Beach condo vs mountain cabin investment property

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cwademba
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Beach condo vs mountain cabin investment property

Post by cwademba » Thu May 31, 2018 1:32 pm

Hello all,
I would like to ask opinions on this topic. I'm sure it has been discussed numerous times, but would love to hear opinions. We are looking for an investment opportunity as we are no longer available to invest with Roth IRA's due to work promotion and have some cash on hand. We would love to hear people's opinions and experiences on whether to invest with a Panama City Beach condo or a Smokey Mountain cabin. We live appx. 4 hours from Smokey Mountains and appx. 7 hours from PCB. We are willing to put 50% down payment (125-150k) on the property and have run the numbers with rent and appreciation with the ROI, but would like clarification on some experiences, whether good or bad. Or is this a bad idea and is it better to keep investing in mutual funds or paying our mortgage faster. We would appreciate any information. I have posted our numbers below. Thank you for the opinions and experiences.

Ages 38 & 36
Salary 250k
Cash - 200k
Retirement accounts (IRA's, & 401k's) - 900k
Non-Tax Advantage Mutual Funds - 90k
Net Worth - 1.2 million
Primary residence mortgage - 600k

CnC
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Re: Beach condo vs mountain cabin investment property

Post by CnC » Thu May 31, 2018 1:48 pm

You can still do Roth IRA's. Contribute to regular IRA after tax and convert it.

Property investments like cabins and condos are very very risky investments if you are many hours away.

If you are familiar with rentals it could be a different story. But how steady will the rentals be, will it be a vacation home, are you going to do all the property management?


Rentals work nicely of you know what you are doing. Plunking down money without significant knowledge and planning is a big risk.

runner540
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Re: Beach condo vs mountain cabin investment property

Post by runner540 » Thu May 31, 2018 5:11 pm

Can you please clarify if you have any euity in your primary home?
Your retirement accounts, cash and mutual funds seem to be the same as your NW $1.2MM

livesoft
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Re: Beach condo vs mountain cabin investment property

Post by livesoft » Thu May 31, 2018 5:41 pm

You live too far away from both places to make them useable. They would both be bad for you.
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3funder
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Re: Beach condo vs mountain cabin investment property

Post by 3funder » Thu May 31, 2018 5:47 pm

It is most likely a bad idea. Stick with what you've been doing.

KyleAAA
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Re: Beach condo vs mountain cabin investment property

Post by KyleAAA » Thu May 31, 2018 5:52 pm

Is there a reason you wouldn't want to buy a rental property closer to where you live? Is it because you plan to use it as a vacation home as well? I'd be more likely to beef up my taxable account than either.

ThankYouJack
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Re: Beach condo vs mountain cabin investment property

Post by ThankYouJack » Thu May 31, 2018 5:53 pm

I have a friend who owns one of each and the beach place rents better - it's a bit nicer. He enjoys it but puts a ton of time into it. It also seems a bit stressful when there are bad renters who break rules or leave the place a mess.

I have other friends who are long term renters of a beach house. They say they just about break even each year as costly repairs add up quick so any profit comes from appreciation.

Personally, I'd rather rent and not put the work into owning and renting one. I figure if they were that profitable real estate pros / gurus would own more of them and turn over would be a lot lower.

NextMil
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Re: Beach condo vs mountain cabin investment property

Post by NextMil » Thu May 31, 2018 6:06 pm

Assume you are DINKS, but have to ask. Kids? Planing for them?

If you are wanting to buy resort/vacation property, always buy on the dip, unless you are filthy rich. I would vote beach, but its almost double the travel time, unless there are flights.

mx711yam
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Re: Beach condo vs mountain cabin investment property

Post by mx711yam » Thu May 31, 2018 6:21 pm

Family member has 1 of each. Makes almost twice as much with cabin, but it's huge.

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BruceM
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Re: Beach condo vs mountain cabin investment property

Post by BruceM » Thu May 31, 2018 8:43 pm

We hold both. Developable land offering seclusion and privacy near a large body of water or tall mountains will almost certainly grow in value over the decades ahead. Do you want this for long term investment or future development purposes?

