Buying a vacation home

[asmom]

I like to watch a show called House Hunters International on HGTV, mostly because I like to see how people in other countries live. It's fun. Many of the shows focus on Americans or Canadians buying vacation homes, usually in the Caribbean, but in other countries also and I am wondering what is the value of that? I mean, why is that better than renting at a resort for the 2 or 3 weeks a year that you are there. One of the physicians I work with bought a second home on a lake (and they are struggling to pay for it but that's a different story) but it is just exhausting to listen to her sometimes when she talks about going up to the lake. I'm wondering what's so great about it? I appreciate a different perspective.

[irmanator]

Maybe it is going to double as their retirement home? Though I wouldn't do it if the payments are that tight.

[wincrasher]

Financially speaking, you are probably better off renting a few weeks or months a year. Also you have the flexibility to go to different places.

A weekend place may be a different story. If you use it enough and it's a place you really enjoy, then it may be worth it to you.

[BlackDiamond]

I wouldn't like that because I would feel like I HAD to vacation in the same place year after year. I know people who bought a Lake House in NH and the wife said she regrets it because now they never go anywhere else.

[disneysteve]

Vacation homes are luxury purchases. They don't make financial sense. That what makes them luxuries. It is like trying to explain why anyone buys a $40,000 car or a $10,000 Rolex watch. Right or wrong, some people choose to sink their spare money into owning a 2nd home. Of course, under normal circumstances, real estate does appreciate over time, so there is some degree of investment aspect to this but the carrying costs often outweigh the appreciation value.

My wife and I have looked seriously into buying a home in Florida but we could never make the numbers work in our favor and we weren't willing to do it at a loss. So we continue to rent each time we go.

My partner at work has fallen in love with Costa Rica, a place often featured on that TV show I believe. Now he is the type who I fully expect will buy a place down there probably sooner than later. But he is not the guy you would want to take saving or investment advice from.

[EEinNJ]

Buying a second home can make financial sense if you can spend enough time there, if you can get it at a good price, or long term, it will become your primary/retirement residence. I've contemplated buying a place myself, but for now, just paid off the mortgage on the house I already have. I don't get enough time off, nor can I afford the ongoing expense and work of maintaining another place.

I have extended family that has a place in Maine, like "On Golden Pond". It's been in their family many years and is now worth a fortune. At least I get to visit a few days every couple of years.

At the other extreme, now you can buy a condo in SW Fla dirt cheap. I know someone who bought one for $30k, now prices have rebounded to around $75K. On the other hand, a snowbird I know spent $200K before prices tanked, now places like her's are going for $100K.

[ceejay74]

Agreed with all of the above. And since you asked for different perspectives on why people buy them:

I don't own a vacation home, but it's my pie-in-the-sky goal--one that I will only try for if I get out of debt and accelerate my retirement saving to a comfortable point. (I doubt I'll be able to do all that AND buy a vacation home, BTW.)

When I ask myself why, there is a strong emotional component that outweighs all others. I love the idea of being able to travel but having a familiar home base in that faraway place. I love to imagine offering to let friends use it if they're traveling in that area. My fondest childhood memories are of trips to my parents' vacation home in the gorgeous hills of West Virginia (though I grew to prefer urban settings in adulthood and would be more likely to purchase an apartment in a city for my second home).

Any purchase where the emotional comes before any practical consideration is definitely a luxury purchase, IMO (except perhaps decisions involving one's beloved relatives, where emotion will often come before practical even if it IS a necessity). That said, if I ever get to a financial place where I can actually buy a vacation home, there are some financial considerations:

Buying real estate is less of a complete "waste" of money than taking vacation trips, unless the value plummets to the point where the debt is unrecoverable. Of course it can be difficult to asses whether a value is inflated, but in most cases home value will stay stable or increase.

The possibility exists of renting the place out when you're not planning to be there; I rented someone's second home via the Web site VRBO.com (Vacation Rentals by Owner) and had a very nice time, and I'm sure that helps defray the costs of the second home somewhat.

But those factors don't take away from the fact of my vacation-home dream being a huge luxury purchase.

Even though it doesn't stop me wanting one, I realize there are potential cons, such as not wanting to visit the same place over and over again. I'd try to hedge my bets by purchasing a place in a European city with easy access to other cities and countries. There's also the risk of taking on debt later in life (I wouldn't likely be able to afford a good down payment for another 10-20 years) when my entire outlook recently has been getting completely debt-free. So it's a purchase I'd try to not let my emotions make the decision on. I'm actually glad I don't have the money for it right now, because the temptation would be so strong. If I still feel this strongly in 10 years, it might make more sense to take the leap. (You know the 10-second rule about impulse purchases in stores? This is my 10-year rule. LOL).

