Thoughts on Buying a Vacation Home
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Over the years, we’ve toyed with the idea of owning a vacation home. When I was a kid, I always envied families with a lake house, and even as an adult I’ve been drawn to the idea.
As time has worn on, however, we’ve cooled on the idea. It’s funny, but now that we’re in a position to actually make that old dream a reality, it just doesn’t seem like a very good idea.
Cost of ownership
For starters, owning a second home can be a huge money pit. After all, you have to furnish it, pay taxes on it, insure it, pay for any repairs or maintenance issues that might crop up, buy a boat to tie to your dock, and so on.
And yes, I know… Many people view their vacation properties as an investment. At the same time, I’d be willing to bet that the vast majority of those with a second home are losing money on it.
The simple truth is that, unless you rent it out, you’re not likely to see much return on your investment. And if you do rent it out, then your desire to own a relaxing vacation property will have transformed you into a landlord.
Unnecessary headaches
Another problem is the amount of work that comes along with owning a second home. There’s grass to be cut, walls to be painted, and so forth. Before you know it, your formerly relaxing weekends will be spent maintaining not one, but two homes.
Freedom to travel
I’m also not crazy about is the idea of being tied down to one primary location for all (or most) of our vacations. While we love going to the beach, we also like variety. Sometimes we head to a lake, sometimes we go to the ocean, and we definitely like checking out new places.
If we had a vacation home, we’d feel obligated to make use of it, which brings us to my final point…
Guilt and regret
Finally, I’m not crazy about the feelings of guilt that would inevitably come from not using it enough. This is partly related to freedom to travel point, but it goes beyond that. If, for example, we decided to have a lazy weekend at home, I suspect we’d wind up feeling like we should be using our vacation home instead.
At the same time, if we were intent on renting it out to help offset the cost of ownership, we’d probably wind up feeling guilty if we used it during the high season. After all, that’s exactly when someone is most likely to want to rent it. We thus might wind up using it primarily during the least attractive times, and regretting that we couldn’t spend the days/weeks there.
The final analysis
Ultimately, we’ve moved from the “wish we had one” to the “no thanks” category when it comes to owning a vacation home. This isn’t to say that we won’t change our minds sometime down the road but, as things currently stand, we’re perfectly happy renting our fun.
Published on September 8th, 2010 - 13 Comments
Filed under: Real Estate
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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September 8th, 2010 at 9:16 am
Friends, Coworkers and I had the exact same conversation at dinner last week! (and came to the exact same conclusions). Most of those who had vacation homes had them because the home had been passed down to them by parents/grandparents/other family. Some who had one didn’t want it anymore because of the upkeep and other annual costs (taxes & insurance!) – and the other headaches you listed here. But they didn’t want to sell because it had “been in the family for so many years.”
My aunt tried to sell me a share of the family beach cottage for $20K last year (amazing what a financially strapped family member will do – her share is worth MUCH more than that!) I politely declined because of the reasons you listed. We did stay there for two weeks this past summer, but don’t want to tie ourselves down to driving 20 hours every year just to make use of the home. Or flying there every so often for “work weekends.” No, my parents took us there EVERY single summer…and while I have some good memories, I would like to give my kids more of a variety as far as summer vacations go
September 8th, 2010 at 9:53 am
I agree. DH and I have talked about this and there isn’t one place that we would want to visit enough to own property there. We’re also content to rent our fun.
September 8th, 2010 at 11:22 am
We struggle with the same thought process. One thought was to find a place on/near a lake or mountain within a 2 hour drive for very cheap and spend relatively peaceful weekends there (so it’s more of a weekend home than vacation home). We’ll still go back and forth a few times, I’m sure. But unless and until we’re committed to the idea, we’re staying on the sidelines.
September 8th, 2010 at 12:43 pm
How about buying a vacation home and renting it out to people like yourselves who don’t want to own but rent on their vacations?
You can hire a management company to handle maintenance and what not. You could probably make some money or at least offset some costs. It’s an investment in my opinion.
September 8th, 2010 at 2:31 pm
We just went through this decision-making process this summer. We’d found a condo near the beach for a great price, in an area close to my wife’s family. We thought we’d offer short-term vacation rentals to off-set the costs and use it ourselves whenever we felt like it.
Talking to a property management company, we realized that the costs involved would make it cheaper for us to get a hotel once a year, instead. In a vacation property, you need furniture, a TV, cable service, electricity, a cleaning service, insurance and regular maintenance, on top of paying the HOA fee whether someone is staying there or not, plus the management fee.
We ended up buying the property anyway, but plan to use it for long-term renters.
