Vacation house? Need objective third party

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SQRT
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Re: Vacation house? Need objective third party

Post by SQRT » Thu Sep 13, 2018 11:05 am

Dottie57 wrote:
Thu Sep 13, 2018 11:02 am
I don’t see the appeal. Rent for a month on the lake.
Yes, it is a personal thing. Many people don’t see the “appeal” but many others do. Going back to a place you control and is always available appeals to some people. Your clothes in the closets, your boat at the dock, your furnishings and art. Might appeal to some people?

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HomerJ
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Re: Vacation house? Need objective third party

Post by HomerJ » Thu Sep 13, 2018 12:15 pm

SQRT wrote:
Thu Sep 13, 2018 11:05 am
Dottie57 wrote:
Thu Sep 13, 2018 11:02 am
I don’t see the appeal. Rent for a month on the lake.
Yes, it is a personal thing. Many people don’t see the “appeal” but many others do. Going back to a place you control and is always available appeals to some people. Your clothes in the closets, your boat at the dock, your furnishings and art. Might appeal to some people?
FYI, I own a condo at the lake with our boat on a lift in a dock right down the steps. I agree it's wonderful to just jump in the car and head out there for a 3-day weekend without having to pack much, because we already have all our stuff there.

I'm very happy with owning.

But the OP is also talking about going for an entire summer, so they get some of those advantages even with renting. Renting for 4 or 6 or 10 weeks straight mitigates the whole packing/unpacking thing. Staying at the same place for multiple weeks is a lot like owning. You get many (not all) of the advantages, and none of the disadvantages.

(We paid cash for our condo AFTER we had paid off our main house, and had our retirement money well on track)
The J stands for Jay

Dottie57
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Re: Vacation house? Need objective third party

Post by Dottie57 » Thu Sep 13, 2018 12:30 pm

SQRT wrote:
Thu Sep 13, 2018 11:05 am
Dottie57 wrote:
Thu Sep 13, 2018 11:02 am
I don’t see the appeal. Rent for a month on the lake.
Yes, it is a personal thing. Many people don’t see the “appeal” but many others do. Going back to a place you control and is always available appeals to some people. Your clothes in the closets, your boat at the dock, your furnishings and art. Might appeal to some people?
I guess. But for me, I would rather go on vacation to different areas before even thinking of buying. Maybe 10 extended vacations. Try oceans - north and south, east and west coast,. Also Appalachians, rovkies, great lakes and then decide.

DC3509
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Re: Vacation house? Need objective third party

Post by DC3509 » Thu Sep 13, 2018 12:36 pm

The question really wasn't if one would do this as a personal preference, but rather if he could afford it/whether it made financial sense.

SQRT
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Re: Vacation house? Need objective third party

Post by SQRT » Thu Sep 13, 2018 1:36 pm

DC3509 wrote:
Thu Sep 13, 2018 12:36 pm
The question really wasn't if one would do this as a personal preference, but rather if he could afford it/whether it made financial sense.
Yes, and we all agree he can afford it. My point was that it’s a lifestyle choice not really a financial one. It’s always better not to spend too much and rent first. But there are some advantages to owning. After all, many (most?) own.

texasdiver
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Re: Vacation house? Need objective third party

Post by texasdiver » Thu Sep 13, 2018 2:16 pm

At that level of income the issue is usually time not money. Obviously the OP can afford a vacation house.

If my wife and I had that level of income we'd be most certainly looking at spending our vacations in places like Europe and Costa Rica, not at some family compound on a lake. But that's just us. The "plane flight required" is a red flag in my mind because that pretty much makes it a week commitment to get, or at a minimum a very long weekend. Otherwise it isn't worth it. A lake house that's an hour away in the mountains or something is a different proposition as it becomes a viable weekend destination. How many free weeks are you really going to have? Especially with kids and all their activities? And are you really going to want to spend those precious few weeks at the same lake house when you can afford to go anywhere in the world?

