Curious on your Opinion of Buying a Second/Vacation Home

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trailrunz
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Curious on your Opinion of Buying a Second/Vacation Home

Post by trailrunz »

I'm looking for some opinions on buying a second home, or perspective for those that have bought a second home. Did it work out? Are you happy you did it? Where were you at financially when you bought it? What is one thing you learned that you didn't know when you bought it?

Our situation: My wife and I are in our early 40s, no children & no plans to have any, net worth $1.2M and both work fully remote - as long as we have fast & reliable internet we can work anywhere. We live in the Midwest and both really hate the winter, but we have a close network of friends here as well as family, so we aren't really motivated to move. Financially we are debt free other than primary mortgage, save 20% of income into retirement, mortgage balance is $185k (17 years to go at 3.00%), house is worth $600k.

For the past two years we have rented an Airbnb in Florida for 5 weeks and we are headed down south for another 5 weeks coming up. While the airbnbs save all of the headaches of homeownership, the past two years and this year our cost is around $7k for 5 weeks of rental for a very modest, 3-5 miles from the beach, no-frills style house.

In the process of going south each winter, we've fallen in love with the idea of buying a second home in a warmer climate, but in order to do so we would need to define some financial goals and specify a plan to get there. I'm questioning whether that goal is a worthy one, or if I should just be content to do the airbnb thing.

Here's what I'm looking for: On the premise that we enjoy/value going south to get a reprieve from winter but we do not want to move, should we simply be content to rent, or should we set goals to be financially ready to buy?

Airbnb Pros:
-Not your house (no maintentance/upkeep); just show up and instantly be there worry free (theoretically)
-Flexibility each year to check out a new location (if you don't like the house/location you stayed at, pick a different one next year)
-No property taxes, insurance, surprise maintenance costs - avoid everything that falls into the sarcastic column of "joys of homeownership"
-If we were to lose our remote jobs we wouldn't have to consider selling the second home (we both work in industries where both remote and "in the office" type of roles are common, so if we were to change an obligation to be in the office could happen).

Airbnb Cons:
-You have to pick a start and end date; reduced flexibility over owning. This is the biggest drawback for us - we have to limit the time we are there and deciding when we want to go typically well in advance of knowing what our schedules actually look like.
-You don't necessarily know what you are getting simply by looking at well taken airbnb photos and while you may know the area, its hard to know the neighborhood (safety is the primary concern with many areas in Florida).
-Expensive. $7k for 5 weeks is a lot of money; probably less than owning but I struggle with it not being a total spend vs potential investment

Strongest Reasons for Homeownership (from my POV):
-Could turn it into an airbnb in the summer months. Sure, reduced demand but potential to offset costs of ownership.
-Flexibility to extend our stay from 5 weeks to 5 months (or whatever); start and end dates become whenever we feel like it (restating this from above)
-Good likelihood of it being a positive investment vehicle (I realize this isn't guaranteed)

Thanks for any comments.
livesoft
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by livesoft »

My relatives have vacation homes that they invite us to. If you have relatives, then put that as a possibility on your list. :)
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changingtimes
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by changingtimes »

I can't speak to buying in Florida or possibly renting it out (I'm sure other folks will chime in), but I bought mine last year and at this point could not be happier. I don't check the boxes for a lot of the "think hard before you do it" points, and it seems like you don't, either. I also can work from anywhere. I have no kids, so there's no worries about either not being able to go to the second home as much as they grow up or wanting to be close to them/grandkids. I bought in an HOA that handles exterior maintenance, so no worries about having to deal with that by either hiring folks or having to do it every time I visit. I also load up with cameras, remote thermostat, lights, etc.

I will say that my financial situation was/is better than yours. (50s, over $2m in accounts, plus eventual pension and SS [including survivor's]) I also could see moving here permanently (or at least for an extended period) and would net $$$ from the sale of my primary home. And if the earth swallowed the vacation home, I would be supremely bummed but could easily take the hit (ie, I wouldn't be depending on its eventual sale for more dough later on).

