Vacation homes. Dismal math & a dead horse

[Tangler]

The way I justify the second home to myself is that it will be our retirement place. If I buy a year two early no big deal financially. Of course we haven’t found it yet, but we have both time and patience to get what we want.

bingo, just makes sense to me to look slowly and carefully.

[VagabondMD]

We never approached our second home as a financial investment. It was an investment in family. We bought our current primary residence in 1993 (as I started my staff job) and our second home in 2005 as I transitioned from university to private practice. We were mortgage free when we bought our second home and paid cash for it. The second home cost 15% more than we had paid for our primary residence 12 years earlier. Due to the recent run up in lake front properties our second home is now worth more than our primary residence. It is winterized and is often occupied by various family members. We have never rented it out but have let friends stay here free of charge. Hopefully we will downsize the primary residence within 2-3 years. We will not sell the second home in our lifetime and it is doubtful that the children will sell it either as they all enjoy it and they will be able to afford it. At the end of the day I am happy that we bought the second home as opposed to having the additional money in VTI. Not a financial decision for us.

This is exactly the model that I am attempting to emulate.
1. Not an investment but likely to appreciate in value.
2. Not for income.
3. Yes for family and friends.
4. Yes plan to downsize our primary residence after purchasing second home.
5. Yes first home mortgage paid off (2011) and plan to pay cash for #2.
6. Second home will likely cost between 3x and 4x what we paid for our primary residence in 1999 and will be worth 1.5-2x current value.
7. Not sure about not selling 2nd home in our lifetime, hard to say since we do not have it yet.

[StarTrekDoc]

This is exactly the model that I am attempting to emulate.
1. Not an investment but likely to appreciate in value.
2. Not for income.
3. Yes for family and friends.
4. Yes plan to downsize our primary residence after purchasing second home.
5. Yes first home mortgage paid off (2011) and plan to pay cash for #2.
6. Second home will likely cost between 3x and 4x what we paid for our primary residence in 1999 and will be worth 1.5-2x current value.
7. Not sure about not selling 2nd home in our lifetime, hard to say since we do not have it yet.

Yep -
DD is either a Hawaii or Socal destination. When that finally happens we'll locate the 2nd home and then downsize/move accordingly.

[afan]

We went through this and ended up not buying. We love the community, go there every year. Renting for a week is expensive by our standards but far cheaper than a purchase. It would take many lifetimes to break even.

Agents loved to claim that one could make enough on rentals to cover the annual costa. But they were vague to the point of useless about what proportion of the time one could expect the unit to be rented or how much to charge.

We did not want to be landlords, deal with tenants, deal with a property management company. Our jobs would make it out of the question to go as often a once a month. Our weekends are busy and we could not go their often on the weekends. Counting, maybe, 3 weekends a year and one week, it made no sense.

That would have left a lot of time for rental, but we did not want to own or deal with a rental.

Fortunately for us, they rejected our offer and we did not increase it.

So now we go somewhere in that area for a week a year. We make a reservation, spend a pleasant week, and for 51 weeks per year we can ignore the entire area.

No worries about rental, maintenance, property company, flooding, or anything else.

If you can go often enough to make it worth dealing with and if you do not need the rental income, then it could be useful. The friends of ours who have second homes do not rent them out. When neither they nor relatives are using them, they sit empty. I do not know what arrangements they make for someone to check on the places. Even that pattern would be more hassle than we would want.

As it is if we decide to vacation somewhere else, we would have nothing holding us to this particular place. If there were a flood caused by rising sea levels or a big storm. If the town lost power due to such an event. If the roof were damaged by a storm or fallen tree. If anything else happened, we would shrug, say "That is a shame" and go on with our lives. To us, that is vacation. Owning two properties is not something we would want.

[uptoolate]

What is the distance from your primary home and approximately how many times a month do you go there?

Relaxing three hour drive through a few small towns and farmland. Have been here probably 2 weeks a month May to end September and a few weeks in the winter including New Years some years. During Covid summers we were here more. Zoom actually made it much easier to be here. I've been retired from clinical work for 8 years. When I was working I had 11 weeks off a year (for last 10 years of practice) so was here quite a bit. DW's family from UK was here for a week last week (out of their two week stay) and my sister and family are visiting for 5 days next week. Grown children come and go when they can. Often with their friends.

[mamaham]

My honest opinion is that you can afford it but do you want it. I have owned more than one home before and found it to be exhausting. If you own it there will always be some chores to do.

I’ve never owned a second home and don’t want one. For the very reason you stated = more work. Also, there are so many places to go, why go to the same place all the time…

go with option 1 - rent and explore, rent and explore. Never buy.

