Vacation Home Advice and Thoughts?

[MRBXXXFVVS1]

For those who have vacation home(s), would love to get your advice and thoughts on:

1) Do you get a lot of use out of your vacation home(s)? Do you think it's worth it?

2) How do you view it as an investment compared to rental properties and the stock market? Understanding there are property taxes and maintenance costs. I think the return/appreciation would likely be lower than the stock market.

I personally don't think the hassle and wear/tear is worth it to me to rent out a vacation home, so it would probably sit empty 90% of the time.

3) Would you finance or pay cash? Benefit of financing is low interest rates, leverage, and can invest the capital elsewhere for better returns. Benefit of paying cash is I don't have to think about payments from a psychological perspective. I won't be able to take advantage of any tax deductions or benefits.

 

[missy]

Yes we use ours more than our NYC home these past 2 years. We didn’t buy it as an investment but we bought it for ourselves and for our enjoyment.

Generally real estate is a good investment however these days who knows. I do know a house on our block here at the beach just sold for way more per square foot than ever before. Incredible really and I think it’s because people are becoming desperate to get away from the city.

We are not planning on selling. At least not any time soon. Unless things change which of course could happen.

The one thing in life we can be sure of is change. In the meantime enjoy whatever decision you make.

Live for now with an eye towards the future but the here and now is the most important. We have paid both mortgages so own both free and clear. But property taxes are killer and our monthly maintenance expenses in NYC crazy high too.


It’s a fun (though stressful) decision and make your lists and evaluate and see what works best for you.


One more thing. Never take on more than you can easily afford. Rule number one. Live well within your means. Anything could happen. Don’t stretch yourself thin.

 

[kgizo]

1) Yes, We’ve had it for 16yrs. It is less than 2hrs away which was important to us so that we could zip out on a Sat and come back Sun. Our realtor said people either sell after 2 yrs (bc can’t use it with kids soccer/baseball/etc commitments) or stay through retirement. That has held true for the turnover we’ve seen with our neighbors.
2) It’s not an investment. If you want one you pay for it, and if not then don’t. We feel it is worth it compared to what we would spend on vacation and entertainment. Ours has appreciated, but you never know. The second home market is more fickle and if you needed to sell urgently that could be a challenge. If you are on a lake / ski mountain there are times people house shop and times they don’t. When the market crashes or financing is hard to get they don’t sell well. Right now homes are selling very well because people want a safer way to vacation. If you are considering renting it out be sure to understand tax laws and neighborhood restrictions.
3) In our market most pay cash so a realtor can advise you if you need to do that to make a competitive offer. Rates are really low right now. In our state we don’t get much a deduction for interest payments so you’ll want to understand what that means for you.

 

[MRBXXXFVVS1]

Thanks @missy and @kgizo for the perspective and advice! That's a great point that selling a vacation home could be challenging depending on the market. My main concern is if we will end up using it, as unfortunately it would be several hours away. Agree 1000% percent on not taking on too much, we believe in living well below our means.

 

[lilmosun]

It is less than 2hrs away which was important to us so that we could zip out on a Sat and come back Sun. Our realtor said people either sell after 2 yrs (bc can’t use it with kids soccer/baseball/etc commitments) or stay through retirement. That has held true for the turnover we’ve seen with our neighbors.

This is our situation

Mine is only a small lakeside condo - 90 minutes away,

Our use has fluctuated widely. It was great when the kids were young...the lake in the summer and we'd use it for ski weekends in the winter. Then the kids got to the age where had other commitments and use became more intermittent until they got to an age where they'd rather stay home to hang with friends, Now we don't use it much - some years not at all and basically hanging onto it for retirement. The now grown kids will occasionally go up there with friends and we do rent it our a handful of weeks a year to help offset the costs (same people each year - they clean it and treat the place as their own - so its not a hassle).

