
DFWinvestor
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Re: Your thoughts on vacation home or second home

Post by DFWinvestor »

I always dreamed of owning a lake house here in Texas. Now with the drought, so many lakes are down and a lot of them have a boat dock with dry land underneath it. This has been the case for a few years and there's no end in sight as best I can tell. You couldn't give one of those properties away now. I'm glad I didn't purchase one when I really had an itch to do it.

I think if my net worth was 3-4 times higher I would consider something coastal, even with the risk of hurricanes. For now it's a pipe dream.
Tybogleheads
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Re: Your thoughts on vacation home or second home

Post by Tybogleheads »

Purchasing a vacation comes with a lot of financial responsibilities: monthly mortgage, insurance, PGE, water, property tax, not including repairs and maintenance. It's more fun to just rent, enjoy the place and not worry about hassles of being a homeowner. Sounds like a money drain to me. The idea of owning one sounds glamorous, but frankly how often can you really vacation with one's job, family schedule, etc. Etc. I would advise against it. How about creating a yearly vacation budget? That will be cheaper and less stress definitely.
DougS
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Re: Your thoughts on vacation home or second home

Post by DougS »

We have a second home on one of the great lakes and love it. Its within an hour of work so I can commute in the summer. Who knows if it will turn out to be a good investment. We have two young kids, and it really helps us bond as a family. Much better than we would do with all of the distractions at home. Its our magic family place.
kaudrey
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Re: Your thoughts on vacation home or second home

Post by kaudrey »

We bought a small log home in the mountains 2 hours away from our primary home 4 years ago. I don't regret it for a minute. We crunched our numbers, knew we could afford it, and go there on as many weekends as our schedules allow. We didn't spend a fortune - we had a budget and stuck to it. It is not cheap, but it is within our financial means, and we get to enjoy it now while we are still working - it is a great stress reliever to us to be out there! Everything is balance.
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frugaltype
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Re: Your thoughts on vacation home or second home

Post by frugaltype »

DFWinvestor wrote: I think if my net worth was 3-4 times higher I would consider something coastal, even with the risk of hurricanes. For now it's a pipe dream.
Prices are dropping in my area of the coast, as more people realize hurricanes are going to get worse and more frequent and in the not too distant future these houses will be uninhabitable due to the rising sea level.

It used to be the town here assessed waterfront houses at twice the value of a similar waterview property just across the street, but they dropped that difference pretty drastically at the last reevaluation.
North
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Re: Your thoughts on vacation home or second home

Post by North »

We built a beach house last year about an hour and 20 minutes away from home, and I can honestly say it's the best decision we have ever made. I work from home a day or two per week, which makes for nice long weekends at the beach all year round. My company has a VERY generous paid time off policy (7.5 weeks/year) which allows us to travel quite a bit AND enjoy the beach house for extended vacations on a regular basis. Like another poster said, we keep the place in pristine condition, completely decluttered, and it truly feels like we go away to a nice resort every time we go. I have always dreamed of a having a place like this and it feels wonderful to finally make it a reality. The mortgage is small and we will have this and the primary home paid off well before retirement. We will probably sell the primary and live at the beach full time when we retire. I say go for it if you can conservatively make the numbers work.
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Random Musings
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Re: Your thoughts on vacation home or second home

Post by Random Musings »

No desire on our part to have a "vacation home" in another set location since we prefer to travel to many different places. If we ever want to change my primary residence, we'll move.

OTOH, if I was wealthy beyond belief, then a few trophy homes would be in order......

RM
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IlliniDave
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Re: Your thoughts on vacation home or second home

Post by IlliniDave »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
If I have enough of what is essentially "play" money during retirement I'll strongly consider owning a modest summer place up in the Northwoods (N. Wisconsin, NE Minnesota, SW Ontario), where I'll more-or-less live during the summers (may or may not qualify as a vacation home, depending on how strict/loose that definition is). But, it would have to be just the right location and property (a bit nicer than a cabin/cottage, but not much). I wouldn't do it for financial reasons, and to me it would be sort of a luxury-type expense rather than any sort of investment or financial diversifier. In other words, the purchase money would be considered as spent and gone and recovering capital from it would not be part of the basic plan for funding retirement.
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HomerJ
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Re: Your thoughts on vacation home or second home

Post by HomerJ »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
My wife and I bought a lake condo (about 2.5 hours from our primary house) last summer.

It cost us $200k, but we expect to get that back someday, so that doesn't bother me. We are a bit real-estate heavy now, with probably 40% of our net worth tied up in two houses.

With a condo, maintenance, repairs, etc. are easier and cheaper than a house... Our total costs are about $6000 a year for HOA fees, property taxes, cable, Internet, and utilities.

We can rent the place for $225 a night and easily get $3k a year... More if we want to deal with the tax implications of renting more than 14 days a year... We've already got our place rented for 13 days for this upcoming summer, and it's only March.

So we figure the place is costing us $3k a year... Or the cost of one vacation... and we plan to go at least 10 times throughout the year... We'll do at least one full week out there in the summer, and 10 or so 3-day weekends. My wife and my son will probably do another full week out there while I stay home and work.