[Lithium]

My sister just bought a second home. Went to visit this weekend. Time will tell how this will work out in the long run, but from where I sit, she seems to be the poster child of why these second homes are a horrible financial decision.

she and her husband, who is a hoarder and massive spender, bought their first house for around $725k two years ago, 0% down. Really nice 4BR 3BA house in the city that has now appreciated to over $1M. In the meantime, my sister has gotten a BMW SUV and he’s replaced his vehicle twice, now has a gigantic Ford F150. Plus a blowout wedding, they acquired a dog and paid for the training, and now they just had a baby. Within a month of the baby being born, they bought an $830k lake house that’s 2BR and 2BA using a HELOC for the down payment. So despite having a newborn they’re up at the lake house every weekend trying to fix it up and get it ready to be lived in despite that both of them work. They want to use it as a hybrid vacation home and short term rental. Anyone who’s read a RE book and looked at the local market would probably tell you the numbers don’t work as an investment property. I can’t imagine it will get much occupancy in the winter.

My sister is freaking out because she hasn’t gotten her maternity pay yet and they have two mortgages to keep up. They can’t get much done because their jobs are demanding and the baby is exhausting. On top of that, my brother in law had a pulmonary embolism last year and gets fatigued fairly quickly.

it boggles my mind why people make these choices. I think my sister is caving in to peer influence, as she has several friends who have married rich and whose friends husbands bought their wives BMWs and second homes and they all seem to be happy on social media. For some people this is the new American dream, but to me it sounds like a special form of h*ll.

[StarTrekDoc]

keep up with the Joneses is a real thing unfortunately. Even with our financial conservative upbringing, DD slipped a little during HS to influences. Luckily she's found her footing again in college

[Lithium]

Keeping up with the Joneses wasn’t a big problem 50 years ago. Now we have a lot more wealth inequality and social media influencers. Forget the Joneses, it’s all about keeping up with the Kardashians now.

[Anne]

My sister just bought a second home. Went to visit this weekend. Time will tell how this will work out in the long run, but from where I sit, she seems to be the poster child of why these second homes are a horrible financial decision.

she and her husband, who is a hoarder and massive spender, bought their first house for around $725k two years ago, 0% down. Really nice 4BR 3BA house in the city that has now appreciated to over $1M. In the meantime, my sister has gotten a BMW SUV and he’s replaced his vehicle twice, now has a gigantic Ford F150. Plus a blowout wedding, they acquired a dog and paid for the training, and now they just had a baby. Within a month of the baby being born, they bought an $830k lake house that’s 2BR and 2BA using a HELOC for the down payment. So despite having a newborn they’re up at the lake house every weekend trying to fix it up and get it ready to be lived in despite that both of them work. They want to use it as a hybrid vacation home and short term rental. Anyone who’s read a RE book and looked at the local market would probably tell you the numbers don’t work as an investment property. I can’t imagine it will get much occupancy in the winter.

My sister is freaking out because she hasn’t gotten her maternity pay yet and they have two mortgages to keep up. They can’t get much done because their jobs are demanding and the baby is exhausting. On top of that, my brother in law had a pulmonary embolism last year and gets fatigued fairly quickly.

it boggles my mind why people make these choices. I think my sister is caving in to peer influence, as she has several friends who have married rich and whose friends husbands bought their wives BMWs and second homes and they all seem to be happy on social media. For some people this is the new American dream, but to me it sounds like a special form of h*ll.

Sounds like h$ll to me too but this behavior is what keeps the economy going and allows those of us in the minority to retire early and live our desired lower consumption lifestyle off of our investments so what can I say.

[Tangler]

Keeping up with the Joneses wasn’t a big problem 50 years ago. Now we have a lot more wealth inequality and social media influencers. Forget the Joneses, it’s all about keeping up with the Kardashians now.

Well, I have been a little lucky in that I have never done social media stuff, except for this forum and a fishing forum which frankly I find helpful.

I enjoy running ideas by smart people who are not selling anything and often have similar questions and good ideas and solutions.

[Tangler]

My sister just bought a second home. Went to visit this weekend. Time will tell how this will work out in the long run, but from where I sit, she seems to be the poster child of why these second homes are a horrible financial decision.

she and her husband, who is a hoarder and massive spender, bought their first house for around $725k two years ago, 0% down. Really nice 4BR 3BA house in the city that has now appreciated to over $1M. In the meantime, my sister has gotten a BMW SUV and he’s replaced his vehicle twice, now has a gigantic Ford F150. Plus a blowout wedding, they acquired a dog and paid for the training, and now they just had a baby. Within a month of the baby being born, they bought an $830k lake house that’s 2BR and 2BA using a HELOC for the down payment. So despite having a newborn they’re up at the lake house every weekend trying to fix it up and get it ready to be lived in despite that both of them work. They want to use it as a hybrid vacation home and short term rental. Anyone who’s read a RE book and looked at the local market would probably tell you the numbers don’t work as an investment property. I can’t imagine it will get much occupancy in the winter.