My husband would have preferred a house but for me, having our primary residence to maintain was enough. I wanted a get away, not someplace else we had to go up and do work on. Something that we are both glad of given our declined use. The condo community is very small and owner run to keep costs low - there is a shared beach, pool, laundry facility, tennis courts and each unit has a deed boat slip.

fwiw - as your situation is probably different - this was a total impulse buy because we had friends who owned there and it was so cheap (we bought it during a real estate/crash in the mid-90')s. We did get a mortgage rather than drain our savings (at the time). Our mortgage was the equivalent of a car payment so it was never a financial stretch and we paid it off in 10 years. We have had many offers to buy but still hang onto it because it doesn't really cost us anything to keep and we like knowing its there for us as a getaway, if not now, when we retire.

 

[whitewave]

Well, we inherited ours, so mortgage wasn’t applicable.

First world problem alert:

It’s hard owning 2 houses. (3 if you count the 2 bedroom RV we have: 38 feet long)

You never know where your stuff is. No matter how I try to dedicate house A things for house A, inevitably things will travel back and forth and I have to take an inventory every now and again to find the stuff that belongs in it’s place.

Next time I go to house B, I have to take a pic of the unmatched socks so I can see if they are at house A, etc.

We use house B all the time and our 23 year old son lives there for university now (we will probably never get rid of him). In the last few years, we had to spend 8k on roofing and siding, 4K on a new cedar fence for the yard, 3k for upgrading the wiring to handle all of the electronics. (The House was built in like 1945 post war and my son is the 4th generation in it). It’s very small, about 1100 sq ft and is worth more for the lot as a tear down now, so it’s becoming somewhat of a money pit. We hope to tear down and rebuild a cottage type house.

Every now and again, I dream of buying a beach condo, but that would only complicate matters and at that point, it’s just easier and cheaper to rent out someone else’s place for a month than to buy one. Like you mentioned, I wouldn’t want to rent it out if I owned one.

 

[whitewave]

Mine is anywhere from 2 hours 50 minutes to 5 hours away depending on traffic, which has been great lately with everyone working from home.

Thanks @missy and @kgizo for the perspective and advice! That's a great point that selling a vacation home could be challenging depending on the market. My main concern is if we will end up using it, as unfortunately it would be several hours away. Agree 1000% percent on not taking on too much, we believe in living well below our means.

 

[Gussie]

Mine is 10 hours away. Crazy, right? But it's where we want to be. We plan to move closer after all the kids are in college (7 years). We just bought it last summer and have used it a lot. Lol, we have been here since March! But in normal times, we expect to use it summer, spring break, Thanksgiving, and Christmas. We bought it so we wouldn't argue about where to vacation!

We won't sell it or rent it. I can't stand the thought of someone sleeping in my bed, lol! Plus I have decorated it for us, not renters, so I have fine antiques and art that I don't want broken. If we ever wanted cash out of it, the land is 75 unrestricted acres. We would sell land but not the house. We only keep a mortgage so we can escrow the taxes and insurance and it's low enough to be paid off at any time. All bills are autopay. We have a caretaker for the boat dock who also checks on the house periodically. We also have a guy mow in the summer. It hasn't been bad as far as maintenance goes.

I LOVE IT! I don't see cars for days and it is my happy place.

 

[jaaron]

My own feeling is that investment vacation properties are a different thing than vacation homes. One you buy with an eye to value, because they're in a popular location and are fairly bombproof in terms of damage, and one you buy with love, because they're what you want in a place you want to be. Neither way is more right than the other- they're just different, and I think you're sensible to be clearheaded about what you're looking for.

Like Gussie's, ours was a good six hour drive at the time we bought it (an hour flight, but then you have to factor in getting to the airport, security, etc.). It seemed crazy, but we love it then and still love it now because when we're there, we feel really away. And, like hers, it's been carefully renovated and has art and antiques, so we don't rent it. For me, if it has that vacation rental feel, it's not somewhere that's going to feel like home. We bought it a long time ago in a place we love. As we're somewhat conservative in our spending, it felt like a financial stretch at the time, but we managed to pay it off quickly. It's an old house, so needs a decent amount of upkeep, so we've been very fortunate in that one of the people who did a lot of the work on the house functions as a caretaker and he's amazing.