[BlackDiamond]

I guess for me, I just wouldn't want to always vacation in the same place. And even if I did, I would want to experience staying in different resorts, and also there is an element of "I don't have to make the bed or do the cleaning" that I like when I stay at a resort. I went to Disneyworld a bunch of years ago and stayed with my friend at their families condo there. It was just me and one friend. On the plus side, it was quiet and we each had our own bathroom. But beyond that, it didn't feel like a real vacation to me because I had to makes beds, and we cooked at home. I guess I am the sort who would just rather save money and travel less and have more of a "vacation" feeling vacation. I guess I can see it as an investment, like maybe you could rent it out to other people when you weren't there. But then there is risk and liability in that too.

[am_vanquish]

My in-laws have a condo about 2 hours from their primary residence and it serves as more of a a "weekend getaway" than a vacation home. They own their own business & run it out of their home, so their excuse is that they already spend WAY too much time in one place. The condo also has several amenities like pools, hot tubs, free spa services, etc ... so they mentally offset the cost on what they would pay anyway for a pool/spa. Because it's nearby and they make trips regulary, they don't feel like they HAVE to go there every time they go on vacation.

Also, it's a semi-popular beach town, so they make some decent money off of spring-breakers and snowbirds by renting, but still not enough to really justify it.

[cschin4]

Owning more real estate sounds exhausting to me. I guess i am not a high energy type. There is more than enough work to take care of one home from maintenence, cleaning, decorationg, etc that having another would be too much. If you are uber rich and can hire out all that stuff then fine. But, I know people with camps, campers, vacation homes and it seems like a drag to pack up and take off all the time. They feel compelled to use it since they own it past the point where it really is fun.

[jIM_Ohio]

I like to watch a show called House Hunters International on HGTV, mostly because I like to see how people in other countries live. It's fun. Many of the shows focus on Americans or Canadians buying vacation homes, usually in the Caribbean, but in other countries also and I am wondering what is the value of that? I mean, why is that better than renting at a resort for the 2 or 3 weeks a year that you are there. One of the physicians I work with bought a second home on a lake (and they are struggling to pay for it but that's a different story) but it is just exhausting to listen to her sometimes when she talks about going up to the lake. I'm wondering what's so great about it? I appreciate a different perspective.

Three factors

1) some consider the vacation home an investment
buy it for 150k, sell it for 300k 10-20 years later.

2) If you visit the area often, having access to comfortable living conditions is welcome. Keeps other costs lower.

If I stay in a hotel, I have to eat out 3-4 times a day, and its possible I do not have a fridge to keep my mountain dew cold or microwave to heat up some oatmeal or popcorn. If I have a house or condo I get those conveniences and I am willing to pay that price for the conveniences.

3) renting the house to others is a way to supplement income or offset expenses.

I know several family members which have two houses- here are examples

1) My aunt and uncle have a condo in Florida because they visit there often. They can also have their grandkids and kids use the condo on trips to disney world and have even offered the place to my wife and I and other family too.

2) A different aunt and uncle have a house in a Denver suburb, then a condo in the mountains by Loveland ski resort. They ski many weekends in the winter, and dealing with a 2 hour commute in traffic to get home was not worth the "cost", so they purchased a condo which they stay at for ski weekends. They let other family use the condo as well (of course most of us are east of the Mississippi).

3) I plan to get a vacation house in a few years as well- gives a good get away for any time I want a weekend away.

[mdcrim]

We bought a vacation (weekend) home in 12/09. I'll share my reasoning for the purchase.

First and foremost, I was able to go in with my parents on the purchase 50/50. They are retired and have always wanted a weekend place but couldn't afford one on their own. This way all costs can be split 50%. We have an escrow account, funded by both of us, I handle all bills and repairs.

The home is under two hours from both our and our parents primary residences, so it is doable to visit for a day trip or a short overnight. It is located in an area that has activities year round. There is a lake for summer time and small ski resort for the winters.

We have a geriatric dog who is unable to be boarded or left with anyone due to special needs, so this affords us a way to bring him along (I know, he won't be around forever but we are a dog family so I know we'll get one or two more eventually, after he passes).

My son is 8 years old so I figure he's going to be willing to hang out with us for maybe another 7-8 years if we're lucky so this gives us a place to go with him. The house is large enough for guests so we can bring his and our friends with us.

It is in a rentable area but we are not going to do that unless we end up never using the property. I don't like the idea of people sleeping in my bed and using my things.

Regarding financing, we were able to refinance our primary residence and pull the money out. By obtaining a lower interest rate, our monthly payments for our mortgage only went up $240/ month and we own the weekend home outright. I figure it's going to cost roughly $5000 to $6000 per year ($3000 each family) for taxes, insurance, utilities and regular maintenance, although I know we will have to deal with big ticket items over the years.

