Is a Vacation Home Worth it?

(Photo Details:  Murphy Brown in Calistoga)

Is a vacation home worth it?  Let’s just cut to the chase.  No, it’s not.  I mean, unless money is of no concern to you.

Of course it’s not always about money, is it?

Vacation with your pet

I have been joking lately that I bought my vacation home in the Napa Valley for my dog and sold it for my cat.  That joke is not really far from the truth, in that it actually is the truth.

Fifteen years ago, when we bought our cute little cottage in the wooded hills of Calistoga, I did have more in mind than just vacationing with my beagle Murphy.  We lived in San Francisco where the weather is cold and foggy in the summer.  I would commute home each evening from the sunny peninsula into a bank of fog, don gloves and a knit cap, and brave the wet wind to walk my dog after work.  All while knowing 30 minutes in any direction it was 80 degrees.

The idea of owning a vacation home some place warm was appealing. 

Add to that the fact that I was only allotted three weeks of vacation each year to get away, and a weekend get-away property just seemed dreamy.  The icing on the cake was that we could bring our doggy to our home-away-from-home and so the whole family could be on vacation together.

Vacation with your friends

Not only that, our vacation house became a great gathering place for our friends.  Friends would come up for winetasting weekends.  We’d dine al fresco on the warm summer nights and play games by the fire in the winter.  And of course our friends loved it even more because we often loaned it to them for their own getaways, even without us.

Life changes and you still own that house

A few years after buying that house, we moved down to the peninsula so I could eliminate my grueling commute.  That put us 1) farther away from our vacation home, and 2) in a spot where the weather was just as good as Calistoga, if not better.  We didn’t go quite as often.

And also our friends’ lives got busier with kids and life in general, and those wine-tasting weekends dwindled. 

Retirement

After I retired, we figured it was only a matter of time before we would be selling the house so we decided to move there for two years and convert it to a principal residence so we could sell it and exclude the gain from our taxes.   We could kill two birds with one stone--save some taxes and get our fill of the place before we sold it. 

That was 2008-2009.  The housing market tanked and so that tax plan turned out to be irrelevant.  There was no longer any gain to worry about if we sold the house.  So we held on until now.

Back to pets

So here we were, using the house less and less, when the neighbor’s kitty decided to move in with us.  Cat’s don’t like to go on weekend getaways like dogs do.  And if I’m going to be away from my cat to go on a little trip, I’d rather it be somewhere else, not the same place I’ve been going to for 15 years.

The money

So there you have it, I bought the house for the dog and sold it for the cat.  But when you read a title like is something worth something, you’re thinking about money, not pets, right?  So let me tell you about the money.

Yes we sold the house for more than we paid for it.  That would make you think it was worth it wouldn’t it?  Wait a minute.

Don’t forget all the money we put into it, taking out dead trees, rebuilding a damaged bridge on our private road, the new water-heater, the kitchen and bathroom updates, the landscaping, the furnishings, I could go on and on.

Not to mention, it costs money just to keep a house, property taxes, insurance, utilities.

Basically it was a wash.  After considering all the net costs, we walk away even.  Which sounds great really, right?  Because that means you got free vacations for 15 years.  Sort of.

The other way of looking at it is if we took all the money that we put into that house and instead invested it, the earnings on that money would have paid for all those vacations and then some.  Even at the Four Seasons.  Oh, and at the Four Seasons you don’t have to do yard work or clean up after yourself when you’re done.

But then I couldn’t have vacationed with my doggy.  So I guess it was worth it after all.

Related Posts:

Penny Wise and Pound Foolish (or Stupid Tax Tricks)

Two Dumb Financial Decisions I Made--and Why I Made Them

My Short Career as a Landlord

 

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Comments

[Still the Lucky Few]

If only we could see into the future when contemplating a vacation home! I've never heard of a 'good' story. Mostly people don't use it, and lose money. It's sort of like owning a sailboat (never a good idea, I've always thought!)

[Retired Syd]

Lucky: I guess it's one step better than a sailboat, at least it's an appreciating asset. But I do relate to that joke my step-mom told me years ago: Wha't the second happiest day in a boat owners life? The day he bought the boat. Then what is the happiest? The day he sells it!

[Sue]

We just purchased a Park Model in a 55+ community in Arizona. It's just under 400 sq ft and wasn't all that expensive. Our plans are to get out of the Colorado winters and live in AZ for 6 months. Then we can enjoy the Colorado summers. We are so looking forward to staying in our AZ tiny home, starting this winter.

We haven't invested that much money, so hopefully can do this for many years to come.

[Mark]

I never put in a pool when the kids were younger because I interviewed about 10 people who had them. They pretty much all said: the first summer you will use it every day, the second summer a couple days a week, 3rd summer some and the rest of the years you just pay a pool man and look at it.

[Cindi]

After 10 years, we sold our Newport, RI beach house for $50,000 less than what we paid. Throw in, in order to sell the home the EPA forced us to replace our septic at a cost of $37,000. Add in the brokers fee and I'm looking at a $100,000+ loss. At the closing our attorney congratulated us on our loss because he said the state of Rhode Island was going to kill us out-of-towners taxes.
Go figure.
I don't think about money anymore. I can't take it with me. All I know is that my family had a blast in the beach house for 10 years and yes! we owned a sailboat. After a while, I have forgotten the lost money and just remember our good times. The happiest day of my life was selling that albatross AND that sailboat! LOL.
As for that $100,000 loss, my NY home has appreciated as much this past year. So, it's awash also.
Think I'm cured?
I just closed on a Florida condo this past Tuesday. Eventually DH and I WILL retire here but in the interim we're balancing two houses again. Our plan is to sell NY, reign in all that lovely equity....but as you and I know, we humans make plans....God laughs!
It is what it is, Syd. At this point, I don't think about money anymore. I just want to enjoy the rest of my life, for however long that's going to be. We have enough and that's all that matters.
Glad you are back writing again.