Now, I'm not including gas to drive out there, or gas for the boat (oh, did I mention the boat? There's 30k gone that I never expect to get back), and we also lose a potential $5k or so in interest that $200,000 could be generating in a bond fund (of course, a bond fund could also lose money...We didn't lose any interest last year, since Total Bond Market returned about 0%)

So yeah, this place is costing us some money. But we plan to go out there a lot, and not spend money on other vacations... We normally spend about $12k a year on vacations; from now on, it will be one vacation a year ($3k-$4k), and the rest of the money will be used for the condo.

If your husband has no interest in going to the same place year after year, and you don't want to deal with renters, then I don't think a vacation home is a good idea for you.

This is only our first full year so we're really excited about it. Ask me again in 5 years if I'm still excited about my vacation home.. :)
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HomerJ
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Re: Your thoughts on vacation home or second home

Post by HomerJ »

mlipps wrote:I think for me the main hesitation is your husband's concern about going to the same place for all your vacations. And the idea of weekend house sounds nice, but I need my weekends to get errands done, clean my first home, and do some cooking for the week. When we're gone for one weekend, I always spend the next playing catch up. If I were retired I would consider it, but I would probably just permanently move somewhere rural & cheap & vacation in the city instead!
This is a very good point... A main reason we bought our lake condo last summer is because my wife retired. We too used to do all our chores on the weekends (shopping, laundry, yard work, etc), but now that she's not working, she can do all that during the week, and even have the car packed and ready for when I roll into the driveway at 4:00 pm on Friday... With a 2.5 hour drive, we're at the lake by 6:30 (and in the summer that still leaves us with 2-3 hours of daylight).
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HomerJ
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Re: Your thoughts on vacation home or second home

Post by HomerJ »

whomever wrote:We saw a house we really liked a couple of years before retirement in the town we plan to retire to, and so are maintaining two houses right now. Just some things to consider:

1)Costs: property taxes, utilities (the second house, for example, has a $60 a month minimum water/sewer charge), upkeep (you now own two shingled roofs/water heaters/etc that age whether you are in the house or not), insurance, taxes. If you want cable/internet when you visit the second house, there is that. If you have an alarm, there are fees for that. If you're in house two very much, you will want a washer and dryer. Many places will require lawn service, lest the neighbors object.

2)On alarms: this depends on location and so on. Depending on how observant the neighbors are, you may or may not have to worry about people breaking in and stealing the plumbing and wiring. If you're in a freezing climate, you need to worry about the furnace going out and the plumbing quietly freezing. Unless the plumbing has been carefully designed for draining, even draining it will leave residual water in low spots in the pipes. If you move in a household of stuff, then you may have regular burglaries to worry about.

3)It's really not fun to have the alarm company call and say the power went off and the freeze alarm is alerting, and getting to drive for hours over winter roads to investigate.

4)You get twice as much of the usual homeowner honey-dos.

Don't get me wrong - we expected all this and would do it over - it's only for a couple of years, hopefully. But don't underestimate the costs and hassles. And a lot depends on the neighbors - if the immediate neighbors are old friends, that's different than if they are strangers.
One word: condo.

I would never buy a second HOUSE for all the reasons listed above... But a condo is much easier.
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tennisplyr
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Re: Your thoughts on vacation home or second home

Post by tennisplyr »

Am 64 and do not and would not own a second vacation home. Besides costs, headaches, etc I like the flexibility of doing different things when I want to. Feeling that I would have to use it because I own it isn't what I want.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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TimeRunner
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Re: Your thoughts on vacation home or second home

Post by TimeRunner »

...and if your second home is a nice yacht in a rented marina slip....$$$$$$ and alot of week-end sanding and varnishing. :oops:

Sometimes you can just look at stuff like that and know it's probably the wrong decision unless you can have it be a turn-key experience. :wink:
One cannot enlighten the unconscious. | "All I need are some tasty waves, a cool buzz, and I'm fine." -Jeff Spicoli
gogleheads.orb
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Re: Your thoughts on vacation home or second home

Post by gogleheads.orb »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
I'm a huge househunters international fan and now co own a vacation home. Don't do it! It is just one more thing to worry about. It will cost more than you think. It will take up more of your time than you think. Unless you are going to retire there pretty soon and spend 6months there, don't do it. Live vicariously through those that do it on TV.
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Bustoff
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Re: Your thoughts on vacation home or second home

Post by Bustoff »

btenny wrote:So I suggest you rent a place full time (yea it is expensive but so is spending $200K to buy) for a year or two first to make sure you like where you are planning to buy.
+1
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Kosmo
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Re: Your thoughts on vacation home or second home

Post by Kosmo »

If I had the money I'd buy a vacation house near a ski resort in VT or upstate NY. It's close enough that I could drive up for a weekend, but far enough that I'm "away from it all". And there's enough events and activities year-round to keep the family occupied, it's not just a winter destination.