We went into this purchase with the idea that we are not going to be tied to this house. Meaning we are still going to vacation in other places and will not feel guilty about not using this house all the time. We figure if we can get up there one weekend a month it will be worth it. We spent Spring Break there and intend to spend 1-3 weeks this summer there. We fully intend to host extended family there for Thanksgiving and Christmas as well.

Lastly, we have been looking in this area for years and the prices have dropped roughly 30% since we started looking. We may never make a profit on this house, but I think we'll probably at least break even. Either way, this is not a purchase for an investment, it is for us to use.

Hope my reasoning makes sense to some...

[asmom]

We bought a vacation (weekend) home in 12/09. I'll share my reasoning for the purchase.

First and foremost, I was able to go in with my parents on the purchase 50/50. They are retired and have always wanted a weekend place but couldn't afford one on their own. This way all costs can be split 50%. We have an escrow account, funded by both of us, I handle all bills and repairs.

The home is under two hours from both our and our parents primary residences, so it is doable to visit for a day trip or a short overnight. It is located in an area that has activities year round. There is a lake for summer time and small ski resort for the winters.

We have a geriatric dog who is unable to be boarded or left with anyone due to special needs, so this affords us a way to bring him along (I know, he won't be around forever but we are a dog family so I know we'll get one or two more eventually, after he passes).

My son is 8 years old so I figure he's going to be willing to hang out with us for maybe another 7-8 years if we're lucky so this gives us a place to go with him. The house is large enough for guests so we can bring his and our friends with us.

It is in a rentable area but we are not going to do that unless we end up never using the property. I don't like the idea of people sleeping in my bed and using my things.

Regarding financing, we were able to refinance our primary residence and pull the money out. By obtaining a lower interest rate, our monthly payments for our mortgage only went up $240/ month and we own the weekend home outright. I figure it's going to cost roughly $5000 to $6000 per year ($3000 each family) for taxes, insurance, utilities and regular maintenance, although I know we will have to deal with big ticket items over the years.

We went into this purchase with the idea that we are not going to be tied to this house. Meaning we are still going to vacation in other places and will not feel guilty about not using this house all the time. We figure if we can get up there one weekend a month it will be worth it. We spent Spring Break there and intend to spend 1-3 weeks this summer there. We fully intend to host extended family there for Thanksgiving and Christmas as well.

Lastly, we have been looking in this area for years and the prices have dropped roughly 30% since we started looking. We may never make a profit on this house, but I think we'll probably at least break even. Either way, this is not a purchase for an investment, it is for us to use.

Hope my reasoning makes sense to some...

It sounds like fun. It doesn't have to make sense to others. I'm not judging, I'm just curious.

[asmom]

Owning more real estate sounds exhausting to me. I guess i am not a high energy type. There is more than enough work to take care of one home from maintenence, cleaning, decorationg, etc that having another would be too much. If you are uber rich and can hire out all that stuff then fine. But, I know people with camps, campers, vacation homes and it seems like a drag to pack up and take off all the time. They feel compelled to use it since they own it past the point where it really is fun.

Well that's kind of the way I feel! I think you are on to something with the low energy/high eneryg type. Apparently, I'm in the former group. I like to play too but that sounds like a lot of work to me. But if you got the energy to pack it all up and head out 3 or 4 times a year or more then I say go for it, it really sounds like fun.

[disneysteve]

2) If you visit the area often, having access to comfortable living conditions is welcome. Keeps other costs lower.

If I stay in a hotel, I have to eat out 3-4 times a day, and its possible I do not have a fridge to keep my mountain dew cold or microwave to heat up some oatmeal or popcorn. If I have a house or condo I get those conveniences and I am willing to pay that price for the conveniences.

This is all true but before buying, you should always run the numbers and compare owning to renting. In some areas, renting is actually far cheaper without the hassles and responsibility of ownership. The Disney World area is a perfect example. We have been renting homes there for about 20 years now. Because the market is so saturated with rental properties, rental prices have stayed steady. We literally pay no more today than we paid 10 or 15 years ago. We can easily rent a 3-bedroom house with full kitchen, pool, WiFi, washer and dryer and more for $100/night or less. We've looked into buying, spoken to other owners and realtors and property management companies and the numbers just don't add up. It is cheaper to rent. Plus, we are able to adjust our accommodations each trip based on our wants and needs. If just the 3 of us are going and just for 1 week, a 2-bedroom condo is plenty. Last year, we went for 2 weeks and wanted our own pool, so we got a 3-bedroom house. One year, both of our mothers joined us so we rented a 4-bedroom house. We wouldn't have that flexibility if we owned.