Vacation Home: Own vs. Rent??

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capitalhockey
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Vacation Home: Own vs. Rent??

Post by capitalhockey » Wed Mar 13, 2019 9:43 am

Hello,

One of my childhood dreams was to own a nice vacation home. It seemed very far fetch when I was growing since we grew up poor. My wife also had a similar upbringing. We both worked hard to become professionals in well paying fields and save 40% of our annual gross pay each year. We could use the 2nd home for family vacations, weekend getaways...maybe pass it on to next generation for legacy. I went over our finances and have the means to afford afford a vacation home with $250k cash and no mortgage.

However, I am starting to think renting a vacation home will be much better usage of the $250k:

1) We have used Airbnb often to rent out nice vacation homes that we have enjoyed
2) More variety in rental destinations vs. returning to same one location
3) Less headaches in managing second home....just show up and enjoy rental and leave when done
4) No annual property taxes, maintenance costs, etc.
5) We average $2,500 per vacation rental for week long stay, the $250k can fit in 100 outings!!

I told the wife that the $250k can stay in an investment account set aside for travel and leisure. If we can get a modest yearly return, we can use the funds for vacations and travel for our family over a lifetime. Is this a sound approach?

BradJ
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Re: Vacation Home: Own vs. Rent??

Post by BradJ » Wed Mar 13, 2019 9:56 am

I have always heard vacation homes are like boats, great when you buy them, even better when you sell them. The idea of owning one sounds great to me, but it would have to be something I could get to in under four hours and I would buy on the small side (budget and size). Maintaining it would be harder than you think.

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hand
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Re: Vacation Home: Own vs. Rent??

Post by hand » Wed Mar 13, 2019 9:58 am

capitalhockey wrote:
Wed Mar 13, 2019 9:43 am
We could use the 2nd home for family vacations, weekend getaways...
There's often a big difference between the dream of a vacation home and the reality. Sure you *could* use a vacation home as you describe, but realistically, how *would* you use the vacation home?

Standard advice is to rent for a year/ seaon in the desired vacation home location to determine if your actual usage aligns with your expected usage, whether you want to return to the same locale in future years, and to get some local knowledge on pros and cons of specific properties and locations.

ohai
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Re: Vacation Home: Own vs. Rent??

Post by ohai » Wed Mar 13, 2019 10:02 am

Hi, OP. I think you know the decision already. Keep in mind that when you buy that house, you are also buying all the time you could have spent in the house year round. So, if you don't rent it out to other people, you are paying rent even for time you don't spend in the vacation house. From a financial perspective, buying the place makes little sense, as you seem on the way to concluding. I don't know how much intangible value to attach to this sort of house though.

I would not even like to buy such a place as an investment property. My relatives own a bunch of shore houses, and it consumes a ton of time to run. I will inherit these properties one day, and I intend to sell them rather than keep running them.

IPS&IPA
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Re: Vacation Home: Own vs. Rent??

Post by IPS&IPA » Wed Mar 13, 2019 10:06 am

I owned a vacation home an hour from home and we loved it, at first.
Then we wanted to try out other things and rented out the vacation home, bad experience!
Then I added up the expenses for our 250k vacation home and it ran around 6k a year.
Then we sold our vacation home for about what we paid cash for and got back all of our money.
Paid 250k plus 15 years of expenses @ 6k year = 90k
Sold for 275k less sales expenses of 25k = net 250k all our money back less expenses of 90k = 160k
Had we invested in the same period our 250k it would have grown to 875k before taxes.
So you decide. I know what I would do now if I could go back in time.
Elwood: It's 106 miles to Chicago, we got a full tank of gas, half a pack of cigarettes, it's dark... and we're wearing sunglasses. Jake: Hit it.

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Kitty Telltales
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Re: Vacation Home: Own vs. Rent??

Post by Kitty Telltales » Wed Mar 13, 2019 10:07 am

I've had a vacation home for about 15 years. My conclusion is that you are thinking along the right lines. We do still hold onto the home because it's planned to use it more often and longer in our early retirement years, but it is definitely a trade off over exploring more vacation spots. However, it's our home away from home and we can't help but love the place.

If you do buy, keep it simple and not something you have to manage often. I agree that not too far away is better. It's also helpful if you know someone nearby who can drop by in emergencies, such as hurricanes. I had to fly to the States the year before last because I couldn't get anyone on the phone for days.

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Re: Vacation Home: Own vs. Rent??