A lot for you to think about!
wilked
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by wilked »

If it's as you say it is (modest, miles from a beach) my guess is there is a deal to be had for under $5K. I'd contact multiple AirBnB owners about an adjusted rate for a longer term rental and maybe talk to local realtors for the same. You shouldn't be paying short term rental prices for a long term stay
NiceUnparticularMan
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by NiceUnparticularMan »

Most reasonable models I have seen suggest that your second property needs to get a lot of use in order for it to make any sort of sense financially. This can be through a combination of implied rent savings and actual rental income, but one way or another an empty home is typically not a good financial investment (given reasonable assumptions), only an occupied one. And even then it is risky, meaning you would generally be better off investing in diversified assets not one particular rental property.

I note that while the rise of things like AirBnB have made it somewhat easier to get rental income, logically this means prices should have gone up in popular vacation rental areas, and I believe there is empirical evidence to that effect. So, if you are buying a vacation property today in the AirBnB era, you should even more expect that you will need that rental income when you are not using the property to make it a plausible idea financially.

Personally, we have never even been close to wanting to keep going to the same place over and over for anywhere near the required amount of time. Growing up, my family had a cabin and we went there summers, winter breaks, and other weekends. As an adult, I much prefer what we do with our kids which is take longer vacations to all sorts of different places in the world, weekend trips locally to different places, and so on. There are a few local places we repeat maybe a couple times a year, but that is far from often enough to justify actually buying.

I then have zero interest in becoming a long distance property owner/manager. I actually did it once briefly when my Dad passed away with a small collection of rental properties and I was the executor. I got a lot of help but it was still a pain. I also did it once locally when we ended up renting out our last home while trying to sell it. Even though it was much closer to our new home, it was still a pain.

So personally, I am more than happy with the prospect of always renting vacation homes.

But others love the vision of spending a lot of their time in some one specific other place, getting to know that place really well, getting to know the community, and so on. That's not me, but I get why it is an ideal for some people.

But again, that can be an expensive and risky vision, particularly if you are talking about a reasonably popular vacation location. So to make it really work financially, you might have to be prepared to rent it out a lot. With all the additional work and risk that would involve.

On the other hand, if you are wealthy enough and/or are talking about a place which is not too popular and therefore prices are quite modest--eh, it might well be a luxury worth it to you.

Like, we now tend to fly business class when we do transatlantic flights. Is that a good financial investment? Not in any conventional sense, but we sure do prefer it, and we can afford it. So at the point your second place becomes a luxury you can afford, and you plan to make use of it at least a lot, it doesn't have to make sense financially.
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trailrunz
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by trailrunz »

Thanks, this is a very helpful reply.
Sax32
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by Sax32 »

I have a lot to say about this, because Airbnb is a business that I've run successfully in the past and have interest of getting back into the business of at a different level.