If it were me, I'd do a couple seasonal vacation rentals in that location and see if it is what you really want long term.

bltn
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Re: Vacation house? Need objective third party

Post by bltn » Fri Sep 14, 2018 2:15 am

ge1 wrote:
Mon Sep 10, 2018 2:36 pm
Just a few thoughts from somebody who has owned vacation homes and owns one now:

- 700k for a vacation home is expensive, even for your income level and especially given your net worth. We used to own a vacation home in that price range and after moving which limited our use of the house we sold it and built a cheaper vacation home closer to where we live now.

- Maintenance - make a detailed budget what the maintenance costs will be, i.e. utilities, house checks, lawn mowing etc. It adds up quickly.

- Vacation homes are amazing and you and your family will make a lot of great memories - just don't fool yourself into thinking it could be a good financial decision. It's a luxury (and there is nothing wrong with that) and it's expensive.

- I'm sure others feel different, but I would caution against including any rental income in your decision. At least for me, a vacation home is a place where we have our stuff, fun outdoor gear etc, a place my friends can use - and not a place I want to rent out to strangers and I need to lock away my stuff.

good luck
We don t rent out our vacation home. We still enjoy using it, 10 years after we built it. But it is expensive to maintain. And we don t find ourselves taking vacation trips to other places. Before we had our vacation home, we traveled yearly , often overseas, for vacations. But we re happy to have our home at the beach.
I would recommend paying cash for the vacation home. Or, if you re convinced this home is the one for you, paying this one off in 2 years. Don t figure on renting your vacation home to others. You ll feel better about the home if you care for it like your primary residence.
Congratulations on the new job.

DC3509
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Re: Vacation house? Need objective third party

Post by DC3509 » Fri Sep 14, 2018 7:01 am

SQRT wrote:
Thu Sep 13, 2018 1:36 pm
DC3509 wrote:
Thu Sep 13, 2018 12:36 pm
The question really wasn't if one would do this as a personal preference, but rather if he could afford it/whether it made financial sense.
Yes, and we all agree he can afford it. My point was that it’s a lifestyle choice not really a financial one. It’s always better not to spend too much and rent first. But there are some advantages to owning. After all, many (most?) own.
I actually don't think we all agreed on the above -- see the previous posters talking about how he needed $30 million bucks in the bank first or how you MUST pay cash or this was "lifestyle creep" in a major negative way.

SQRT
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Re: Vacation house? Need objective third party

Post by SQRT » Fri Sep 14, 2018 8:46 am

DC3509 wrote:
Fri Sep 14, 2018 7:01 am
SQRT wrote:
Thu Sep 13, 2018 1:36 pm
DC3509 wrote:
Thu Sep 13, 2018 12:36 pm
The question really wasn't if one would do this as a personal preference, but rather if he could afford it/whether it made financial sense.
Yes, and we all agree he can afford it. My point was that it’s a lifestyle choice not really a financial one. It’s always better not to spend too much and rent first. But there are some advantages to owning. After all, many (most?) own.
I actually don't think we all agreed on the above -- see the previous posters talking about how he needed $30 million bucks in the bank first or how you MUST pay cash or this was "lifestyle creep" in a major negative way.
Well, ok, but seems like the consensus is pretty clear. They can afford it.

MSO4PRN
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Re: Vacation house? Need objective third party

Post by MSO4PRN » Fri Sep 14, 2018 9:18 am

unless its under 2.5hr drive each way, rent.
im in my mid 30s, all my friends parents are dumping 2nd homes (either primary or vacation) and opting to rent either airbnb/vrbo. all of them were sick of dealing with bs when they were on "vacation". on the other hand, friends of mine are stating to buy lakehouses as well. my parents bought theirs that was a 2 hour drive from the city. 2 hours is a perfect cut off for " oh its not raining, lets go" whereas a flight is committal (not counting if your on southwest), also don't expect your kids once in high school / college (or their firends) to come either - unless its on the oceanfront or on a ski hill.

SQRT
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Re: Vacation house? Need objective third party

Post by SQRT » Fri Sep 14, 2018 10:46 am

MSO4PRN wrote:
Fri Sep 14, 2018 9:18 am
unless its under 2.5hr drive each way, rent.
Generally solid advice although not always practical. Our first vacation home was a lake house about 2 hours from the city. Used almost every weekend to “wind down” from our intense jobs. Still love it after 21 years.