Post by Jack FFR1846 » Wed Mar 13, 2019 10:08 am

BradJ said exactly what I was thinking. Perhaps its because when we bought a boat and went away, pulling the boat to a lake 3 hours away, we would look at lakeside homes from the boat and go through real estate pamphlets given out all over.

Here's what I found with the boat. For less than the cost of insurance, I could rent a brand new boat at the marina where I bought mine and on the same lake we went to. I tracked our days using the boat over the years and the 4th year, that number was 1. So the decision to sell the boat was very easy.

For a vacation home, think about it the same way. It is not just the $250 to buy it, it's the property taxes every year. In our case, the lake is in New Hampshire and not only would we have to pay the very high NH property taxes, but because the community was a big vacation home area, the tax rate for non-permanent residents is double what residents pay. Add to that homeowner's insurance, regular maintenance, stuff you would buy to put into the house. For us, the costs above and beyond buying the house equaled the cost of the house over 10 years. We dropped the idea. We've still gone to the area for vacations to do other things, but our cost was significantly less than what a house would have cost and we also went other places (sort of hard to stay in a NH lake house when we are in Ft. Myers, Florida).

Some people rent their vacation house when they're not using it. But that adds management and tax issues and if you decide last minute that you want to go to the house because a long weekend coming has perfect weather predicted, and you call the manager only to find you can't go to YOUR house because its been rented.......then what? Go up and rent? Oh, cool....you get to pay for both the house costs and the cost to rent.
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randomguy
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Re: Vacation Home: Own vs. Rent??

Post by randomguy » Wed Mar 13, 2019 10:09 am

ohai wrote:
Wed Mar 13, 2019 10:02 am
Hi, OP. I think you know the decision already. Keep in mind that when you buy that house, you are also buying all the time you could have spent in the house year round. So, if you don't rent it out to other people, you are paying rent even for time you don't spend in the vacation house. From a financial perspective, buying the place makes little sense, as you seem on the way to concluding. I don't know how much intangible value to attach to this sort of house though.

I would not even like to buy such a place as an investment property. My relatives own a bunch of shore houses, and it consumes a ton of time to run. I will inherit these properties one day, and I intend to sell them rather than keep running them.

It depends a lot on usage. Buying a ski lodge that you go to 25 weekends/year (or beach house. Or city apartment) is different than the one you go to for 2 weeks of the year. Even there you pay a lot for convenience (I.e. not have to pack everything ). To some extent it is also asking the question of do you want to spend most of your vacations in the same spot. Some people like the routine. Others want variety.

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Re: Vacation Home: Own vs. Rent??

Post by SevenBridgesRoad » Wed Mar 13, 2019 10:10 am

You will spend part of each vacation working on this second home. Homeownership means chores.
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Tamarind
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Re: Vacation Home: Own vs. Rent??

Post by Tamarind » Wed Mar 13, 2019 10:14 am

If I were you I'd rent. Enjoy the vacation home you want where and when you want to and let others deal with the home the rest of the year. VRBO, AirBnB and the like mean that there is lots of information available to all parties, so the market sets pretty fair prices for vacation rentals.

jpelder
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Re: Vacation Home: Own vs. Rent??

Post by jpelder » Wed Mar 13, 2019 10:15 am

This is definitely a lifestyle decision, in addition to a financial one. I have extended family (grandmother, in-laws) who used to own vacation houses, and direct family (parents) who regularly rent them.

Pros of Ownership
-Spontaneous trips are possible if you live close
-It's fun to go to the same place year after year and get to know it
-You know exactly what you're getting (kitchen tools, bedding, amenities, etc.)
-Extra income from renting is possible (but this reduces flexibility of spontaneous trips)
-First dibs on popular times (Holidays, Spring Break, whatever)

Cons of Ownership
-Maintenance/repairs/insurance are real costs (especially if you have a beach house in a hurricane zone)
-Lack of flexibility, since the house is a fixed-ish cost (Why go somewhere else for vacation, when we can go there for free?)

Pros of Renting
-You can go wherever you want that has vacancies and that you can afford
-Your costs are controllable: No bonus this year? Just take a less expensive trip
-No cleaning!

Cons of Renting
-Popular locations book up or are expensive during busy season
-You don't know what the house comes with as far as facilities, amenities, furnishings, etc go.

ohai
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Re: Vacation Home: Own vs. Rent??

