Do you think a vacation home is a good investment?

[Anonymous]

Anonymous wrote:OP, it doesn’t really sound like it makes sense for you?

Most people who purchase vacation homes already have a place they like to go.

If it’s actually the investment you care about, there are far easier ways to make money.

Yup!

Think of how many people you know who only vacation to the MD/Del eastern shore because "we own a condo there and we must use it". If you want the ability to travel and vacation in different places, don't get a vacation home. Unless you want to be a landlord and deal with all that entails.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have been talking about getting a vacation home for years. DH got a large bonus this year and we are now sitting on a sizable amount of cash. Our family likes to travel but we don’t necessarily like to go to the same place so it is hard to pick one place for a vacation home. We like the beach but may want to go to Maine one year and the outer banks the next. Same with skiing. We go somewhere different every year. I also don’t want to go to the same beach for 2 weeks. If we go on a long vacation, it would not be to a beach house.

From an investment standpoint, would be just be better off investing in mutual funds vs a vacation home?

We have a 2nd home, but it is not a vacation home. I do not understand the concept of a vacation home. Vacations are vacations, being at your home is not a vacation. No, our 2nd home is not an investment unless you count how much it has appreciated (which indeed has been significant) however, we have to maintain 2 homes so it is expensive.

Not sure why people think owning a 2nd home pervents vacatons.

Because if you stretch your budget to get a 2nd home, many times you cannot justify/afford to take other vacations. I know many many people who only go to their condo on the shore and maybe Disney. That's it...they always feel they need to use their condo to get their money's worth...and/or are worried if they don't get enough renters that they wont break even.

[Anonymous]

We have a beach home.
We have the money to vacation elsewhere but we often don't because we feel like we "should" use the beach house.
We have limited vacation time (one of us is in healthcare so can't work remotely) so if we have 2 weeks off over the summer
we usually go to the beach for at least one if not both.

If we didn't have this house, we would definitely go more places because we'd have to.

[Anonymous]

Calculate the CAP rate. If it's 8% or higher, it's a good investment.

[Anonymous]

We bought a beach house in a location we can easily fly to. We can just go for a weekend. We have a lot of work flexibility so that helps.
We don’t rent it out.

And we still travel to plenty of other places.

[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.

I don’t understand this. If I look on Zillow now at sold homes most of them have not sold for that much more or they are sitting for months or years on end.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, it doesn’t really sound like it makes sense for you?

Most people who purchase vacation homes already have a place they like to go.

If it’s actually the investment you care about, there are far easier ways to make money.

Yup!

Think of how many people you know who only vacation to the MD/Del eastern shore because "we own a condo there and we must use it". If you want the ability to travel and vacation in different places, don't get a vacation home. Unless you want to be a landlord and deal with all that entails.

No, lots of us have homes on the DE shore that we use as weekend getaways and we travel and vacation in different places. We are doing 2 international trips this year and 2 domestic trips. There are many like us out there.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, it doesn’t really sound like it makes sense for you?

Most people who purchase vacation homes already have a place they like to go.

If it’s actually the investment you care about, there are far easier ways to make money.

Yup!

Think of how many people you know who only vacation to the MD/Del eastern shore because "we own a condo there and we must use it". If you want the ability to travel and vacation in different places, don't get a vacation home. Unless you want to be a landlord and deal with all that entails.

No, lots of us have homes on the DE shore that we use as weekend getaways and we travel and vacation in different places. We are doing 2 international trips this year and 2 domestic trips. There are many like us out there.

Good for you. There are also plenty as described above---who "vacation" at their beach house because they feel the need to "get their money's worth". If you are worth enough, then yes you can have a vacation home and still take multiple other fancy vacations. However, many are not able to do so.

I mean, I own 3 homes, each worth $2-3M pre-renovations, recently gutted/renovated 2 of them, am taking 4 international vacations this year and 3 domestic vacations. So I guess that means everyone does that....

[Anonymous]

We own a beach house in Delaware, and use it all the time. We definitely spend vacations there instead of traveling overseas or elsewhere, and have no regrets at all. It's close, easy to get to, inexpensive, and relaxing. Love it there!

That said OP, you should not think of your vacation house as an investment. Maybe you can cover a bunch of your costs by renting it when you are not there, and that's fine. But as an investment, you have plenty of other options.

[Anonymous]

It feels like people are answering this in different ways and not always related to your question. You asked: is a vacation home a good investment?

My answer: It could be if it appreciates in value or you rent it out and at a minimum cover your mortgage but ideally make a profit.

Otherwise, no it's not a good investment.

Everything else is about whether a vacation home is a good decision based on lifestyle etc. It sure as heck is not for my family but YMMV

[Anonymous]

Anonymous wrote:

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

This

In which case it's not much different than buying an income property, e.g. rental. Because vacation homes demand varies by season and is subject to whimsy local rules that tend to change, your income stream also may become unstable, especially if you want to enjoy the property yourself. Depending on how much time you have to enjoy your property and what seasons are plausible (e.g. if only during school breaks, it's harder), you need to do the numbers. If you are loaded and don't rely on income from it, then go ahead, what do you have to lose. Vacation homes are the best for people who are retired, loaded and don't work for a living, work remotely and don't have school aged kids, or have loads of extra money they won't miss, and also live close enough to travel there frequently enough.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It depends on location, and a host of other factors, OP. To me, it is not worth the investment of my mental energy.

+1. For me its the mental energy specifically. Maintaining our primary home is work enough. I don't need more work. I'll stick to hotels and rentals. If I were uber wealthy and a personal assistant could manage all the property maintenance and contractors maybe, but I'm not.

This. It's draining having to worry about primary home with jobs and kids. I will just rent someone else's headache for whatever short vacation time we got. I prefer hotels TBH, have a nice pool, beach, zero maintenance, and go out to eat every day. The least thing I want after my daily grind is to be cooking, grocery shopping and cleaning. Maybe people with unlimited time off and adult kids appreciate this stuff. I want to be relaxed and served when I am on my measly 1 week - max 2 week vacations.

[Anonymous]

It’s been a great investment for us, we bought in 2017 for $1.2M and similar house on our street sold this year for $2.5M. This is Delaware beach

[Anonymous]

Anonymous wrote:We own a beach house in Delaware, and use it all the time. We definitely spend vacations there instead of traveling overseas or elsewhere, and have no regrets at all. It's close, easy to get to, inexpensive, and relaxing. Love it there!

That said OP, you should not think of your vacation house as an investment. Maybe you can cover a bunch of your costs by renting it when you are not there, and that's fine. But as an investment, you have plenty of other options.

It sounds awesome if you truly don't care about going somewhere else. I love to explore and go to new places. We are working though, so time is limited. For me vaca home would have to be an investment and managed rental, so would have to be somewhere we'd want to retire, as this is when we will be really using it. I would at that point prefer something warmer all year around vs. NE beach town depressing in off season.

[Anonymous]

Anonymous wrote:It’s been a great investment for us, we bought in 2017 for $1.2M and similar house on our street sold this year for $2.5M. This is Delaware beach

You got lucky. And rates were low and Covid had skyrocketed prices in these locations. Don't project that this luck will apply to new buyers, they are likelier to be underwater with current mortgage rates and with demand dying down for many reasons, incl. econ downturn