Since moving to another country and selling our primary house there, it's become an even more important place for our family as it's our home base when we go back. We did go through times of not using it so much during those busy kid-schedule-driven years, but always managed to spend a month there in the summer. And now, that the kids are older (college aged), they often go with friends.

Would it work to try renting something for a couple of months to see how often you get there?

 

[rocks]

Mine is 10 hours away. Crazy, right? But it's where we want to be. We plan to move closer after all the kids are in college (7 years). We just bought it last summer and have used it a lot. Lol, we have been here since March! But in normal times, we expect to use it summer, spring break, Thanksgiving, and Christmas. We bought it so we wouldn't argue about where to vacation!

We won't sell it or rent it. I can't stand the thought of someone sleeping in my bed, lol! Plus I have decorated it for us, not renters, so I have fine antiques and art that I don't want broken. If we ever wanted cash out of it, the land is 75 unrestricted acres. We would sell land but not the house. We only keep a mortgage so we can escrow the taxes and insurance and it's low enough to be paid off at any time. All bills are autopay. We have a caretaker for the boat dock who also checks on the house periodically. We also have a guy mow in the summer. It hasn't been bad as far as maintenance goes.

I LOVE IT! I don't see cars for days and it is my happy place.

A little piece of heaven. Just beautiful.

 

[NewShiny]

1) Do you get a lot of use out of your vacation home(s)? Do you think it's worth it?

Yes - we are there nearly every weekend in the summer and about one weekend a month in the winter. It is 100% worth it in this time of our lives. Having a getaway from our very demanding lives has been amazing for our family. It’s been especially wonderful to have this year. It’s been the only place I’ve truly been able to de-stress from all the chaos Covid has caused in various aspects of our lives.

I think the ability to use it often is tied to location. Anything greater than two hours away will be harder to get to on a whim.

2) How do you view it as an investment compared to rental properties and the stock market? Understanding there are property taxes and maintenance costs. I think the return/appreciation would likely be lower than the stock market.

We don’t view it as an investment. If you are considering this only or even majorly as an investment, I would not recommend it. You also don’t want to buy anything other than what you can comfortably afford under your means. You want a vacation home to be a respite from stress, not a cause of it. If you set it up as a vacation or even longer term rental, go into it knowing that’s your plan, because that will drive purchase (ie location to shops/restaurants/local attractions) and furnishing considerations (ie it should sleep as many as possible).

Like others have mentioned, I don’t want others sleeping in my bed or putting wear and tear on our place, so no plans to rent it out but we do allow close friends and family to use it. We have 5 bedrooms so plenty of room for guests.

3) Would you finance or pay cash? Benefit of financing is low interest rates, leverage, and can invest the capital elsewhere for better returns. Benefit of paying cash is I don't have to think about payments from a psychological perspective. I won't be able to take advantage of any tax deductions or benefits.

We financed to take advantage of low interest rates but did a short term loan (10 years) with plans to pay it off early. Not the best decision in terms of investing, but my DH is risk averse and wants to own outright ASAP.

One more note about vacation homes and finances - be prepared to pay more for pretty much everything related to a vacation home. Peace of mind costs money. It seems almost everything is more expensive than our main residence from yard and cleaning services to new expenses we picked up from having a boat, dock, and maintenance on the ‘fun’ stuff. It’s worth it to us at this time in our lives though - we spend more time outdoors with family and friends making wonderful memories.

Let us know what you decide!

 

[klrrrr]

Mine is 10 hours away. Crazy, right? But it's where we want to be. We plan to move closer after all the kids are in college (7 years). We just bought it last summer and have used it a lot. Lol, we have been here since March! But in normal times, we expect to use it summer, spring break, Thanksgiving, and Christmas. We bought it so we wouldn't argue about where to vacation!