Post by ohai » Wed Mar 13, 2019 10:17 am

randomguy wrote:
Wed Mar 13, 2019 10:09 am
ohai wrote:
Wed Mar 13, 2019 10:02 am
Hi, OP. I think you know the decision already. Keep in mind that when you buy that house, you are also buying all the time you could have spent in the house year round. So, if you don't rent it out to other people, you are paying rent even for time you don't spend in the vacation house. From a financial perspective, buying the place makes little sense, as you seem on the way to concluding. I don't know how much intangible value to attach to this sort of house though.

I would not even like to buy such a place as an investment property. My relatives own a bunch of shore houses, and it consumes a ton of time to run. I will inherit these properties one day, and I intend to sell them rather than keep running them.

It depends a lot on usage. Buying a ski lodge that you go to 25 weekends/year (or beach house. Or city apartment) is different than the one you go to for 2 weeks of the year. Even there you pay a lot for convenience (I.e. not have to pack everything ). To some extent it is also asking the question of do you want to spend most of your vacations in the same spot. Some people like the routine. Others want variety.
Yes, yes. Usage rate definitely matters and varies by person. But realistically though... are you really going to go on vacation to this place at its maximum capacity? If you go visit your vacation home 25 weekends a year, you must hate your main home a lot...

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Re: Vacation Home: Own vs. Rent??

Post by adamthesmythe » Wed Mar 13, 2019 10:26 am

If you rent be prepared to swallow hard and pay top prices during holidays, etc. Remember, you are saving money by not buying the vacation home so you can spend it on what you want.

If you go the vacation home route, passing it on to kids is the least sensible motive. It may be a burden not a benefit.

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Re: Vacation Home: Own vs. Rent??

Post by orangesherbet » Wed Mar 13, 2019 10:47 am

If you have liked the Airbnb rentals I would stick with that because as you concluded, it’s a much better financial decision, offers variety etc. We have a vacation home and are very conscious that it’s our highest consumption item. In my case we apparently can’t vacation anywhere but at home (beds aren’t right or the kitchen isn’t equipped properly, always something to whine about 🙄). We also use it a lot and we know we are paying for the convenience factor (no packing, we can leave Sunday night after all the traffic has died down, that sort of thing). In our area property tends to appreciate so with the value going up, it feels slightly less irresponsible. But still a conscious choice to consume and we’re ok with that for now.

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climber2020
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Re: Vacation Home: Own vs. Rent??

Post by climber2020 » Wed Mar 13, 2019 11:29 am

Different for everyone, but the people I know who own them talk like it's a chore to spend time at the vacation house. They've already sunk all that money into it so they feel obligated to go, even if they'd really prefer to do something else with their limited time off.

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Re: Vacation Home: Own vs. Rent??

Post by Shallowpockets » Wed Mar 13, 2019 11:34 am

When I was young none of my dreams were like that. Not like that now either.

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Re: Vacation Home: Own vs. Rent??

Post by FinTruth » Wed Mar 13, 2019 11:41 am

We bought a ski condo 6 years go. The prices were super low at that time, and even with the good prices, I thought that we would lose quite a bit of money after HOA fees and taxes. In those 6 years, the value has more than doubled, the yearly gross revenue has more than doubled, we use it all the time, and it pretty much pays for itself as it gets rented out when we are not there. We did do some repairs when we first bought it, such as buying a new couch, and some painting. It has required very little maintenance over the years, and almost all of it is performed by the property management company. I think what makes this a little easier is that it is a condo. We don't have to worry about scheduling exterior maintenance, snow plowing, etc.

On the flip side, when I look now at how much they cost, I don't think that it would come anywhere close to break even...

My advice, if you want a vacation home, wait for a recession in prices, otherwise it will likely not be worth it over renting. Also, make sure it is somewhere you would go often. We go to ours probably 10 times a year, and we find it worth it. And if you are not renting it out, I would never do that, the expenses and upkeep are just not worth it.

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Re: Vacation Home: Own vs. Rent??

Post by Thegame14 » Wed Mar 13, 2019 11:47 am

the renting means you have a yearly expense, buying you have some yearly expenses being property taxes and maintenance plus utilities, but also freedom and possible rental income and an asset. A vacation home you can use depending on the location all year round and many times a year, vs taking one vacation per year. I would think if you are a young family with limited vacation time, then rental may be better, vs if you are retired or semi retired and can go to the vacation house once or twice a month, then buying makes more sense.

I would suggest the vacation approach for now looking to find a place to buy down the road.

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Re: Vacation Home: Own vs. Rent??