BruceM

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gasdoc
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Re: Beach condo vs mountain cabin investment property

Post by gasdoc » Fri Jun 01, 2018 8:03 am

You live too far from either to manage them effectively. The management company that you will most likely need in your absence will take most of your profits.

gasdoc

cwademba
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Re: Beach condo vs mountain cabin investment property

Post by cwademba » Fri Jun 01, 2018 8:06 am

Good morning everyone. Thank you for the responses and I will answer a few of the questions asked. We have very little equity in house as it has just been finished and we put 20% down, so minimal equity. We have two kids that we currently have 529's for and could probably beef that up a little. We are in-state graduates and plan for our kids to be the same hopefully. If we bought beach property, it would be long-term investment, as we are looking to add more to our plan. We are planning on the "back door" option of IRA's for sure, but are in the infancy stage of looking at vacation rental property. We have looked at other rental opportunities, but would prefer vacation to be used by our family and this intrigues us more as of now. Thanks for the advice

SQRT
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Re: Beach condo vs mountain cabin investment property

Post by SQRT » Fri Jun 01, 2018 8:45 am

Will these be mostly rented out or mostly used by you? I would say that, generally, vacation type properties used for rental investments are a tough way to make money. We have several such properties, mountains, desert, urban, lakeside but only use them personally and can easily afford them. For someone in your position, I would think you would be better off building your liquid net worth. There will be plenty of time for this kind of thing later on.

It may end up being a great lifestyle choice but much less likely to be a good investment choice.
Last edited by SQRT on Fri Jun 01, 2018 9:30 am, edited 1 time in total.

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Pajamas
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Re: Beach condo vs mountain cabin investment property

Post by Pajamas » Fri Jun 01, 2018 8:50 am

If you are looking for a second home, do you prefer the beach or mountains? Unless you are going to spend a lot of time there, it probably would be less expensive to rent a place when you want to go.

If you are looking for an investment, are you sure that a rental property in a vacation destination is your best choice for an investment? Even if you want to be a landlord, there are good reasons most prefer properties that are near where they live. If you are convinced that a vacation rental property is the right kind of investment for you, what property do the numbers indicate would be the best investment?

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lthenderson
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Re: Beach condo vs mountain cabin investment property

Post by lthenderson » Fri Jun 01, 2018 8:56 am

Personally I would not buy beach front property in Panama City Beach as an investment. In the years I have been going there, I have already seen the erosion problems they have due to rising sea levels which are only forecast to get higher.

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alpenglow
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Re: Beach condo vs mountain cabin investment property

Post by alpenglow » Fri Jun 01, 2018 8:58 am

I live 6 hours from my mountain cabin. Bad idea. Don't do it.

NextMil
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Re: Beach condo vs mountain cabin investment property

Post by NextMil » Fri Jun 01, 2018 11:16 am

Just curious for those that do own, I assume after owning, your recommendation would be to rent places for your trips rather than owning?

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HomerJ
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Re: Beach condo vs mountain cabin investment property

Post by HomerJ » Fri Jun 01, 2018 11:26 am

The beach one is too far to use as a weekend getaway. It's also too far away to manage easily as a rental, so you'll have to get a management company, which will eat into your profits.

We have a lake condo that we rent out 5 times a year (covers all our HOA fees), about 3 hours away, and renting is a pain, and a lot of work. I wish we didn't rent, but the money is nice. But there is a huge difference between leaving when we know we're coming back ourselves next week, and leaving when we know a renter is coming next week.

A LOT more cleaning to get it "renter-ready". If you pay someone else to do all that, it will cut into your profits, and it's surprisingly hard to find good people.

You do have an advantage that a beach condo in Florida can be rented year-round.

I just think you should be paying off your current house instead. We didn't buy our vacation home until we had the first one paid off.
Last edited by HomerJ on Fri Jun 01, 2018 11:35 am, edited 1 time in total.
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HomerJ
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Re: Beach condo vs mountain cabin investment property

Post by HomerJ » Fri Jun 01, 2018 11:32 am

NextMil wrote:
Fri Jun 01, 2018 11:16 am
Just curious for those that do own, I assume after owning, your recommendation would be to rent places for your trips rather than owning?
I love owning our lake condo. We're close enough (3 hours) to easily go up for a weekend (but sometimes I wish it was 2 hours instead of 3) :)

I love not having to pack hardly at all, since we have everything already there. We have a dock with a boat and a jetski on a lift sitting there waiting for us, so we don't have to haul a boat behind us or rent a boat when we get there.

I also plan to use that place as a retirement home when we retire (summers there, winters someplace warm).

