Do you think a vacation home is a good investment?

[Anonymous]

Anonymous wrote:Yes. We bought 3 and Airbnb then when we are not staying at them, brings in a modest income of 100k

8:55 here. If this is the intention, be sure to check on the availability of a vacation rental license and any limitations for weekly rentals in the area you’re considering. In some highly desirable places where house prices have risen a lot, local sentiment has driven limitations and even restrictions on new vacation rentals. The pandemic made this worse, as wealthy people from away bought up houses. Due diligence is more necessary than ever.

[Anonymous]

Anonymous wrote:A vacation house isn’t an investment. It’s a place to go enjoy. If you’re not going to do that somewhat regularly then there isn’t a point

This. If we could go somewhere different every vacation we would, one of my kids makes that impossible so we have a summer house. Bought it ten years ago, planning on retiring here and it has been one of our best investments, but it doesn’t make sense for people who don’t want to keep going back to the same place. If you want to buy something and rent it out do that closer to where you live.

[Anonymous]

Anonymous wrote:A second home is not an investment unless you want to become a landlord/property manager.

This

[Anonymous]

Anonymous wrote:

Anonymous wrote:A second home is not an investment unless you want to become a landlord/property manager.

This

This. And consider how it would feel if there were a hurricane, flooding, whatever disasters are typical of the area. I always thought we'd have my mom's place in Vermont as a permanent vacation home but after the recent flooding I'm not sure it's worth it to deal with.

[Anonymous]

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

This all sounds great until you’re demolished by a hurricane.

We had a vacation/rental property ocean front in Corolla. Absolutely money pit and stressful AF. Sold it and put the proceeds in mutual funds. Much easier.

OBX used to just be white AF. Now it’s white and MAGA AF.

[Anonymous]

OP, it sounds like a second home doesn't make sense for you regardless of affordability. You don't have one particular place that you want to visit many times.

We love our second home. It's an area we frequented prior to buying and knew we loved it. We have so many wonderful family memories there with our kids. We love the ease of just heading there for weekends and having toiletries and all our stuff already there. We love not having to plan a getaway. We also do vacations to other places, but we look for every excuse to go there.

[Anonymous]

Anonymous wrote:

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?

Tons of short sales/foreclosures on OBX - you just have to look for them.

[Anonymous]

Anonymous wrote:No, it is not a good idea as purely an investment.

This

[Anonymous]

Anonymous wrote:Tons of short sales/foreclosures on OBX - you just have to look for them.

Where and how do you look for short sales/foreclosures on the OBX?

[Anonymous]

Anonymous wrote:A vacation house isn’t an investment. It’s a place to go enjoy. If you’re not going to do that somewhat regularly then there isn’t a point

+1, we got a small house on the bay in SoMD in 2015 and enjoy going there every couple of weeks. We don't rent it out as we don't like strangers being in our space. The house is a 2nd home and we rarely pack anything when we go, it's about 1.5 hrs from NoVA.

[Anonymous]

Anonymous wrote:

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?

We only rent it for the weeks in the summer when it commands top dollar and then use it the rest of the time or allow our parents to stay. It’s a beautiful home and I get so happy every time we go. Our property management company keeps the home beautiful and their fees are very reasonable for the service they provide.

We paid $1.1M and a conservative estimate of its current value is around $2.5M. So between the $500K down payment and $115K in repairs, those are just about our only costs since the mortgage, insurance and repairs have been pretty closely covered the summer rental fees. (Except 2020 when we did not rent, but used it as soon as the OBX bridge opened up.) If we were to sell it now, that would be huge gain on our $615K initial investment and would beat the performance of our stock market holdings since 2017.

To the hurricane comment, that’s the case with virtually all ocean front homes. It’s a risk, but that’s the nature of the world. Some won’t be willing to risk and that’s fine for them too.

For us, it was a very wise choice. If we did not have the cash to fix up the home when we first bought it, it would be another story. Having the cash to make the house beautiful and ready to rent at a premium was key.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?