We won't sell it or rent it. I can't stand the thought of someone sleeping in my bed, lol! Plus I have decorated it for us, not renters, so I have fine antiques and art that I don't want broken. If we ever wanted cash out of it, the land is 75 unrestricted acres. We would sell land but not the house. We only keep a mortgage so we can escrow the taxes and insurance and it's low enough to be paid off at any time. All bills are autopay. We have a caretaker for the boat dock who also checks on the house periodically. We also have a guy mow in the summer. It hasn't been bad as far as maintenance goes.

I LOVE IT! I don't see cars for days and it is my happy place.

Gussie, would love to see more photos of your dreamy getaway!

 

[winnietucker]

Did you decide? We’re considering this. Found a place we’d really like and I feel like while it may be cheaper to just VRBO it, having your own place opens up the possibility of going whenever. I’d love to hear if you decided to pursue it further/ initial thoughts.

 

[MRBXXXFVVS1]

Did you decide? We’re considering this. Found a place we’d really like and I feel like while it may be cheaper to just VRBO it, having your own place opens up the possibility of going whenever. I’d love to hear if you decided to pursue it further/ initial thoughts.

We are still considering it, I think we would if it was closer, but given it's a few hours away I'm not sure how often we would go. An idea is to rent a vacation home (for a year lease) and see how often you use it, if you're not ready to commit.

I think that the stock market or rental properties are a much better investment, so a vacation home is a hybrid of investment and pleasure expense. There are costs associated with it, but it's hopefully an appreciating asset.

I did decide that if we were to move forward, we would finance it given how low interest rates are and the opportunity cost to use the capital elsewhere (stock market, rental properties). Let us know what you decide!

 

[LLJsmom]

Talk to your CPA. Tax rules and how much you plan to use it can make a big difference from a tax stand point. Also depends on if you are US citizen with a US vacation home, or a US citizen with a foreign vacation home, or a foreigner, in which case I would have no idea. If you are a US citizen with a US vacation home, I would definitely talk to your CPA about whether tax planning strategies would be available to you, based on your intended usage of the home.

 

[winnietucker]

Talk to your CPA. Tax rules and how much you plan to use it can make a big difference from a tax stand point. Also depends on if you are US citizen with a US vacation home, or a US citizen with a foreign vacation home, or a foreigner, in which case I would have no idea. If you are a US citizen with a US vacation home, I would definitely talk to your CPA about whether tax planning strategies would be available to you, based on your intended usage of the home.

I didn’t realize there were tax benefits for a vacation home. Will look more into this, thanks for sharing!

 

[whitewave]

I will add that during Covid, having another house has been a sanity saver. Also, my daughter is in a townhouse now 1.5 hours away, and her roommate (whose parents own it) moved in with her boyfriend, lol. Her parents don’t know.

So now I have another place to hang out and she has a very small courtyard with grass, so I can bring the Bulldogs.

That is what I have been doing during the quarantine... going from house to house to townhouse.

Seriously, it’s saved my mental state being able to go to different places and not have to worry about germs.

 

[Aerielle Max]

Mine is 10 hours away. Crazy, right? But it's where we want to be. We plan to move closer after all the kids are in college (7 years). We just bought it last summer and have used it a lot. Lol, we have been here since March! But in normal times, we expect to use it summer, spring break, Thanksgiving, and Christmas. We bought it so we wouldn't argue about where to vacation!

We won't sell it or rent it. I can't stand the thought of someone sleeping in my bed, lol! Plus I have decorated it for us, not renters, so I have fine antiques and art that I don't want broken. If we ever wanted cash out of it, the land is 75 unrestricted acres. We would sell land but not the house. We only keep a mortgage so we can escrow the taxes and insurance and it's low enough to be paid off at any time. All bills are autopay. We have a caretaker for the boat dock who also checks on the house periodically. We also have a guy mow in the summer. It hasn't been bad as far as maintenance goes.

I LOVE IT! I don't see cars for days and it is my happy place.

WOW!!! I love the view - so relaxing and so calming. Just a perfect place to unwind. I dont mind living here with such a beautiful view.

 

[beatricecrummles]

Is there a vacant lot that is for sale? I would love to have one. The place is indeed amazing!