Post by MarkerFM » Wed Mar 13, 2019 1:06 pm

Speaking as someone who has owned at least one second home for 20 years, I would say you can almost never justify it from a financial standpoint. We have no regrets about owning them, and we use(d) and enjoy(ed) them for large parts of every year. But, we would never consider it a financial win.

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Re: Vacation Home: Own vs. Rent??

Post by rmark1 » Wed Mar 13, 2019 1:19 pm

My parents have taken a travel trailer to the same area annually for 30 years, and have noted the cabins along the road to the campground selling about every 5 years. I think the realtor just starts over at the beginning of the road every 10 or 12 years.

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Re: Vacation Home: Own vs. Rent??

Post by phxjcc » Thu Mar 14, 2019 1:34 am

I grew up in a GI home built in 1946, 980 sq ft, 2 bedroom, 1 bath. Just Mom, Dad, and me.

West Los Angels, Ca.

Close to both their work places.

In 1966 they looked at upgrading to a larger house, longer commutes for both, and they would again have a mortgage.

They decided instead to buy a place in Palm Springs (don't laugh...it cost 16K) for 1/2 what they were looking to pay in LA.

To them the LA house was like the place they HAD to live to work and make money.

The vacation house is where they choose to LIVE the way they wanted to.

It was astounding, the transformation, as soon as they got to the desert.

So, we went EVERY weekend, holidays, and three weeks in the summer.

When I was older I would go there on my own.

Best memories of my youth.

If you have a happy place and can afford it, do it.

When your old and in the home, what are you going to look back on and smile, you bank acccount or your memories?

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Re: Vacation Home: Own vs. Rent??

Post by msk » Thu Mar 14, 2019 4:19 am

Been there, done that. Great Year 1, 2, 3 but gradually declining enthusiasm. Became more of a family nuisance by Year 4 and by Year 10 glad to have finally got rid of it. No real comparison with renting. Memories, no need to pack, etc. Just be aware that you will have to drag the family to go there from Year 5 onwards. Plan on selling at end Year 4 and you might actually miss having sold it :mrgreen: Wait longer and you'll probably celebrate getting rid of it.

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Re: Vacation Home: Own vs. Rent??

Post by sean.mcgrath » Thu Mar 14, 2019 4:36 am

It's a very personal decision, and fwiw here's our experience: we live in Europe, and after ten years of vague dreaming we bought a summer house back in Michigan in 2009. We love it: there is enormous psychic benefit to it being our own place, the kids have really come to see it as special, the rest of my family in Michigan and Ohio uses it a ton. My wife, who was very skeptical, now sees it as a fantastic decision. It's become an important part of family memories and traditions.

My take on our experience: it brings us a ton of pleasure, but is far from being a good investment. We bought at the depth of the crash, using Euros at a great exchange rate, and a house that had been on the market more than a year. Even so, despite enormous paper gains in the first five years, I doubt it will have anything close to a competitive rate of return over thirty years. Personally, I doubt real estate is a good investment when you don't manage/maintain yourself (though I'm no expert).

You can afford it, definitely pay cash. If you do go for it, don't count on making money -- if you do, that's a bonus. If you are the kind of people who like to build traditions in one spot rather than have a lot of variety ("nesters"?), it can be really nice.

Cheers,
Sean

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Re: Vacation Home: Own vs. Rent??

Post by Pigeon » Thu Mar 14, 2019 6:58 am

Both my ILs and my step-mother and dad had vacation homes. Having watched how that worked, I wouldn't have one as a gift.

Both locations were lovely, and were only 1-2 hours away, so having to travel long distances wasn't an issue. Great memories were made in both homes.

However, they were a real grind, with a great deal of work involved, between hauling food back and forth, cleaning, maintenance of the house and yard, etc.

As the kids got older, they wanted to go less and less. They had sports and other activities, and wanted much more to be with their friends than with their parents. Teens get summer jobs. When the kids married, it created a lot of friction and resentment. The young married couples didn't want to be in the vacation homes with the inlaws. The inlaws didn't want to just vacate the place so that the young couples could enjoy them. There were scheduling issues and issues about standards of cleanliness.

The one my step-mother owned was like a dark cloud over her head all the time. She would think about how much it cost to own the place, and divide it up in her head to a # of usable weekends. Every weekend either she and my father couldn't go or it rained she'd fret about how much money was being wasted as the place sat idle. She had plenty of money, but this stuck in her craw.

