Vacation homes—don’t do it

Summer has come and gone, and it’s one more year that I haven’t surfed a 15-foot wave.  I blame the move from LA for a lot of that because I just can’t get out to the ocean as often as I need to (now we’re about 3 hours from the Atlantic).

The obvious solution is for Foxy and I to get a beach house.  This is something we have talked about seriously, off and on, since we moved to North Carolina over two years ago.  The clear benefit is we would have an awesome second home on the Atlantic Ocean: it would be beautiful and peaceful and a blast for the cubs as they grow up, plus the SURFING.

Why wouldn’t we do that?  As with many things the answer is—cut to Stocky rubbing his thumb and middle finger together—money.  It would be a huge expense, but just because something costs a lot doesn’t mean it’s not worth it.  After all, vacations and leisure time are very important.  We’re fortunate that it is a possibility for us.

Ultimately, I think vacation homes tend to be lousy ideas for most people because of two main reasons: 1) They are expensive compared to other options.  2) They really limit what you can do (or want to do) for vacations.


Breaking down the numbers

A vacation house is typically not cheap.  Let’s say a decent beach house right on the water would cost $500,000.  Definitely they can vary widely in price, but we’ll see that the price really doesn’t change our calculations.

Based on some of our recent blogs, we know that you’d typically buy a house with a mortgage, although vacation homes have mortgages less frequently than primary residences.  For simplicity’s sake less assume we bought it outright (again, this won’t really impact our decision).  If we sink $500,000 into a vacation house that means we wouldn’t be able to invest it at a market average of about 7%.  That comes to about $35,000 per year.

Also, owning a vacation home comes with considerable costs.  There’s property taxes—let’s say $4,000 each year.  We’d also have utilities, including luxuries like internet and cable—we’ll put that at $500 per month or $6,000 annually.  Then, because the ocean is such a harsh environment you have a lot of upkeep.  Air conditioners rust, wood needs to be restained, and on and on; I asked a neighbor who used to live on the beach and they said that was probably another $5,000 annually AT LEAST.

The expenses come to $15,000 a year plus the investment potential at $35,000 a year, so now we’re talking $50,000 annually.  My, oh, my.  What we could do with $50,000?  More on this in a second.

Of course, as we talked about a lot in looking at rental properties and your house as an investment, there are some upsides.  Our beach house could appreciate, but national averages put that at about 0.4% annually, so that comes to about $2,000 each year.  Not a big deal.

Plus, I think (I haven’t found a lot of hard data on this) prices for vacation homes are much more volatile than primary residences.

Also, we could rent it out.  That’s what most people do with vacation homes.  There are some major risks with that.  Best case someone else is putting their butt on my toilet seat.  Worst case is someone turns my slice of heaven into a meth lab.


The fun we could have

If we look at all the calculations above, we can simplify it to thinking we have $50,000 annually on vacation.  Think of all the things we could do with $50,000.

If we were super committed to the beach to fulfill my surfing dream, we could rent a place on  After a few minutes of searching I found similarly sized places to the one that cost about $500,000 which are also right on the beach.  We could rent those for $6,000ish for the month of July.  Throw in June and August, and we could rent a beach house for the entire summer for $18,000.  If you annualized that $6,000 per month it comes to $72,000 which is more than the $50,000 we were saying owning a beach house would cost, but there are some problems with that.

Since it’s a beach house aren’t those three summer months really the most important?  Honestly, how often would you be going to the beach in November or March?  Maybe a little bit but probably not that much.

You could imagine a similar scenario with a ski cabin in the mountains.  You’d love it during the winter months when the snow was there, but the other times probably wouldn’t be as awesome.

Oh, and there’s that little thing called . . . the cubs.  We have two little cubs who have school and friends and all that.  So it’s not realistic for us to be away from home during the school year.  Maybe we could pull off a whole summer away at a beach house, but if it was a mountain cabin how often could we spend there?

Add in things like sports, friends’ birthday parties, boy scouts, and on and on.  It just doesn’t seem realistic that we could spend enough time there to justify the $50,000 cost.  That leads to the idea of renting it out when we don’t want to be there, that creates a conundrum too.

We’d want to be at our vacation house during the best times (summer months, holiday weekends) when the rental demand would be the highest.  We could get high rents during those peak times, but then that kind of defeats the purpose of US having the place.  We could rent it out when we didn’t want to go (think March), but that’s when most other people wouldn’t want to go either.  You can see the problem.

There’s a huge connection between the amount of time we’d spend at the beach house and the “goodness” of the decision it would be to buy—the more time we spend the better it would be to purchase.  We just talked about how it’s not really realistic to spend all our time there or even most of our time there.  For a beach house you’d probably max out at all three summer months, and maybe 5 weekends scattered throughout the rest of the year.  That’s the absolute most.

Call that a total of 18 weeks or 4.5 months, and that’s really pushing it.  At $6,000 per month (which is inflated because that is all high season), your rental expenses would come to $27,000 a year.  Doesn’t look good.


Tied to an anchor

In some way, if we bought the beach house it would seem like a sunk cost.  We’d be paying for it whether we spent time there or not.  That would really motivate us to spend every possible moment there, certainly every vacation there.

Yet, that would be a bit of a miss, no?  Beaches are awesome, but what if we wanted to spend a week in the summer visiting Mimi and Grandpa Ocelot in Michigan?  That’s a week we wouldn’t be at the beach house.  Or Disney, or going up to the mountains, or a trip to Washington DC or California.  Just owning that place would put us in a weird spot where we would feel we’d have to go there all the time even if we wanted to go somewhere else.

Now if we rented, we could go to the beach when it suited us but also anywhere else that caught our fancy.  Plus, apparently there is more than one beach in the world.  If we rented we could go to the beach we would have bought at, let’s say Surf City, but also Virginia Beach, Myrtle Beach, Nags Head, Florida, and on and on.  I understand that going to the same place would be nice to get comfortable there, but variety is the spice of life too.


For those main reasons, I think that a vacation home for us doesn’t make sense.  It’s too much, and it ties us to one place.  But I do think there are situations where it does make sense.

If you don’t have little kids, a vacation home makes a lot more sense because you don’t have your calendar dictated by school.  After kids, we could spend the summer months at our beach house but also April and May and then September and October.  Those are beautiful months to stroll on the sand and watch the sun rise over the water.

Plus, as you get older I think you tend to shift from wanting to see a lot of different places to knowing what you like and just wanting that.  My in-laws, Mimi and Grandpa Ocelot are at that stage.  As an example, they have gone to the same timeshare in Florida ever since I’ve known them.  They like the place, like the people, know there won’t be any surprises or anything.

For someone like them you could imagine a vacation home would make sense.  It’s predictable and they could spend enough time there to justify the costs.  Just for Foxy and me, at our age, when we still have an itch to see a lot more of the country and the world, plus with two little cubs, I think you can get a lot more bang for your vacation buck buy NOT buying a vacation home.

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