We only rent it for the weeks in the summer when it commands top dollar and then use it the rest of the time or allow our parents to stay. It’s a beautiful home and I get so happy every time we go. Our property management company keeps the home beautiful and their fees are very reasonable for the service they provide.

We paid $1.1M and a conservative estimate of its current value is around $2.5M. So between the $500K down payment and $115K in repairs, those are just about our only costs since the mortgage, insurance and repairs have been pretty closely covered the summer rental fees. (Except 2020 when we did not rent, but used it as soon as the OBX bridge opened up.) If we were to sell it now, that would be huge gain on our $615K initial investment and would beat the performance of our stock market holdings since 2017.

To the hurricane comment, that’s the case with virtually all ocean front homes. It’s a risk, but that’s the nature of the world. Some won’t be willing to risk and that’s fine for them too.

For us, it was a very wise choice. If we did not have the cash to fix up the home when we first bought it, it would be another story. Having the cash to make the house beautiful and ready to rent at a premium was key.

See, here’s the thing. It’s worth that now, but OBX property values rise and fall with reckless abandon. There is zero guarantee that your house will maintain or increase in value, and an equally good chance that it will decline. And the decline can happen with very little notice.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?

Tons of short sales/foreclosures on OBX - you just have to look for them.

Meaning lots of bad investments. Buyer beware.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For us, absolutely! We purchased an ocean front house in Corolla, NC in 2017. We got it for a steal and it has a mortgage at a nice low fixed rate. It needed a little bit of TLC with new paint and new furnishings and we redid the bathrooms and decks. The TLC cost about $115K. It was a stretch at the time, but I’m so glad that we took the leap and made it work.

We rent it for 5-7 weeks in the summer and net almost $13,000 per week and it pays for the mortgage, taxes, insurance and upkeep. And we spend the other weeks enjoying the house.

And the house’s value has shot up.

But if we had not had the cash to fix it up and gotten lucky with the interest rate, it would not have been a good move on our part.

Why don’t you rent it the rest of the year? Are you using it! How much did you pay for it?

We only rent it for the weeks in the summer when it commands top dollar and then use it the rest of the time or allow our parents to stay. It’s a beautiful home and I get so happy every time we go. Our property management company keeps the home beautiful and their fees are very reasonable for the service they provide.

We paid $1.1M and a conservative estimate of its current value is around $2.5M. So between the $500K down payment and $115K in repairs, those are just about our only costs since the mortgage, insurance and repairs have been pretty closely covered the summer rental fees. (Except 2020 when we did not rent, but used it as soon as the OBX bridge opened up.) If we were to sell it now, that would be huge gain on our $615K initial investment and would beat the performance of our stock market holdings since 2017.

To the hurricane comment, that’s the case with virtually all ocean front homes. It’s a risk, but that’s the nature of the world. Some won’t be willing to risk and that’s fine for them too.

For us, it was a very wise choice. If we did not have the cash to fix up the home when we first bought it, it would be another story. Having the cash to make the house beautiful and ready to rent at a premium was key.

See, here’s the thing. It’s worth that now, but OBX property values rise and fall with reckless abandon. There is zero guarantee that your house will maintain or increase in value, and an equally good chance that it will decline. And the decline can happen with very little notice.

Sure, that’s part of the risk. Just like any investment. Real estate is no different.

But I’m willing to take this particular risk and if the house declined in value, it’s only a modest portion of our NW. We have plenty of other assets in property and the stock market.

And so far it’s paid off handsomely in our case. $615K of our cash in 2017 for a $2.5M asset in 2023 plus the use of that asset has worked out quite well. It’s fine if others want to make different choices.

[Anonymous]

Homes in vacation areas rarely appreciate like primary residences and are more subject to headwinds in the broader economy. When the economy is weak, vacation property values suffer much more than primary residences.

If you're speaking of a property to rent out when not using it personally, you're speaking of a business and the amount of income you derive from it will depend on your business acumen, the amount of effort you put into it, your overhead, and the strength and consistency of demand for rentals in that location. Whether the ROI will be superior to more liquid investments in the equity and bond markets is difficult to predict, but one consideration is that an individual rental property is a single highly concentrated asset, which iin investment terms is always highly risky.