Both my ILs and my step-mother sorely wanted this to be a legacy for their kids. That lead to all kinds of squabbles. Finding an equitable way to pass it along is tough. One of the step-siblings wanted the place, but couldn't afford the upkeep himself. His siblings either didn't want to use it or lived so far away as to make it impractical. With my ILs, one BIL was really bullying us to go in on it with him. He and his wife are filthy, we don't much like him, and being tied to real estate with him would be a nightmare. Dh's other siblings live far away and they didn't want it, but he thought they should also go in on it. Ugliness followed.

We rent places. Sometimes we return to the same place and sometimes we seek different locations. We like the variety and find maintaining one home to be plenty. We make great memories in the houses we rent.

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Re: Vacation Home: Own vs. Rent??

Post by lthenderson » Thu Mar 14, 2019 7:59 am

We own a vacation home but went about it a different way than most. Rather than buy some $250k house with proportionate amount of maintenance required, we bought a $15k 500 sqft cabin (30 years ago) that just has the necessities. Our thought was that if we never put a dime towards keeping it current and just did required maintenance, we weren't out a lot of money. It is situated on the border of over a million acres of national park land with lots of mountains, rivers and trails so we spend most of our time there outside so in our situation, just having a dry comfortable place to eat and sleep in the evenings was all we were looking for.

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Re: Vacation Home: Own vs. Rent??

Post by Hockey10 » Thu Mar 14, 2019 8:03 am

capitalhockey wrote:
Wed Mar 13, 2019 9:43 am


I told the wife that the $250k can stay in an investment account set aside for travel and leisure. If we can get a modest yearly return, we can use the funds for vacations and travel for our family over a lifetime. Is this a sound approach?
Yes, this is very sound. One of the problems with owning a vacation home is that you pay for it 52 weeks of the year, but you may only get to use it for a dozen or so weekends per year. Assume that it is at a beach and you structure your entire year's vacation schedule to have long weekends and maybe a full week or 2 at the home.

Then you get an invite for your sister's birthday party on July 4 weekend which is 150 miles from your vacation home. And you get the same invite every year. Or, your son makes the Little League All Star team and has practices every Sat / Sun through the end of July. Or, one of your kids gets an invite to a birthday party in your hometown and refuses to go to the beach that weekend. Or, the weather is great Mon - Fri, then it rains on Sat/Sun. Or, you arrive at the house and have to spend the weekend doing some repairs. Or, one of your kids complains that he has no friends at the beach, and would rather stay back home to hang out with his friends. Or, you structure your workweek to take off every Friday during the summer. This leads to getting 5 days of work done in 4 days for 3 full months, so your performance at work suffers. Or the house gets flooded by a hurricane. The list of potential distractions goes on and on and on.......

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Re: Vacation Home: Own vs. Rent??

Post by sergio » Thu Mar 14, 2019 12:34 pm

A guy I work with has a condo in FL that he spends maybe a grand total of 6 weeks at per year. A few years ago while the condo was not occupied (he was here in the midwest working), a water supply pipe burst in the middle of the night, flooding his unit and several others, and causing considerable damage to the common areas. This began a nearly two-year long legal battle with HOA who decided to go after him full force. He ended up with legal bills in the $20k range, plus all the extra flights he had to take down there, lost vacation time to deal with the lawsuit, insurance deductibles etc. Not to mention the headache and stress he incurred dealing with contractors, insurers, the HOA, the lawyers etc.

And he's thinking of now upgrading to larger unit :oops:

My family used to take a week-long trip when I was younger, and we'd always rent a townhouse or condo, or just stay at a hotel. Some years we went skiing in Colorado or Utah, one year we went to Miami, another year to CA etc. With a vacation home there would be pressure to always go to that location, since "you've already paid for it".

Unless I plan to spend at least 4 months a year in the same location year after year, I would never even consider buying a second home. One home is already enough headache to deal with.

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Re: Vacation Home: Own vs. Rent??

Post by Irisheyes » Thu Mar 14, 2019 12:44 pm

phxjcc wrote:
Thu Mar 14, 2019 1:34 am
I grew up in a GI home built in 1946, 980 sq ft, 2 bedroom, 1 bath. Just Mom, Dad, and me.

West Los Angels, Ca.

Close to both their work places.

In 1966 they looked at upgrading to a larger house, longer commutes for both, and they would again have a mortgage.

They decided instead to buy a place in Palm Springs (don't laugh...it cost 16K) for 1/2 what they were looking to pay in LA.

To them the LA house was like the place they HAD to live to work and make money.

The vacation house is where they choose to LIVE the way they wanted to.

It was astounding, the transformation, as soon as they got to the desert.