We have been avid campers for years down in South Minnesota and thought it would be fun to invest in a lake home. In 2018 we bought a single family home on a lake in South west Minnesota with the thought of renting it out and using it for vacation time. We found that we rarely used the lake home ourselves, because we missed the variety of camping at all sorts of campgrounds around the state.
So what we did was turn it into an Airbnb property pretty much full time. We live an hour away from this property, so we looked into management, but found out that the fees would eat big time into the cash flow. Our yearly income was $15k. We were 8 time over Super hosts, so we really did a good job. The problem is that between every guest, I had to drive 118 miles round trip to change sheets, sweep the floors, wash the floors, change over the towels, fix any damage to the walls or floors, make sure the water softner is working, mow the lawn, shovel the front door and back deck of snow, so many things. 2019 was a crazy year down south in Minnesota, because there was massive flooding, so we had to constantly move the dock in our out and the boat lift. There are also taxes, flood insurance, business insurance, internet, electricity, Propane, maintenance expenses. It just wasn't worth it, so we sold it in 2020 and made money on the sale.
I miss the business, but one thing I would suggest if I ever do it again is to scale large, meaning it needs to be a property that has a lot of ammenties, is a large property, a pool, hot tub, sauna and in a very touristy area. Your rents need to be so high that it makes sense to hire a property manager, have a handy man ready on call, a plumber and an electrician. I would also suggest you be a handy person yourself, because no matter how good you think your help is, I would want to visit the property at least 4 times a year, to make sure the little things aren't missed. No property manager is going to take care of your property as well as you will. They aren't pro-active and won't look at the fine details, such as a door slowly falling of a hinge and not closing properly or is blockage in a water softner line or a slow leak coming from a water line to a utility sink. You have to be active if you own and Airbnb, there is simply no way you can run a good business passively, no such thing.
We sold all of our rental properties in the past two years and put the proceeds towards our primary and have 84k left on the loan. Once we pay that off, we plan on looking for real estate investments, maybe even an Airbnb. Oh, I forgot one last thing. I would make sure you look at the local ordinances of the city you plan to buy in, because it can make all the difference. Hawaii, for example changed the rule where you cannot rent for less than 30 days. Also, how did states handle the pandemic, were they open and allowed businesses to operate. To me, I want to invest in a state where there aren't massive lockdowns and changes in ordinances. Make sure the city you look in is friendly towards Airbnb's and most likely will be in the future. Orlando, isn't friendly at all to Airbnb's, most areas require you live in the home, which doesn't make much sense at all.
I forgot to respond to your concern on costs for vacations. We just spent $4400 on an all inclusive trip to Cancun Mexico, so 7k on vacations isn't concerning.
Last edited by Sax32 on Mon Jan 23, 2023 12:58 pm, edited 4 times in total.
126inc
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by 126inc »

I wouldn't do it based on your financial situation. You also underestimate how much work it is to have a 2nd home, it's not that easy to find a good property manager that will handle everything like bookings/checking/checkout/cleaning etc and then they will want a cut. The property management contract also typically states either booked guest stays take priority or there is a max personal/friends/family use and going over that you pay a certain % of what it would book for. So you can't really just show up whenever you want and have to block it out in advance.

Source: I own a second home in hawaii, purchased with cash and managed by professional property manager (law requires local onsite contact and I don't want to deal with guests anyways). Financially it doesn't really make sense but it's worth it to me, it's just not as carefree as you're currently thinking.
LittleMaggieMae
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by LittleMaggieMae »

Don't make an assumption that the costs/expenses you have on your primary home will carry over to where ever you buy your second home. As for Florida - I always hear how "cheap" it is to live in Florida because X costs so much less. Unfortunately no one ever talks about the expenses A thru W and then Y and Z. :)

Also a 2nd home may have a higher mortgage rate, property taxes, insurance(s) than a primary home in the same area.

Don't discount the cost of all the monthly expense of a house - utilities, cable, lawn service, pool service, whatever.
You'll need an EF for the house AND have a plan to pay for any "maintenance" or "repairs" you will be doing to in in the first 5 years of ownership. How will you pay for roof damage? or to have a tree cut down? or a pool repair? or an HVAC issue?

Also if you rent your 2nd home - I would suspect it starts to feel less like a "home" to you when you visit and more like a rental property. OK, I'm talking about the "emotional" aspect of this kind of ownership. Can you keep yourself thinking of the property as a rental property and not as your "home"??


I'm not trying to talk you out of a 2nd home or an out right rental property. Just be prepared that when people say they are making lots money doing it - it might not be adding a lot of money to their pockets for immediate spending.
And any money they are able to keep may need to go towards future maintenance and not towards their own personal monthly spending.