[Retired Syd]

Cindi: The best thing about those wonderful memories we made in our vacation homes (or on our boats) is that we don't actually have to continue to own the albatross to still have the memories! Right?

Sue: Smart move--400 sq. feet. Low cost and low maintenance. That will make you much happier in the long run.

Mark: Not to mention the risk of someone drowning!

[Janis]

Better to be one of those friends who visits other people's vacation homes! Fortunately, my brother lives near Napa, so we have a free place to stay when we go wine tasting. I think that when people really run the numbers as opposed to letting their emotions guide them, a vacation home seldom pencils out. But, it really is only money and, for some people, vacation homes are the right decision. Your Calistoga home looks beautiful; it must have been tough to let it go.

[dgpcolorado]

Your experience is familiar: my family had a vacation home at Lake Arrowhead in S. California. So, I learned about vacation homes early on and never went that route for myself. However, I did get a timeshare in Avon (Beaver Creek/Vail) many years ago, which was a tiny mote of an expense compared to a vacation house. And I used it for more than a dozen years. Although I can't sell it — the best way to buy a timeshare is to pick it up for nearly free on the resale market — I do rent it out every year so it is nicely cash-flow-positive. Except for having to file Schedule E every year, I can't complain.

One curious thing about retiring young is that every day is a vacation! One reason I stopped using my timeshare is that I live in a nicer, prettier, place now and when I was at the timeshare I'd find myself just wishing I was home. With my cat...

Unlike you, Syd, I really, really don't like to travel. I'll go explore for a day or two with a tent, but that's as exciting as it gets for me. But, then, having gorgeous mountains and the red rocks country of Moab in my "back yard" certainly helps!

[Retired Syd]

dbpcolorado: You'll see in tomorrow's post that I am getting a lot closer to you on the whole travel thing. But I'll never gravitate toward camping. This much I know.

[Retired Syd]

Janis: It was not tough to let it go--that's the subject of an upcoming post. And yes, that's what I want in my next life: a FRIEND with a vacation home! Totally worth it then!

[Joyce]

I had a vacation condo in Mammoth Lakes, CA for 14 years. Although I didn't get to spend as much time there as I would have liked, I did love going up there in all seasons. Even though I always missed our cats when I was there, it was kinda nice not having litter boxes to clean :-) .

Like you, I had hoped to be able to move there/make it my primary home after retirement for a couple years for tax purposes. However, I decided to sell it when my job got eliminated in late 2012. I figured I'd rather retire then than keep working a couple more years just to finish paying off the mortgage + the annual upkeep. Plus, my elderly parents were needing more assistance which reduced the time I was able to get away. Although I made the right financial & "life-circumstance" decision, and absolutely love being retired (and, yes, there aren't enough hours in the day!), I still really, really miss having my home away from home getaway place. Even after 3 years, I still frequently have dreams about being there and wonder what changes the new owners made.

[Retired Syd]

Joyce: You can always go rent a place up there and see if that fulfills your desire to be up there? And when you leave you have no ongoing responsibility for it!

[Joyce]

It just wouldn't be the same at all. Too many memories of what I no longer have. Thanks for your reply though. I enjoy your blogposts!

[Tom Sightings]

Yes, glad to see you back; hope we see many more posts. Question: I've had a rental unit for 20 years, and my acct. tells me if I moved there for 2 years as a primary residence, then sold it, I could only deduct 2/20nds of the gain, not the whole gain. Has the law changed? Comment: Yeah, but renting is expensive, too. We're looking to rent near Charleston, SC, and it'll be $5 or $6K for a month, and that's shoulder season, not high season. Seems like a lot!

[Retired Syd]

Tom: Hmmm, I'm not sure what the rules are when you used your home as a rental, but when you sell your primary residence, you get to exclude up to 500k of gain if you are married. The rule for primary residence is that you lived there for 2 of the last 5 years. So I am unaware of any rules that say you must prorate the gain. Perhaps that is something particular to rentals? I guess I've been out of the tax business for too long . . .

As far as renting, we could rent the house we used to own for three months before it would be more expensive than the carrying costs for one whole year! And that's not even counting the lost income on how the money could have been invested if it hadn't been invested in the house. But I'm sure the economics vary by location.

[Donna Connolly]

A few years ago, while still working and living overseas, we bought a condo in Las Vegas (when the property costs were rock bottom). Our plan was to use it as a vacation home when we retired. In the meantime, we rented out the property. That worked out so well for us--we just continued renting it out after we finished working. No matter what door you choose there are always the "what ifs". So the condo never did turn into our "get-away/family+friends-vacation-spot/memory-maker" that we originally envisioned that it would. But the property has brought in a steadily monthly income which has been helpful.
So glad that you are blogging again. I've missed your posts!
Donna
www.retirementreflections.com

[Retired Syd]

Donna: Thanks for your nice comment. Now renting it out, that's a whole other proposition. In that case, I think you can make the economics work out. And even if you then use it in the future for a vacation home, you've already been paid back so much of the money already. I would consider that if I ever ventured down this road again.