How much $ to buy vacation home

[Anonymous]

How much money do you think it is prudent to have in retirement and investments before buying a vacation home (really a condo)? Some facts - have a $1.5m house here with mortgage around $800k. Rate is low, so no plan to pay this off early, plus we deduct the full amount of the interest payments. With vacation home, we would likely pay cash since we are maxed out on interest tax deduct and it is not a necessity. How much would you want in the bank to feel like this is not a stupid thing to do? We would pay costs associated with house out of cash flow (taxes, condo fees, etc).

[Anonymous]

How much do you want to spend on the second home? $300k or $1m.

[Anonymous]

Anonymous wrote:How much do you want to spend on the second home? $300k or $1m.

$750k-$1m

[Anonymous]

How far away is it? How old are your kids?

We’ve had and have a few. The ones that are far away or are in a place that’s not too far and the traffic is bad really negatively affected the pleasure derived from them. If the kids are in any sports or time sucking activities that matters as well because it affects the amount of use. If neither of those things matter, the amount would have to be low enough that if I lost it all, it wouldn’t matter. We don’t know enough information about you to answer this. For example, you could pay cash but does that put a dent in your savings? Is resell easy? Would you easily have money and people to do maintenance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How much do you want to spend on the second home? $300k or $1m.

$750k-$1m

At least $6 million

[Anonymous]

How old are you and what's your Hhi?

[Anonymous]

Anonymous wrote:How far away is it? How old are your kids?

We’ve had and have a few. The ones that are far away or are in a place that’s not too far and the traffic is bad really negatively affected the pleasure derived from them. If the kids are in any sports or time sucking activities that matters as well because it affects the amount of use. If neither of those things matter, the amount would have to be low enough that if I lost it all, it wouldn’t matter. We don’t know enough information about you to answer this. For example, you could pay cash but does that put a dent in your savings? Is resell easy? Would you easily have money and people to do maintenance.

Plane ride. We go there 3-4 times a year now. Spouse will also sometimes stay there for work. Yes, it will of course put a dent in our savings. We are going to take $ from it to pay for the condo. Plus then the monthly expenses associated with it will come out to cash flow. Resell is pretty easy in this place.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How far away is it? How old are your kids?

We’ve had and have a few. The ones that are far away or are in a place that’s not too far and the traffic is bad really negatively affected the pleasure derived from them. If the kids are in any sports or time sucking activities that matters as well because it affects the amount of use. If neither of those things matter, the amount would have to be low enough that if I lost it all, it wouldn’t matter. We don’t know enough information about you to answer this. For example, you could pay cash but does that put a dent in your savings? Is resell easy? Would you easily have money and people to do maintenance.

Plane ride. We go there 3-4 times a year now. Spouse will also sometimes stay there for work. Yes, it will of course put a dent in our savings. We are going to take $ from it to pay for the condo. Plus then the monthly expenses associated with it will come out to cash flow. Resell is pretty easy in this place.

I would not for a plane ride. If you do it as an investment - for others to stay in...maybe. For yourself? Just get hotel rooms or a rental for that cost and headache.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How far away is it? How old are your kids?

We’ve had and have a few. The ones that are far away or are in a place that’s not too far and the traffic is bad really negatively affected the pleasure derived from them. If the kids are in any sports or time sucking activities that matters as well because it affects the amount of use. If neither of those things matter, the amount would have to be low enough that if I lost it all, it wouldn’t matter. We don’t know enough information about you to answer this. For example, you could pay cash but does that put a dent in your savings? Is resell easy? Would you easily have money and people to do maintenance.

Plane ride. We go there 3-4 times a year now. Spouse will also sometimes stay there for work. Yes, it will of course put a dent in our savings. We are going to take $ from it to pay for the condo. Plus then the monthly expenses associated with it will come out to cash flow. Resell is pretty easy in this place.

Work all the numbers and be brutally honest with them. Will it cash-flow positive?

I did the math on this at our favorite beach place (and I'm not telling where). I came to the conclusion that, for 2 weeks at the beach, I could spend $10-15K annually as an "owner" versus $3-4K renting the place. And when a hurricane is coming, well....as an annual renter it is regrettable but not my own problem.

"Owning" things comes with a lot of unexpected events. It might be a good fit for you, or it might not. Myself, I would retire all debt on my personal home first (which, personally, I have done) before even considering this. But we all are different. Get lots of advice and look at the numbers, but at some point its a decision of what you value.

Best wishes.

[Anonymous]

Definitely won’t be cash flow positive. We won’t rent it out. Best case - the value goes up. But we will still be coming out fonpocket every year for the taxes, etc. Which is fine. This is more of a consumption/asset allocation question.

[Anonymous]

Also - we definitely are not paying off our primary home mortgage. The interest rate is 3.325% and we deduct the interest. We have beaten that on the market by a multiple. So I think it makes sense to keep it, at least for now.

I am just wondering how much people would want to have before sinking $1m in to an asset that isn’t necessary. I am more conservative and think we should have a bit more and spouse thinks we can totally do it now.

[Anonymous]

How much is the condo fee on a place like that? $3k a month? I’d say you will be much better off even renting a place for $10k a week in the same building.

[Anonymous]

The condo fees range from $650-$1000/month. All in, taxes, condo fees and maintenance will be about $30k/year. Right now we are going during Christmas and renting a place is $$$ (ski town).

[Anonymous]

If it is a vacation home condo and not a place you live at full time, buy an older smaller one a block or two from beach that is cheap. I bought mine in 2013 for 290K cash. I am surrounded by million dollar homes. My place is only 1970s garden apt complex in town. I use it to go to beach, not sit in unit.

A one million dollar vacation home most banks want 25% down. Taxes are around 12K a year. Flood and Home insurance higher at beach like around 4k a year. A 750K mortgage is like 3K a month. So like $4,300 a month.

My condo I bought 290K my common charges $350 a month, older unit so only pays $350 a month property taxes. My insurance only $600 a year as discounted as the master condo policy covers a lot. It costs me $750 a month.

I rent it out very rarely. I get 2k a week in summer. I stopped renting it but this one couple from VRBO a few years ago rents it two weeks in July each year for 4k. The main issue as a secondary home in a flood zone a primary home unless it is elevated and to FEMA requirements flood insurance is expensive. A condo flood is covered in master policy and no surcharge to second owners.

[Anonymous]

Anonymous wrote:If it is a vacation home condo and not a place you live at full time, buy an older smaller one a block or two from beach that is cheap. I bought mine in 2013 for 290K cash. I am surrounded by million dollar homes. My place is only 1970s garden apt complex in town. I use it to go to beach, not sit in unit.

A one million dollar vacation home most banks want 25% down. Taxes are around 12K a year. Flood and Home insurance higher at beach like around 4k a year. A 750K mortgage is like 3K a month. So like $4,300 a month.

My condo I bought 290K my common charges $350 a month, older unit so only pays $350 a month property taxes. My insurance only $600 a year as discounted as the master condo policy covers a lot. It costs me $750 a month.

I rent it out very rarely. I get 2k a week in summer. I stopped renting it but this one couple from VRBO a few years ago rents it two weeks in July each year for 4k. The main issue as a secondary home in a flood zone a primary home unless it is elevated and to FEMA requirements flood insurance is expensive. A condo flood is covered in master policy and no surcharge to second owners.

It isn’t at the beach and we are going to pay cash.