So, we went EVERY weekend, holidays, and three weeks in the summer.

When I was older I would go there on my own.

Best memories of my youth.

If you have a happy place and can afford it, do it.

When your old and in the home, what are you going to look back on and smile, you bank acccount or your memories?
Great story. Thanks for sharing.

head gamez
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Re: Vacation Home: Own vs. Rent??

Post by head gamez » Thu Mar 14, 2019 1:48 pm

phxjcc wrote:
Thu Mar 14, 2019 1:34 am
I grew up in a GI home built in 1946, 980 sq ft, 2 bedroom, 1 bath. Just Mom, Dad, and me.

West Los Angels, Ca.

Close to both their work places.

In 1966 they looked at upgrading to a larger house, longer commutes for both, and they would again have a mortgage.

They decided instead to buy a place in Palm Springs (don't laugh...it cost 16K) for 1/2 what they were looking to pay in LA.

To them the LA house was like the place they HAD to live to work and make money.

The vacation house is where they choose to LIVE the way they wanted to.

It was astounding, the transformation, as soon as they got to the desert.

So, we went EVERY weekend, holidays, and three weeks in the summer.

When I was older I would go there on my own.

Best memories of my youth.

If you have a happy place and can afford it, do it.

When your old and in the home, what are you going to look back on and smile, you bank acccount or your memories?
Sounds similar to us. We try to go to our beach home every weekend as it really changes our outlook when there versus back home. We obviously don't make it every weekend as sports and things sometimes get in the way. However, when we are there, we are closer as a family for some reason. Clothes are there, food is there, etc. We just go when we want, regardless of weather etc.

It has been a pretty good decision for us.

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Time2Quit
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Re: Vacation Home: Own vs. Rent??

Post by Time2Quit » Thu Mar 14, 2019 2:02 pm

I am torn on this topic.

Our lake house (No mortgage) has an $11k carrying cost (Taxes, insurance, utilities). This does not include any repairs or upgrades.

There are a lot of positives to having you own place as was already mentioned. There are also a lot of negatives: stuck to the same place, have to winterize the home just incase you loose power and pipes freeze. However, Kids have had some of their best memories.

It ends up costing somewhere around $300-$400/night given the number of nights we spend out there.

In the winter I want to sell the place when I get all the bills, when I am there in the summer I want to keep the place.

Do what’s best for you.
"It is not the man who has too little, but the man who craves more, that is poor." --Seneca

squirm
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Re: Vacation Home: Own vs. Rent??

Post by squirm » Thu Mar 14, 2019 2:57 pm

Rent, for the reason you stated, more variety.

heyyou
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Re: Vacation Home: Own vs. Rent??

Post by heyyou » Thu Mar 14, 2019 2:58 pm

Didn't like the high maintenance at seaside.

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Re: Vacation Home: Own vs. Rent??

Post by jminv » Thu Mar 14, 2019 3:26 pm

My in laws have a vacation home. When they're there, what it really turns into is doing all deferred maintenance during the vacation, ie, a maintenance vacation. When they're not there, they have a lot of money trapped in a home they don't rent out but have continued expenses such as lawn care to avoid the HOA taking them to court (this is a thing with their HOA), utilities to keep the house from getting too hot or too cold or too humid, water for irrigation, a tax bill that is higher than what a continual resident would pay, a home security system, and on and on. It's a headache. As time has gone by, I get roped into more and more of their maintenance vacations to lend a helping hand. I don't really enjoy it since it seems that I have projects on the so called vacation house going from dawn till dusk when I'm there. I also don't enjoy having to go to the same place to visit the in laws in order to help with maintenance rather than us being able to pick a more desirable place I want to go.

My in laws, by the way, love their vacation home. They don't mind doing maintenance or having relatives do it for them. Of course, they'd never pay anyone to do maintenance, other than lawn care. If you're the type of person that doesn't mind this and enjoys having a reason to go to the same place over and over again (I don't mean this in a negative way), then go for it.

I did a rough calculation on how much my in laws are paying for their place and it ends up being way more than an airbnb or even hotel would be. It just seems very wasteful to me. Unless you are there a good portion of the year, the math will not work out well.

head gamez
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Re: Vacation Home: Own vs. Rent??

Post by head gamez » Thu Mar 14, 2019 4:08 pm

jminv wrote:
Thu Mar 14, 2019 3:26 pm
My in laws, by the way, love their vacation home. They don't mind doing maintenance or having relatives do it for them. Of course, they'd never pay anyone to do maintenance, other than lawn care. If you're the type of person that doesn't mind this and enjoys having a reason to go to the same place over and over again (I don't mean this in a negative way), then go for it.
I think that is part of the reason that we still get enjoyment out of ours. I don't mind doing the maintenance.