Just be aware of any Rose Colored Glasses you might be wearing. :)
Last edited by LittleMaggieMae on Mon Jan 23, 2023 1:17 pm, edited 1 time in total.
aristotelian
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by aristotelian »

I would not want to rely on the Airbnb business to make it work financially. Seems like a good idea if you go to the same place every year for extend periods. Personally, I'd rather rent and have the freedom to go (or not go) where I want. Keeping one home in good repair is more than enough stress and expense for me!
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Svensk Anga
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by Svensk Anga »

We have had a second home for 5 years and like it. We have been retired all that time and more. We are resident in Florida 7 months (so no income tax) and spend summers in Michigan. Even Florida natives try to get out of the state in the summer. Expect very little demand for rentals in the summer. Seasonal rentals are expensive because the landlord has to cover all annual costs and earn a return on the place from about 4 months of rents. I think the season is December - March judging by how full the golf courses and restaurants are. April and November are typically pretty nice and might be cheaper. May and October are a bit warm, but not as humid as summers.

We like having a consistent place to go to. I like to have a place to store my toys. We like our neighbors and my wife has gotten involved with the community. We have family in the area, but not too close.

We kept to a modest budget for the second place. I figured if it did not work out, we would sell it and be out some discount from our purchase price and a realtor fee, which would have been no big deal. Actually, it is worth 50% more than we paid for it according to Zillow. I figure holding it is about like holding a TIPS with somewhat negative real yield. It should approximately keep up with inflation but has the drag of maintenance costs. Your "coupon" is avoiding what you might otherwise spend on rentals. Our 2nd home cost about 5% of the retirement kitty. Primary home is long paid off.

It is a bit of a nuisance to maintain the place and look after the lawn, especially if we want to get away from our get-away place. Hiring lawn service has been problematic.

We just got our homeowner's insurance bill for the Florida place and it was a shocker. Be sure you price that before you commit. Closer to the coast is worse than inland. Pre-2001 construction is worse due to slacker building code requirements then.
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trailrunz
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by trailrunz »

Svensk Anga wrote: Mon Jan 23, 2023 2:01 pm We have had a second home for 5 years and like it. We have been retired all that time and more. We are resident in Florida 7 months (so no income tax) and spend summers in Michigan. Even Florida natives try to get out of the state in the summer. Expect very little demand for rentals in the summer. Seasonal rentals are expensive because the landlord has to cover all annual costs and earn a return on the place from about 4 months of rents. I think the season is December - March judging by how full the golf courses and restaurants are. April and November are typically pretty nice and might be cheaper. May and October are a bit warm, but not as humid as summers.

We like having a consistent place to go to. I like to have a place to store my toys. We like our neighbors and my wife has gotten involved with the community. We have family in the area, but not too close.

We kept to a modest budget for the second place. I figured if it did not work out, we would sell it and be out some discount from our purchase price and a realtor fee, which would have been no big deal. Actually, it is worth 50% more than we paid for it according to Zillow. I figure holding it is about like holding a TIPS with somewhat negative real yield. It should approximately keep up with inflation but has the drag of maintenance costs. Your "coupon" is avoiding what you might otherwise spend on rentals. Our 2nd home cost about 5% of the retirement kitty. Primary home is long paid off.

It is a bit of a nuisance to maintain the place and look after the lawn, especially if we want to get away from our get-away place. Hiring lawn service has been problematic.

We just got our homeowner's insurance bill for the Florida place and it was a shocker. Be sure you price that before you commit. Closer to the coast is worse than inland. Pre-2001 construction is worse due to slacker building code requirements then.
Really helpful reply. Thanks for the detail!
dcd72
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by dcd72 »

livesoft wrote: Mon Jan 23, 2023 12:08 pm My relatives have vacation homes that they invite us to. If you have relatives, then put that as a possibility on your list. :)
Is that a pro or a con (he asks semi-seriously)?
Gnirk
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by Gnirk »

We have owned a second home for nearly 24 years, and bought it 8 years before we retired.We paid a modest price for a nice, 1600 S.F. single family home in an over 55 community in the Palm Desert, CA area.
We paid cash.
We pay for yard service year-around.
We do not rent it out.