Once we retired though we wanted other environments,ie a mountain place and eventually a snowbird place. These environments were at least 1,500-2,500 miles away so necessitated air travel. We’ve had the mountain place for about 11 years and the snowbird place for over 6 years. Enjoy them both immensely and regularly.

I just don’t have a personality conducive to renting. That is I need to control my environment and don’t mind the significant costs associated with this. I hate the thought of dealing with landlords and asking “permission” to do certain things or having to check around for new places to rent if the landlord sells,etc.

Luckily we can afford to own and hire plenty of “support staff” to help maintain these places. I know this is not typical and how lucky we are to be in this position. Also,that renting might be preferable for many people,

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HomerJ
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Re: Vacation house? Need objective third party

Post by HomerJ » Fri Sep 14, 2018 1:11 pm

SQRT wrote:
Fri Sep 14, 2018 10:46 am
MSO4PRN wrote:
Fri Sep 14, 2018 9:18 am
unless its under 2.5hr drive each way, rent.
Generally solid advice although not always practical. Our first vacation home was a lake house about 2 hours from the city. Used almost every weekend to “wind down” from our intense jobs. Still love it after 21 years.

Once we retired though we wanted other environments,ie a mountain place and eventually a snowbird place. These environments were at least 1,500-2,500 miles away so necessitated air travel. We’ve had the mountain place for about 11 years and the snowbird place for over 6 years. Enjoy them both immensely and regularly.

I just don’t have a personality conducive to renting. That is I need to control my environment and don’t mind the significant costs associated with this. I hate the thought of dealing with landlords and asking “permission” to do certain things or having to check around for new places to rent if the landlord sells,etc.

Luckily we can afford to own and hire plenty of “support staff” to help maintain these places. I know this is not typical and how lucky we are to be in this position. Also,that renting might be preferable for many people,
Once you're retired, it's a different story.

When you still have kids and jobs, I agree a vacation home should be a 2.5 hours or less drive.

(Mine is 2.75 hours away - I wish it was 2 hours!)

But that's if you want to be able to do weekends there. The OP is talking about spending 10 weeks straight in summer there, so not as big a concern.
The J stands for Jay

malabargold
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Re: Vacation house? Need objective third party

Post by malabargold » Sat Sep 15, 2018 7:55 am

Don’t buy houses you can’t get to , inspect/work on, and get back from within a day

Also for better or worse, summers have changed drastically
for most motivated kids - attending TIP programs,
specialized camps, pseudo internships, not lazing around lakes.
One malady of many affluent parents, raising coddled directionless kids.

SQRT
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Re: Vacation house? Need objective third party

Post by SQRT » Sat Sep 15, 2018 10:05 am

malabargold wrote:
Sat Sep 15, 2018 7:55 am
Don’t buy houses you can’t get to , inspect/work on, and get back from within a day

Also for better or worse, summers have changed drastically
for most motivated kids - attending TIP programs,
specialized camps, pseudo internships, not lazing around lakes.
One malady of many affluent parents, raising coddled directionless kids.
Boy, that’s a pretty big generalization. Buying a vacation home will create coddled directionless kids. Didn’t happen that way in my case. Do you have any personal experience in this regard?

EddyB
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Re: Vacation house? Need objective third party

Post by EddyB » Sat Sep 15, 2018 10:41 am

malabargold wrote:
Sat Sep 15, 2018 7:55 am
Don’t buy houses you can’t get to , inspect/work on, and get back from within a day

Also for better or worse, summers have changed drastically
for most motivated kids - attending TIP programs,
specialized camps, pseudo internships, not lazing around lakes.
One malady of many affluent parents, raising coddled directionless kids.
Maybe I have misunderstood, but regardless of whether they’re coddled, what’s the logic in saying these “motivated” kids, attending “specialized camps” are directionless? What makes an internship a “pseudo” internship? I would have though a “pseudo” internship was more like a traditional one, rather than the unpaid labor that passes for an internship now.

RadAudit
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Re: Vacation house? Need objective third party

Post by RadAudit » Sat Sep 15, 2018 11:12 am

Rent your fantasies.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The Calvary isn't coming, kids. You are on your own.

skime
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Re: Vacation house? Need objective third party

Post by skime » Sat Sep 15, 2018 3:25 pm

DC3509 wrote:
Wed Sep 12, 2018 9:39 pm
skime wrote:
Mon Sep 10, 2018 2:55 pm
If it were me, I would ask myself why I only have approximately $2mm saved on an income of $1.5mm.