We own the home that is on leased land. No HOA fees, but that $7k annual lease does sting a bit.
Last edited by head gamez on Mon Mar 25, 2019 8:19 am, edited 1 time in total.

Oakwood42
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Re: Vacation Home: Own vs. Rent??

Post by Oakwood42 » Thu Mar 14, 2019 5:18 pm

IPS&IPA wrote:
Wed Mar 13, 2019 10:06 am
I owned a vacation home an hour from home and we loved it, at first.
Then we wanted to try out other things and rented out the vacation home, bad experience!
Then I added up the expenses for our 250k vacation home and it ran around 6k a year.
Then we sold our vacation home for about what we paid cash for and got back all of our money.
Paid 250k plus 15 years of expenses @ 6k year = 90k
Sold for 275k less sales expenses of 25k = net 250k all our money back less expenses of 90k = 160k
Had we invested in the same period our 250k it would have grown to 875k before taxes.
So you decide. I know what I would do now if I could go back in time.
+1 great point

CascadiaSoonish
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Re: Vacation Home: Own vs. Rent??

Post by CascadiaSoonish » Thu Mar 14, 2019 10:05 pm

I go back and forth on the same question. I love the idea of a cabin in the woods in the mountains, and know exactly the area where I'd want to buy. But now that I've been watching that set of cabins for a while I've noticed that the values are somewhat stagnant and I know they require continual maintenance due to their age. And now that the kids have sports nearly every weekend I don't know when we'd manage to make use of it -- and I know that it would be a continual battle to get them off their screens and out into the woods. So a lot of what's been said here is reinforcing my suspicions...

PaulW
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Re: Vacation Home: Own vs. Rent??

Post by PaulW » Fri Mar 15, 2019 9:16 am

As the owners of a “beach house” for 10+ years, I have a few comments and thoughts from our experience. Our ages are mid 70s. Our vacation home is about 3 hours from our home. This is one of the reasons saved during our working years.
1. We never considered a mortgage.
2. We rent it for the peak summer months, as we prefer the less congested times of the year to be there. We might keep a week for our use in the summer.
3. This was never viewed as an investment although it gives us a $5,000 to $9,000 positive cash flow.
4. There can be work involved. A 1 hour job is a good reason to go to the shore for 3 days.
5. This is not part of our “Vanguard portfolio”, where we live well on a 3% withdrawal.
6. It’s great to be able go when we want, (from September to May), knowing we have a home waiting with clothes, food, bikes ect. not needing to take much along. A hotel would be cheaper but is feels good to have “our place”.
7. We do not look on this as our vacation time but as another home. This has not limited our travel experiences.
8. As of now, the experience has been great. 10 years later we have no regrets.

Maybe few of these thoughts apply to you, but they reflect experiences of someone who has a vacation home.

PaulW

Grantley
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Re: Vacation Home: Own vs. Rent??

Post by Grantley » Fri Mar 22, 2019 8:04 am

randomguy wrote:
Wed Mar 13, 2019 10:09 am
ohai wrote:
Wed Mar 13, 2019 10:02 am
Hi, OP. I think you know the decision already. Keep in mind that when you buy that house, you are also buying all the time you could have spent in the house year round. So, if you don't rent it out to other people, you are paying rent even for time you don't spend in the vacation house. From a financial perspective, buying the place makes little sense, as you seem on the way to concluding. I don't know how much intangible value to attach to this sort of house though.

I would not even like to buy such a place as an investment property. My relatives own a bunch of shore houses, and it consumes a ton of time to run. I will inherit these properties one day, and I intend to sell them rather than keep running them.

It depends a lot on usage. Buying a ski lodge that you go to 25 weekends/year (or beach house. Or city apartment) is different than the one you go to for 2 weeks of the year. Even there you pay a lot for convenience (I.e. not have to pack everything ). To some extent it is also asking the question of do you want to spend most of your vacations in the same spot. Some people like the routine. Others want variety.
Exactly, it depends upon usage. My parents had a second home on a lake and they used it a lot. Every other weekend probably plus a week or two in the summer. It made sense for them to own it. If you only intend to spend a few weekends and a week or two there, then it makes more sense to rent.