The Pro's:
We love the neighborhood and location.
We have a consistent place to go.
We leave clothes, personal items, and one car here, which is very convenient.
We have a well-designed, highly rated and well-maintained golf course (DH is a golfer)
There is low turnover in the community because people don't leave unless they have to.
Kids and grandkids love to visit.
The Cons:
The HOA dues continue to rise.
Homeowners' Insurance is rising.
We tend not to do any other travel during the five months we are here. (Nov, Jan-Apr)

Would we do it again? YES.
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Watty
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by Watty »

livesoft wrote: Mon Jan 23, 2023 12:08 pm -Expensive. $7k for 5 weeks is a lot of money; probably less than owning but I struggle with it not being a total spend vs potential investment
Keep in mind that if you are using it for an Airbnb and you use it for five weeks during the prime winter/spring rental season that is in effect costing you the same $7K in lost revenu.

That might seem sort of abstract but during those five weeks you will need to pay your utilities, mortgage, etc out of your other funds so it is not like you really get to stay there for free.

I knew someone that had a ski rental in a large complex that was several hours away from where they lived. They would sometimes want to go up there at the last minute but their condo was already booked. They sometimes would rent a different condo in the same building for the weekend so they could go skiing. They did not seem too concerned about that since the rent they payed and took in that weekend mostly offset each other.
trailrunz wrote: Mon Jan 23, 2023 11:53 am -Flexibility to extend our stay from 5 weeks to 5 months (or whatever); start and end dates become whenever we feel like it (restating this from above)
If you are renting the place out in Airbnb then it will not be as flexible as you might think.

People will often reserve places six months or more in advance so you will need to work around your existing reservations and block out your long stays there far in advance.

With a rental depending on the terms you may be able to change your plans and cancel your trip maybe 30 days ahead of time and get a full refund. If you own a place there and you blocked out 5 weeks and you cancel your trip then you may not be able to find renters for those five weeks.
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trailrunz
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by trailrunz »

Watty wrote: Mon Jan 23, 2023 3:27 pm
livesoft wrote: Mon Jan 23, 2023 12:08 pm -Expensive. $7k for 5 weeks is a lot of money; probably less than owning but I struggle with it not being a total spend vs potential investment
Keep in mind that if you are using it for an Airbnb and you use it for five weeks during the prime winter/spring rental season that is in effect costing you the same $7K in lost revenu.

That might seem sort of abstract but during those five weeks you will need to pay your utilities, mortgage, etc out of your other funds so it is not like you really get to stay there for free.

I knew someone that had a ski rental in a large complex that was several hours away from where they lived. They would sometimes want to go up there at the last minute but their condo was already booked. They sometimes would rent a different condo in the same building for the weekend so they could go skiing. They did not seem too concerned about that since the rent they payed and took in that weekend mostly offset each other.
trailrunz wrote: Mon Jan 23, 2023 11:53 am -Flexibility to extend our stay from 5 weeks to 5 months (or whatever); start and end dates become whenever we feel like it (restating this from above)
If you are renting the place out in Airbnb then it will not be as flexible as you might think.

People will often reserve places six months or more in advance so you will need to work around your existing reservations and block out your long stays there far in advance.

With a rental depending on the terms you may be able to change your plans and cancel your trip maybe 30 days ahead of time and get a full refund. If you own a place there and you blocked out 5 weeks and you cancel your trip then you may not be able to find renters for those five weeks.
Solid reply; thanks. Appreciate you pointing out some flaws in my logic. In my head I was thinking something more along the lines of a place with good summer tourism/traffic (like Gulf Shores, AL) and would not rent it at all in the winter. In either case, you make great points.
bltn
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by bltn »

trailrunz wrote: Mon Jan 23, 2023 11:53 am I'm looking for some opinions on buying a second home, or perspective for those that have bought a second home. Did it work out? Are you happy you did it? Where were you at financially when you bought it? What is one thing you learned that you didn't know when you bought it?