I would be more concerned with building a substantial asset portfolio long before I would consider an emotional purchase of a cash flow drag.

At the moment it seems as if you have a bit over 1x gross income saved. If something happens to that income stream, things could get uncomfortable quickly if you want to keep up your current lifestyle. At 45, you should have significantly more liquid assets than that.

Shoot for 20x gross income in liquid assets before you go looking for a second home. You'll never have to think twice as to whether you can afford it or not or if it's a good decision or not.

Always question your motivation when it comes to financial decisions. In this case it seems as if emotion is in the driver's seat. That's never a good thing when it comes to economic decisions - especially big ones like buying a home.
I found a lot of the responses in this thread -- like the one above -- to really show the limitations to the rote advice offered by these boards, unfortunately.

The OP says the household income is $1.5 million -- million. 20x gross income means that the OP needs to save $30 million dollars before you would approve of the OP buying a vacation home -- really? You will surely be the richest person in the graveyard with this strategy. In the meantime while the OP is saving for his $30 million dollar bank account, his kids will grow up, and who knows what else will happen.

To the several people who posted that the OP must pay for this in cash or else it is a bad decision -- why? Again, we are talking about a yearly salary of $1.5 million -- that equates to $125,000 per month. The OP already has made a very big dent in the regular mortgage and has it on a 15 year plan. Even if the OP only puts down 20% on the vacation property -- that leaves a mortgage of $580,000 -- at today's interest rates that is about $2800 per month -- or about 2% of his pre-tax income. The OP is nowhere near the levels of 28% PITI that is usually suggested as a rough guideline. I actually imagine that several of the people who responded to this thread have mortgages that occupy a much higher percentage of their monthly income than the OP.

As to the several people who responded -- but he makes $1.5 million, why hasn't he saved more? Of course, the OP already has about $2 million in assets which blows away the savings of most normal Americans. Even if the OP never saved another dime -- if OP invested that and only that and rode out the waves for the next 20 years -- OP will come way further ahead than nearly everyone else. But as the OP stated very clearly in the thread -- up until recently, the breadwinner was working in a government job and the significant increase was a recent event. This means that most (all?) of the savings has come through a government salary. This is another fallacy I see on these boards -- you experience a significant salary increase and then the goal posts move and everyone writes in asking why you haven't saved more. Bottom line is that OP was clearly living a frugal lifestyle by any objective measure and the net worth will likely climb to extremely high levels with the new salary.

The short answer is: of course, the OP can afford this purchase. $700K isn't that much of a splurge, at least for those of us who live in HCOL areas. The other replies about whether you will use it a lot, the cost of repairing things, etc. -- those are all fair points and should be balanced in the decision equation. But if you think the vacation home will create priceless family memories -- I think that should be the overriding factor. You aren't working simply to make money or saving just for savings sake. What's the point of money if you never enjoy it -- especially on your family?

There are a lot of "rules" on this Board -- for most people, including myself, they are useful. But for people at the very highest ends of the income spectrum -- and yes $1.5 million counts -- the rules can be relaxed and individualized solutions are more appropriate.
At 20x gross, you won't be the richest person in the graveyard, you'll be bullet proof. Nobody wants to go backwards in lifestyle. Once you've achieved a certain level of living, you don't want to be having to start over. If Bezos woke up one morning with OP's money, he'd probably commit suicide.

2008 was only 10 years ago. It was absolutely horrible for most and a permanent life change for many. If that ever happens again and you're paying for mortgages (plural), private school, vacation, luxury cars, etc you had better be bullet proof.

If you lose your job in a nasty downturn and only have 2x annual gross saved, you're going for a very uncomfortable ride. Just ask the "high-flyers" at Lehman Brothers.

MSO4PRN
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Re: Vacation house? Need objective third party

Post by MSO4PRN » Sun Sep 30, 2018 8:21 am

RadAudit wrote:
Sat Sep 15, 2018 11:12 am
Rent your fantasies.
we talking hookers or houses?

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