I have a friend who has a ton of money and could afford many houses. He only owns one because he says it makes no sense to own versus rent. His kids want him to buy a shore house but he has many choices to rent and doesn't want the headaches.

msk
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Re: Vacation Home: Own vs. Rent??

Post by msk » Fri Mar 22, 2019 8:43 am

msk wrote:
Thu Mar 14, 2019 4:19 am
Been there, done that. Great Year 1, 2, 3 but gradually declining enthusiasm. Became more of a family nuisance by Year 4 and by Year 10 glad to have finally got rid of it. No real comparison with renting. Memories, no need to pack, etc. Just be aware that you will have to drag the family to go there from Year 5 onwards. Plan on selling at end Year 4 and you might actually miss having sold it :mrgreen: Wait longer and you'll probably celebrate getting rid of it.
Last weekend I went with my daughter and one grandson to a beach 90 minutes from my home. We had lunch and they had a swim at a hotel's infinity pool by the beach. Beautiful day, no hassles of packing nor cleaning up a beach house after a year's nonuse. The hotel also had loads of beach houses for sale or for nightly rent. The beach house I mentioned in my earlier post quoted above was actually appropriated by the local government to make way for a huge resort development. In compensation, the government gave us a beach plot + loads of $, 2x the cost of a new build. No complaints from yours truly :mrgreen: Our new beach plot is near the hotel we spent last weekend at. I am tempted to build a new beach house for my numerous grandkids as a family heritage, but no way would I do so since I definitely do not trust my kids to have enough enthusiasm to look after it for 10+ years. I might as well just let the land appreciate as the entire beach gets developed, or one of my grandkids grows up enthusiastic enough. I already KNOW that such enthusiasm is restricted to only a few years... Once burnt, twice shy.

jabbahop
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Re: Vacation Home: Own vs. Rent??

Post by jabbahop » Fri Mar 22, 2019 9:11 am

We are snowbirds now but our summer lake camp started out as a vacation home. For us there are three advantages of owning vs renting that I haven’t seen mentioned yet.

- we have a dog so that dramatically limits the rental options
- we can keep our “toys” - paddleboard, kayak, bikes instead of transporting them
- we have a social network of friends/neighbors vs having to start fresh every year

Financially it would be better to rent.

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wander
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Re: Vacation Home: Own vs. Rent??

Post by wander » Fri Mar 22, 2019 9:21 am

I would rent.

IMO
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Re: Vacation Home: Own vs. Rent??

Post by IMO » Fri Mar 22, 2019 2:07 pm

capitalhockey wrote:
Wed Mar 13, 2019 9:43 am

I told the wife that the $250k can stay in an investment account set aside for travel and leisure. If we can get a modest yearly return, we can use the funds for vacations and travel for our family over a lifetime. Is this a sound approach?
OP, in your case, this is obviously a better choice.

The topic of vacation homes seems to bring out 2 camps on this site:

a) Those that despise the thought of having to maintain/financially pay for an additional home and/or don't want to feel obligated to utilize that home.
b) Those that are aware that a vacation home doesn't make the "best financial sense" but choose to have a property that they find fits their own personal lifestyle choices.

If one feels they are being responsible on their future financial/retirement aspects in life and have enough disposable income to have a vacation home, that's their own personal decision. A vacation home does/doesn't mean one cannot go on other vacations if they have enough disposable income.

It comes down to the personal in personal finance. We all can judge the hell out of what is/isn't reasonable use of our disposable incomes. We all can say, "I'm right, and you're wrong" on what one chooses to use one's disposable income from houses, cars, trips, private schools, etc.

David Althaus
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Re: Vacation Home: Own vs. Rent??

Post by David Althaus » Fri Mar 22, 2019 3:38 pm

My wife and I spend winter on the Big Island of Hawaii. We have evaluated (several times) whether or not to buy something. Have never been able to formulate so it pays or even breaks even--depending on assumptions. Honest assumptions with yourself is probably a good idea. Here are some things you should consider:

--Vacation locations are easy to buy but can prove extremely difficult to sell. Zillow the location. You'll likely discover many places are on and off the market for seemingly endless time periods.

--Ties up lots of capital in illiquid asset.

--There's a tendency to underestimate expenses and overestimate the price and number of days such a property can be rented.

--What if you feel guilty about being there in high season when rental income is at its full potential?

--It's axiomatic that the toilet will break on Christmas Day.

We decided it's better to spend the money on rent and turn out the lights when we leave. And, if we forget to turn out the lights it doesn't matter. That said, if what you want is a vacation home it's probably what you will do.

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