Our situation: My wife and I are in our early 40s, no children & no plans to have any, net worth $1.2M and both work fully remote - as long as we have fast & reliable internet we can work anywhere. We live in the Midwest and both really hate the winter, but we have a close network of friends here as well as family, so we aren't really motivated to move. Financially we are debt free other than primary mortgage, save 20% of income into retirement, mortgage balance is $185k (17 years to go at 3.00%), house is worth $600k.

For the past two years we have rented an Airbnb in Florida for 5 weeks and we are headed down south for another 5 weeks coming up. While the airbnbs save all of the headaches of homeownership, the past two years and this year our cost is around $7k for 5 weeks of rental for a very modest, 3-5 miles from the beach, no-frills style house.

In the process of going south each winter, we've fallen in love with the idea of buying a second home in a warmer climate, but in order to do so we would need to define some financial goals and specify a plan to get there. I'm questioning whether that goal is a worthy one, or if I should just be content to do the airbnb thing.

Here's what I'm looking for: On the premise that we enjoy/value going south to get a reprieve from winter but we do not want to move, should we simply be content to rent, or should we set goals to be financially ready to buy?

Airbnb Pros:
-Not your house (no maintentance/upkeep); just show up and instantly be there worry free (theoretically)
-Flexibility each year to check out a new location (if you don't like the house/location you stayed at, pick a different one next year)
-No property taxes, insurance, surprise maintenance costs - avoid everything that falls into the sarcastic column of "joys of homeownership"
-If we were to lose our remote jobs we wouldn't have to consider selling the second home (we both work in industries where both remote and "in the office" type of roles are common, so if we were to change an obligation to be in the office could happen).

Airbnb Cons:
-You have to pick a start and end date; reduced flexibility over owning. This is the biggest drawback for us - we have to limit the time we are there and deciding when we want to go typically well in advance of knowing what our schedules actually look like.
-You don't necessarily know what you are getting simply by looking at well taken airbnb photos and while you may know the area, its hard to know the neighborhood (safety is the primary concern with many areas in Florida).
-Expensive. $7k for 5 weeks is a lot of money; probably less than owning but I struggle with it not being a total spend vs potential investment

Strongest Reasons for Homeownership (from my POV):
-Could turn it into an airbnb in the summer months. Sure, reduced demand but potential to offset costs of ownership.
-Flexibility to extend our stay from 5 weeks to 5 months (or whatever); start and end dates become whenever we feel like it (restating this from above)
-Good likelihood of it being a positive investment vehicle (I realize this isn't guaranteed)

Thanks for any comments.
Having a vacation home in a place you like to visit is very nice. But it is expensive, even with rentals.

I would start saving additional money towards the purchase of a condominium near the coast. Rental income may help some, but likely a vacation home will take a significant financial commitment for maintenance, taxes, and insurance.

When we built our vacation home in an ocean side community in north west Florida, my wife and I had already taken a couple of dozen nice annual vacations to various places. We were happy to confine our future vacations, for the most part, to our new home. The first 10 years we had the home, the value crept up with the rate of inflation or a bit better. After doubling in value the first ten years, it has doubled again in value in the last three years. A very lucky location. But I ve replaced 3 air conditioners, and one metal roof. I ve had it repainted twice and major stucco repair twice. The salt air is terrible on these things. Then last month, a new water heater. And this month we re building a new walk down to the beach. And insurance is climbing quite a bit. No wonder we can t afford to travel anywhere else!!

For now your best bet might be to continue renting while you earmark savings for the vacation home.
Parkinglotracer
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by Parkinglotracer »

We are lucky to have a second snowbird home in Florida - paid off, our annual expenses are about 14 grand a year for prop taxes (6K), insurance (3K), utilities (3K), lawn/pest (1K), misc … that is besides new hvac, kitchen mods, windows, carpet, floors, paint, sod, sprinkler mods over the first few years which can amount to as much as you want to spend. We don’t rent it but enjoy being near relatives for the snowy months of the year. Renting is a whole level more of complication in my mind. Run the numbers and be prepared for it to cost a bit more than you would expect.