But before we bought it, we rented every summer at a different lake, trying many different lakes. That works too, but I like owning better. I haven't got tired of our place yet.
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Jack FFR1846
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Re: Beach condo vs mountain cabin investment property

Post by Jack FFR1846 » Fri Jun 01, 2018 11:35 am

HomerJ wrote:
Fri Jun 01, 2018 11:26 am

I just think you should be paying off your current house instead. We didn't buy our vacation home until we had the first one paid off.
This was exactly what I was thinking. Paying off your primary house is a very easy, risk free way to invest. We did it and when the mortgage was paid, we had all this extra money pouring in. No, really. I guess it's how we can pay for our kids' education in private schools without loans.
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Re: Beach condo vs mountain cabin investment property

Post by Ben Mathew » Fri Jun 01, 2018 12:33 pm

cwademba wrote:
Fri Jun 01, 2018 8:06 am
We have very little equity in house as it has just been finished and we put 20% down, so minimal equity.
I would not invest in a distant vacation property. Rental property close by is hard enough to manage as it is. When it's several hours away, it could become a real drag. If you love it and are passionate about it, you can buy it as consumption. But as an investment, there are likely better options.

Backdoor Roth and 529s would come first. After that, strongly consider paying down the mortgage early. This is particularly attractive if you are not getting much of a tax deduction on mortgage interest (perhaps due to a high standard deduction). Right off the bat, you get a tax-free risk-free return equal to the mortgage interest rate. Now that might not seem like a very high return if you have a low interest rate on your mortgage. But there's more to the story. Your early mortgage payoff should be considered as an extra allocation to bonds. So inside your tax shielded accounts, you would shift more to stocks to maintain your desired risk-return profile. If you do this, then some of your savings are actually being invested indirectly in stocks in tax-shielded accounts. So you'd be getting a higher return than first meets the eye.
Last edited by Ben Mathew on Fri Jun 01, 2018 12:59 pm, edited 2 times in total.

SQRT
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Re: Beach condo vs mountain cabin investment property

Post by SQRT » Fri Jun 01, 2018 12:43 pm

NextMil wrote:
Fri Jun 01, 2018 11:16 am
Just curious for those that do own, I assume after owning, your recommendation would be to rent places for your trips rather than owning?
I wouldn’t rent other than to be sure I liked the location. I like to have my stuff in the home, my art, my cars, etc. Control is important to me.

Beach
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Re: Beach condo vs mountain cabin investment property

Post by Beach » Fri Jun 01, 2018 1:16 pm

My opinion: Pay off your mortgage first, fully fund your Roth, get those 529's maxed.....then use extra money for risky investments like rentals.

gcc32
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Re: Beach condo vs mountain cabin investment property

Post by gcc32 » Fri Jun 01, 2018 2:55 pm

You have most of your net worth tied up in retirement accounts that you can't access for a few decades without large penalties. In buying another property, you'd tie up a good percentage of your free cash in an investment that is unlikely to be very good. You are not an expert at real estate (i assume) and it's unlikely that absent being one plus buying so far away from your primary residence that you will stumble into anything other than a mediocre financial return. I would also consider how your finances would look if one of you lost your job, particularly if there was a recession and it wasn't easy to find a similar job quickly, and it wasn't easy to sell the place quickly for fair market value.

On the other side of the equation, perhaps the driving factor here is getting personal enjoyment out of the property. Maybe you are not really looking at this as an investment. If you could be sure that you will break even on the investment then it's possible locking up most of your free cash is okay because you really gain that much utility out of it and you can replenish your cash within a year or two (I think breaking even is not a great assumption, especially after your time is considered, but it's possible you could do it).

As others have said, I would strongly recommend a place closer to where you currently live. Or I would wait at least 2-3 years until you have significantly more money outside of your retirement accounts and some more equity in your primary residence.

renue74
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Re: Beach condo vs mountain cabin investment property

Post by renue74 » Fri Jun 01, 2018 3:03 pm

My inlaws have a great lakefront cabin about 75 minutes away from us. My aunt owns a condo in Myrtle Beach about 4 hours away.

They each beg their family to use it because they don't....yet we don't either because we have stuff going on.

Owning vacation property takes up a lot of resources and I feel like most friends and family who have bought something like this tends to regret it...maybe not publicly.

I always go back to thinking...."how many trips could we go to different parts of the world vs. buying a property?"

