Vacation Homes: Tranquility or Slavery?
By Ric Edelman
Don’t underestimate the expense and work of a second home
You’re on vacation, having a great time. You’re relaxed, enjoying the warm weather, great views and terrific food. You casually say to your spouse, “Wouldn’t it be great to live like this more often?”
You agree it would, so you buy a home in the area. No more hotels! No more packing and unpacking! It’s yours — a home away from home!Will you live to regret the decision? Many do, for these reasons:
- You realize you can’t visit the property as often as you’d hoped.
- You soon get bored traveling to the same place every vacation.
- You underestimated the cost of furnishing a second home — everything from furniture to televisions to kitchen utensils.
- You didn’t anticipate the time needed for repairs and maintenance. When you do go to the house, you spend most of your time fixing leaking faucets, not relaxing at the pool or ski lodge.
- There’s no room service. You have to cook all your meals — and that means going to the grocery store instead of the beach. This vacation trap is quite common. Lost in the fantasyland of vacation, it’s easy to be struck by inspiration — and then make a decision you’d never make at home, where you can think more logically.
Making a major real estate decision while on vacation is a terrible idea. If you’re really thinking about buying a second home, take your time. Consider the long-term consequences and keep the following in mind:
- It’s a vacation home, not an investment property. You can’t have it both ways: The property will be a place for you to enjoy — or a rental to produce income. Few owners of second homes succeed in doing both. Why? Because you won’t decorate the same if you rent it out — and that means you won’t enjoy the house as much when you are there. And tenants will want to rent the property at the best times — exactly when you want to be there.
- Be realistic about how often you will use the property. Think long and hard about how often you’ll be able to visit. Understand that owning a vacation home might prevent you from visiting other destinations. Is that a tradeoff you’re willing to make?
- Add 20% to the costs you’re expecting. From the mortgage and property taxes to maintenance and furnishings, you are going to spend more on your vacation home than you anticipate — just as you have done with your primary residence.
- Will the house fit your future lifestyle? That vacation spot might fit your family’s lifestyle perfectly. But if your kids are all grade schoolers, will they want to spend the entire summer at that house as teenagers?
- Are you assuming the property will grow in value? Lots of people who bought beachfront property in 2005 today are regretting that decision. Remember: Real estate values don’t always rise.
Don’t let the above dissuade you from buying a vacation home. We simply want to help you consider all aspects of the decision, so you can avoid buyer’s remorse. If you’re thinking about buying a vacation home, talk with your financial planner before you talk to a real estate agent. We can help you make a smart decision.