My sister is freaking out because she hasn’t gotten her maternity pay yet and they have two mortgages to keep up. They can’t get much done because their jobs are demanding and the baby is exhausting. On top of that, my brother in law had a pulmonary embolism last year and gets fatigued fairly quickly.

it boggles my mind why people make these choices. I think my sister is caving in to peer influence, as she has several friends who have married rich and whose friends husbands bought their wives BMWs and second homes and they all seem to be happy on social media. For some people this is the new American dream, but to me it sounds like a special form of h*ll.

Yes. This is the type of situation I am very glad I have avoided.

If you are going to second home, do it from a position of strength.

If you have no primary mortgage and you have a large down payment then it makes more sense and becomes less scary.

I thing some people will get tremendous enjoyment from a second home. ( VagabondMD for example)

I think others (perhaps me?) will find it a tremendous headache, time black hole, and money pit.

[Tangler]

There is something to be said for appreciating what you currently have. Look around and be grateful. Life is pretty awesome.

For example: recently found a fishing spot about 25 min drive from house.

Great spot. lots of big fish. Easy free parking. Great launch site for the kayak.

Several trips with big fish. Awesome night time and early morning fishing in the inky predawn darkness followed by an amazing sunrise.

Also, my primary residence is really nice. Nice little garden. Wonderful deck with fantastic grill (x 2). Easy living.

I might just appreciate what I have and fish closer to home.

After we have been in this house for 8-10 years I might look for a place close to the water that offers great fishing and brings my wife happiness.

Then sell my primary residence and pay cash for the new place.

Right now, there is no urgency. I have about 200k in cash but there is no urgent reason to plow this into a second home.

I could use my roughly 200k in cash for a downpayment or I could use it to help facilitate strategic part time work that maximizes fishing.

Regardless, should be thankful. Luck played a significant part in being in an enviable position.

Gratitude.

[OldSoul]

Tangler, so you’re holding off actively searching for the second/beach home? I’m sorry to hear that. What about your prior statement regarding being 80 years old with 10M in the bank, not fully taking advantage of being able to throw the kayak on the roof rack from ages 50-70 (or something like that)?

I think we’re going to take the plunge, and we are meeting with a builder this coming weekend. Our property is at the coast, 150 ft elevation (outside the tsunami inundation zone), with bay and ocean views. <90 minutes from our primary home. The kids are all out of the house, and I’m cutting back to part time next year. Once the home is completed, we’ll be splitting time between the city and the coast. We’ve been in our current home for 22 years, and we’ll either downsize or sell the primary home altogether when I retire in <8 years.

The recent passing or advanced cancer diagnoses of close family members have made us re-evaluate why we keep waiting.

[Tim]

My sister just bought a second home. Went to visit this weekend. Time will tell how this will work out in the long run, but from where I sit, she seems to be the poster child of why these second homes are a horrible financial decision.

she and her husband, who is a hoarder and massive spender, bought their first house for around $725k two years ago, 0% down. Really nice 4BR 3BA house in the city that has now appreciated to over $1M. In the meantime, my sister has gotten a BMW SUV and he’s replaced his vehicle twice, now has a gigantic Ford F150. Plus a blowout wedding, they acquired a dog and paid for the training, and now they just had a baby. Within a month of the baby being born, they bought an $830k lake house that’s 2BR and 2BA using a HELOC for the down payment. So despite having a newborn they’re up at the lake house every weekend trying to fix it up and get it ready to be lived in despite that both of them work. They want to use it as a hybrid vacation home and short term rental. Anyone who’s read a RE book and looked at the local market would probably tell you the numbers don’t work as an investment property. I can’t imagine it will get much occupancy in the winter.

My sister is freaking out because she hasn’t gotten her maternity pay yet and they have two mortgages to keep up. They can’t get much done because their jobs are demanding and the baby is exhausting. On top of that, my brother in law had a pulmonary embolism last year and gets fatigued fairly quickly.

it boggles my mind why people make these choices. I think my sister is caving in to peer influence, as she has several friends who have married rich and whose friends husbands bought their wives BMWs and second homes and they all seem to be happy on social media. For some people this is the new American dream, but to me it sounds like a special form of h*ll.

It would be interesting for you to try to analyze what makes siblings turn out so different. There is not a "playbook for parenting". At some point they just turn out different.