Life's to short to vacation in the same place year after year. We have friends who rent beach houses on the Carolina coast every summer with their family. It's not cheap. For the price of renting a house on beach, we could "plan" a vacation to far off places if we combined air miles and planned appropriately.

3504PIR
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Re: Beach condo vs mountain cabin investment property

Post by 3504PIR » Fri Jun 01, 2018 3:16 pm

My retirement home is a small horse farm in the Smokey Mountains which I bought in 2010 after the housing crash for about 1/5 of the current value. Lots of second homes from the ATL crowd for weekend getaways and what you're thinking of. That place was hammered during the housing crash, lots of bankruptcies and foreclosures but great news for us. Food for thought.

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Watty
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Re: Beach condo vs mountain cabin investment property

Post by Watty » Fri Jun 01, 2018 3:38 pm

cwademba wrote:
Thu May 31, 2018 1:32 pm
....but would like clarification on some experiences, whether good or bad.
My next door neighbor bought an investment condo near Gulf Shores down the coast from Panama City Beach. This was about two months before Hurricane Ivan hit and wiped out the building so that all that is there now is a concrete slab. From the bits and pieces I have heard it is still an ongoing soap opera 14 years later with all sorts problems with not enough insurance, gaps in insurance, multiple lawsuits, drama with the HOA board of directors, high legal fees, and the financial crisis in 2008 causing the value of property in that area to plummet.

They have apparently come close to selling the empty lot several times but to sell the empty lot would require the the owners to agree and any companies with a mortgage to agree.

The last I heard they were still making a mortgage payment on it and they were of course not able to refinance it when interest rates got low. I have pretty much stopped asking about it since it is a delicate subject with them.

That is of course just an anecdotal story but I would not buy a condo there as an investment.

There are all sorts of problems with trying to remotely own an investment property in a resort area. If you wanted an investment property then I would look for something within a short drive of where you live.

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Re: Beach condo vs mountain cabin investment property

Post by LarryAllen » Fri Jun 01, 2018 3:49 pm

I like real estate as an investment but the vacation rental business is a job... OR a very high property management cost. I would skip it. Buy a traditional rental in the Smokeys and/or the beach, hire a property manager, and make one trip a year to "inspect" your investment property. A nice tax deductible trip is a great bonus of property ownership.

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Re: Beach condo vs mountain cabin investment property

Post by livesoft » Fri Jun 01, 2018 3:58 pm

NextMil wrote:
Fri Jun 01, 2018 11:16 am
Just curious for those that do own, I assume after owning, your recommendation would be to rent places for your trips rather than owning?
I do not own, but my recommendation is to have other family members (older/younger brothers and sisters) and friends who have bought such property and let you use their vacation homes for free or steep discount to prevailing rentals. :twisted:

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Clemblack
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Re: Beach condo vs mountain cabin investment property

Post by Clemblack » Fri Jun 01, 2018 4:12 pm

I think it's a bad idea.

I own 5 single-family rental properties and I can drive to the farthest one in less than five minutes. Three of them are within a short walk. I'm not saying I've got everything figured out - but I wouldn't invest in a property that far away, especially if you're new to real estate investing.

You're doing quite well already. If it ain't broke, I wouldn't fix it.

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gunn_show
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Re: Beach condo vs mountain cabin investment property

Post by gunn_show » Fri Jun 01, 2018 4:54 pm

alpenglow wrote:
Fri Jun 01, 2018 8:58 am
I live 6 hours from my mountain cabin. Bad idea. Don't do it.
I live 7 hours from my mountain condo, and agree, it often makes it rough. You have to be dedicated and put enough days in each trip to make it worth the 7hrs each way. There is no quick way to drive 400 miles.

We bought it on the cheap, did a very nice renovation project last year, and after having a kid and a traveling sales job that got busy this year, I made it up twice this ski season. It was rented out for 3+ months straight, which certainly is paying the bills, but we had a couple rogue renters that caused issues. It only takes one idiot to ruin the whole party. Luckily I have a rock solid management company, at a fair cost, but like others mentioned, it all adds up and staying profitable is a challenge. You basically have to keep it rented, know that you can never go on major holidays because those are peak rental earning nights, and be ready to go on off-weekends enough to make it worth keeping. Otherwise there are much nicer places to rent without the hassles, and also much safer and less-hassle ways to invest. For us, my family grew up going to this mountain since we were toddlers, and I wanted the same for my family and kid(s) and for my brother and any future family he may have. But it is not without cost, headache, and work.
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