We have been lucky as our house has appreciated 40% in 3 years in the St Pete area. The timing was luck of the draw. My guess is after the recent surge the market can’t sustain that level of increase moving forward. Nice 3/2/2 bath 1600 sq ft houses in good neighborhoods are going for 500K. I suspect many real estate markets have similar situations.

We waited for years until we had saved the money and we were retired so we could use it before we bought it.
BrendanP
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by BrendanP »

We live and work in NYC and have a 2nd home which is a condo at the Jersey Shore. Less than 2 hours to get there and we have family nearby. Definitely don't regret it and we go down there during off-season as well.

Only longterm rentals are allowed per HOA, but it is near a University so that is always an option if we really needed it.

DW insists on making it as similar to home at possible so we don't have to pack much and basically have 2 fully functioning households.
hoffse
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by hoffse »

trailrunz wrote: Mon Jan 23, 2023 4:34 pm
Watty wrote: Mon Jan 23, 2023 3:27 pm
livesoft wrote: Mon Jan 23, 2023 12:08 pm -Expensive. $7k for 5 weeks is a lot of money; probably less than owning but I struggle with it not being a total spend vs potential investment
Keep in mind that if you are using it for an Airbnb and you use it for five weeks during the prime winter/spring rental season that is in effect costing you the same $7K in lost revenu.

That might seem sort of abstract but during those five weeks you will need to pay your utilities, mortgage, etc out of your other funds so it is not like you really get to stay there for free.

I knew someone that had a ski rental in a large complex that was several hours away from where they lived. They would sometimes want to go up there at the last minute but their condo was already booked. They sometimes would rent a different condo in the same building for the weekend so they could go skiing. They did not seem too concerned about that since the rent they payed and took in that weekend mostly offset each other.
trailrunz wrote: Mon Jan 23, 2023 11:53 am -Flexibility to extend our stay from 5 weeks to 5 months (or whatever); start and end dates become whenever we feel like it (restating this from above)
If you are renting the place out in Airbnb then it will not be as flexible as you might think.

People will often reserve places six months or more in advance so you will need to work around your existing reservations and block out your long stays there far in advance.

With a rental depending on the terms you may be able to change your plans and cancel your trip maybe 30 days ahead of time and get a full refund. If you own a place there and you blocked out 5 weeks and you cancel your trip then you may not be able to find renters for those five weeks.
Solid reply; thanks. Appreciate you pointing out some flaws in my logic. In my head I was thinking something more along the lines of a place with good summer tourism/traffic (like Gulf Shores, AL) and would not rent it at all in the winter. In either case, you make great points.
Gulf shores can get cold-ish in the winter. Nothing like the Midwest of course, but nobody is getting into the water without a wetsuit on. We go down there between Christmas and new years some years and have to wear coats on the beach and put our kids in thick wetsuits because they insist on going into the water.

I will also say we have our favorite places down there, and I book them a full year out because we are tied to a specific school schedule, and I am very picky about rentals. When I find a favorite I’m willing to book the minute it becomes available. If you are looking at Gulf Shores specifically, it attracts a lot of visitors from Birmingham. You should know that virtually every single large school/system in Birmingham is on the same schedule so the entire city vacations at the same time. It can make Gulf Shores really crowded during breaks. Or lively, if you prefer to look at it that way…

We have thought about doing this. We are younger than you with similar finances. We do have kids, and I’d kind of like that “family home” to attract grandkids someday… but then I think about all the places I could take the kids instead if we aren’t sinking time and money into a second home. We will continue going to the beach because the entire family loves it…. But we will can also do annual trips to Europe and shorter trips to domestic cities, Disney (which has become $$$$!!$$$!!), and local resorts. We might still get a second home one day when we are retired, especially if our kids move away from us. But we wouldn’t rent it out, and it would just be something we have because we can afford to do it. But for now we like the variety of being able to move around.
CloseEnough
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by CloseEnough »

I won't comment on the financial side of this, it just has to work, although if you have to rent to make it work, it could impact my comment below.