In general I think a vacation house is a great idea, provided:
1) You have the money and the time. It'll be more of a problem than anything else if you can't enjoy using the house and keep it properly maintained.
2) It's in a location where there's things to do in every season. A beach house is nice, but unusable for 3/4 the year.
3) It's cost efficient in that it doesn't preclude you from taking vacations to other destinations. If you're locked in to always going to the same place because you paid for it then you're definitely not making the most of your vacations. Assuming you like variety...

I would not count on being able to rent the house out. That might be an added bonus, but your/your family's enjoyment is priority 1.
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frugaltype
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Re: Your thoughts on vacation home or second home

Post by frugaltype »

TimeRunner wrote:...and if your second home is a nice yacht in a rented marina slip....$$$$$$ and alot of week-end sanding and varnishing. :oops:
If you can afford a nice yacht, you can probably afford to hire that out. I still remember the new owner of a yacht (looking at the remains, it must have cost a million easy, no kidding) who apparently thought he could do that all himself. He took his yacht out of the marina and moored it in the bay to "keep it safe during Sandy."
heyyou
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Re: Your thoughts on vacation home or second home

Post by heyyou »

The experience is a lot more like spending the weekend hanging around the house doing chores, etc., than a kicked-back resort vacation in some hotel or condo. I.e., with your own place, your vacations become (at least partly) chores and housekeeping...
We would go out to eat for the local cuisine, then go back to doing chores. Any structure near waterfront needs extra maintenance. To reduce corrosion, have you put vaseline on your bare aluminum window frames lately?

Owned one that was on the second street from the beach, and it was almost too far from home to drive there on a weekend. The people who did best there were those who liked doing handyman chores within sight of the ocean, but didn't spend much time strolling on the beach. They liked the sea air, but didn't do the touristy activities.

Consider always renting the same place, for a month or three months, for a few consecutive years until the shine wears off. I'm always wanting something, but over time, what I want changes, whether I've purchased it or not. Are you currently living where the weather is bad, so cabin fever may be an influence?

As with the nautical reference, our two happiest days were the day we bought it and the day we sold it.
OatmealAddict
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Re: Your thoughts on vacation home or second home

Post by OatmealAddict »

ktd wrote:I like to watch HGTV house hunters and sometimes I get jealous of the people that spent ton of money on a vacation home. If you have the cash, says 200K, would you spend it on a vacation home? My husband doesn’t like the idea of a vacation home. Because he doesn’t want to go to there every year, and he doesn’t like the idea of having an asset that he can’t get to right away. He also believes for the property tax, maintenance, repairs, or dealing with short term vacationers clean up (if rent out), we can just take a real nice vacation anywhere for that amount of money.
Right there with you. In fact, I'm such a fanatic, I auditioned and was in discussions with the House Hunters production company to appear in one of their episodes back in 2005. It didn't end up coming to fruition, but my obsession with the show hasn't waned.

My wife and I both grew up on the beach as kids and now that we're in landlocked Atlanta, our shared long term goal most definitely includes owning a luxurious (to us) beach house on the Gulf Coast. We would by no means purchase it as a second home; it would be our one and only residence. We're 30 years away from realizing this goal, but it's such a strong desire that we center our lives and finances around it, for better or worse. I'll let you know in 30 years if that ended up being a wise decision. :D

All that being said, why not consider purchasing a "vacation home" as a primary residence? Is it just not financially feasible? We stumbled upon a very small town that we absolutely fell in love with and wouldn't hesitate to live there all year long and although all sorts of things could change between now and then, that's the goal we're aiming for.
NorCalDad
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Re: Your thoughts on vacation home or second home

Post by NorCalDad »

As much as we'd like a vacation home along the coast, this has always seemed to me a luxury item comparable to a boat or fancy car that one might keep idle in the garage except for use on the weekends. Which is to say, if you can afford it, it might be nice to have. Most of us can't afford it.

The one scenario in which I could see us buying a vacation home is when we near retirement and eventually want to make that home our permanent home.

For now, we have a few spots we really enjoy, and we make good use of VRBO for weekly rentals. Staying for a week almost feels like we own a vacation home without actually having the burdens of ownership, plus we don't have to stay in the same locale each year.
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Jay69
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Re: Your thoughts on vacation home or second home

Post by Jay69 »

We live in area with a ton of lake shore and woods. At one point in time 40 years ago a lake home cabin was the price of a new car. You can guess what the price of a lake home now is :annoyed

I think the tide is turning back a little now, lot of cabins for sale, lots of cabins that have been for sale for more than a year. I feel the vacation home is still trying to find its pricing floor/feet. The vacation home had a crazy run during the housing bubble if not worse. Not to mention the huge houses that were built where the 800 sq ft cabin one time stood and now those sit empty.

The older generation that owns the cabin wants to give it to the kids but the kids don't want, see many of them for sale with the boat, dock, pots and pans. Its a little sad, the kids don't want it, mom and dad can't take care of it or use it. Mom and dad are delusional and think the kids will want the cabin some day and can't bare to sell it so it sits for years on end with no up keep and rots.

Moral of the story, have an exit plan :wink:
"Out of clutter, find simplicity” Albert Einstein
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