September 8th, 2010 at 5:57 pm
In our 20’s it was our dream to have a vacation home. In our 30’s and 40’s kid’s activities consumed us and no further thought was given to a vacation home. We took great family vacations and created wonderful memories. Now in our 50’s and empty nesters we got the bug again and this time acted on it, and so far have not regretted it for a moment. Depressed r/e values and low mortgage rates combined to create a scenario that we felt like if we are going to do this, now is the time. We have a place where our children can bring their families and create memories of their own, and we do not in any way feel “tied” to the property – we enjoy being there. Some additional thoughts:
1. While there have been expenses with the vacation home they are not as much as we expected. For one thing, when you are at one place then you are not at another, so utilities tend to even out across both properties.
2. We viewed r/e as a good alternative to having almost all of our investments in the stock market – we were incredibly exposed to the market but now have diversified some of that risk (assuming that over time we return to more normal asset correlations).
3. Finally, whether vacation property is a good investment or not is determined by the same laws of supply and demand that govern values for primary (home) real estate. In that regard, we bought something that they are not making any more of in this area, lakefront property. We believe that by buying when we did that over time this will turn out to be a decent investment and we get to enjoy it in the meantime. Also, as previously stated, we are much less exposed to the stock market.
So time will tell if this was a good idea or not, but for right now we are loving it (and so are all of our new friends that we didn’t know we had prior to owning a lake house!).
September 8th, 2010 at 7:36 pm
Excellent post and comments, all of which make sense. We are in our 50’s and bought a vacation home 7 years ago, as a 25th anniversary gift to ourselves. It is a lake house only 90 minutes away by car. Because it is so close, it truly is a second home because we are able to use it often and on short notice. That is key. On the other hand, the rural environment at the lake makes us feel like we are on vacation whenever we are there. Our grown kids live nearby and often join us there. We spend every Christmas holiday there. Our extended family comes every summer for a week, making it a reunion destination. There indeed are costs involved. But we look at it this way. Most people buy way more primary house than they need. We did not. For what many of our contemporaries are spending to own and maintain their McMansions, we can support two homes. If you start young with that mindset and resist the constant urge to upsize, when the time comes, you may be able to do what we did.
September 9th, 2010 at 10:33 am
I would think that most people that think about vacation homes typically think of the vacation home as their planned retirement location. My parents had a home in one location and a ‘work’ home where they made money. The home they planned to retire at was where they were putting their dreams — but until then, it was a vacation home.
September 9th, 2010 at 11:58 am
We’re still struggling with this. I’m in the “No Thanks” camp because of all the reasons you listed in your post. However, my aunt inherited our grandparents cabin on about 80 acres of woodlands and allows family to use it rent-free. We go there one week every year, which to me is perfect (it’s a 5-hr drive so no small trip), but it just makes DH want one of our own more than ever each time. I keep telling him he’s not seeing ANY of the down sides. But it bugs him that my aunt can show up to visit with us when he wants to be there alone – it’s his week off and he doesn’t want her there, but she owns the place and she’s my family.
So for that he wants to spend countless dollars up front and ongoing – it just strikes me as crazy. BUT if we could find something that out-in-the-middle-of-nowhere but sooo much closer to us (like the 90-minute drive another commenter mentioned), then … maybe. I just think of all the work and all the money while he thinks of nothing but the solitude of a week or weekend here and there…
September 9th, 2010 at 12:06 pm
fairydust: Another option would be to simply rent a place for a week every year.
September 9th, 2010 at 12:36 pm
i most thik about my vacation family,poeple retirment, vacation home ,etc My parents had a home in one location and a ‘work’ home where they made money. The home they planned to retire at was where they were putting their dreams — but until then, it was a vacation home.
September 9th, 2010 at 12:45 pm
i would like thing vication home,great family it was created people wonderful think about vication big family
1. While there have been expenses with the vacation home they are not as much as we expected. For one thing, when you are at one place then you are not at another, so utilities tend to even out across both properties.
2. We viewed r/e as a good alternative to having almost all of our investments in the stock market – we were incredibly exposed to the market but now have diversified some of that risk (assuming that over time we return to more normal asset correlations).
3. Finally, whether vacation property is a good investment or not is determined by the same laws of supply and demand that govern values for primary (home) real estate. In that regard, we bought something that they are not making any more of in this area, lakefront property. We believe that by buying when we did that over time this will turn out to be a decent investment and we get to enjoy it in the meantime. Also, as previously stated, we are much less exposed to the stock thank you……………
September 14th, 2010 at 1:16 pm
I don’t think I’ll ever be buying one simply because of the cost and the headache of maintaining a second home.