For me, the biggest reason to have a second home is it is your "home", meaning your stuff, your esthetic for style, your toothbrush in the bathroom. You leave your clothes, your fishing rod, your skis (water skis?) etc. You have your kitchen stuff. Think you are getting the idea. OP, you don't list this as a reason you are considering buying. If that is not important to you, I would just continue to rent.
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trailrunz
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by trailrunz »

CloseEnough wrote: Tue Jan 24, 2023 7:35 am I won't comment on the financial side of this, it just has to work, although if you have to rent to make it work, it could impact my comment below.

For me, the biggest reason to have a second home is it is your "home", meaning your stuff, your esthetic for style, your toothbrush in the bathroom. You leave your clothes, your fishing rod, your skis (water skis?) etc. You have your kitchen stuff. Think you are getting the idea. OP, you don't list this as a reason you are considering buying. If that is not important to you, I would just continue to rent.
Agree with your comments, thanks!
BrendanP
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by BrendanP »

And just to add-on to the last comment above:

The more that you make it your "second- home" and less a "Vacation home", the less likely you are going to want to rent it out.

If it's possible maybe you could get a multifamily or a place with a "mother in law" apartment, and you only rent that Portion out.
atxll
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by atxll »

I think your idea makes sense if the property you purchase is in an area that is primed for future appreciation. Otherwise it would be much cheaper over the long term to rent rather than own. I also recently purchased a second home but it is in a city in the Great Lakes area where housing costs are much lower than the national average. So for me it's also a long term appreciation play. I would be concerned about the future value of a property in Florida due to environmental factors.
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jeffyscott
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Re: Curious on your Opinion of Buying a Second/Vacation Home

Post by jeffyscott »

trailrunz wrote: Mon Jan 23, 2023 11:53 am For the past two years we have rented an Airbnb in Florida for 5 weeks and we are headed down south for another 5 weeks coming up. While the airbnbs save all of the headaches of homeownership, the past two years and this year our cost is around $7k for 5 weeks of rental for a very modest, 3-5 miles from the beach, no-frills style house.

In the process of going south each winter, we've fallen in love with the idea of buying a second home in a warmer climate, but in order to do so we would need to define some financial goals and specify a plan to get there. I'm questioning whether that goal is a worthy one, or if I should just be content to do the airbnb thing.
trailrunz wrote: Mon Jan 23, 2023 4:34 pm In my head I was thinking something more along the lines of a place with good summer tourism/traffic (like Gulf Shores, AL) and would not rent it at all in the winter. In either case, you make great points.
Is the $7K for 5 weeks in FL for a place in FL panhandle, similar to Gulf Shores? I am just wondering if you are comparing an airbnb somewhere warmer and more expensive to buying somewhere cheaper?

$200 a day seems like a lot to me for a place miles from a beach in a location such as that. We usually prefer hotels and shorter trips (because my spouse likes winter, for some reason). So I don't have a lot to go on, but in late Feb of 2020, we paid about $1000 (including all taxes and fees) for a week stay in a very nice 2 bedroom gulf front condo in Navarre Beach. I'd have thought that a long stay at a place miles inland would be a lot cheaper, even if it is a house rather than a condo.

We have absolutely no interest in owning another home and/or becoming a vacation property manager. But, the Gulf Shores/Panhandle area would probably be good if you have no interest in spending spring or summer there, since that's the prime seasons (at least at the gulf, not sure about places that are miles from the beach, though).
And so it goes, And so it goes, And so it goes, And so it goes, But where it's goin' no one knows
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