Owning a second/vacation/rental home

Hi Emily!

We (wife and I) have talked about it many times and even looked at property in CA and Hawaii, but feel we probably won't buy a vacation/retirement home for several reasons:

1. Too much hassle. Condo maintenance, etc. wouldn't be too bad, but the HOA on a condo diminishes any rental income by quite a bit.
2. We would rather try out and stay in different places for parts of the year/different years: One winter in Hawaii, one in Palm Springs, month in Spain, January in Costa Rica, etc.
3. With all the good and varied rental market options - AIRBNB, CL, VRBO, etc. - it is easy to check out and review places.
4. We already have the family cabin as a second home, and that is more than enough maintenance/hassle for us.

I am not a big proponent of buying real estate as an investment unless you are a pro and it is your job or you can be really hands on, like with a local rental home or something, and you have the time and expertise to manage it. If you want real estate exposure in your portfolio, a REIT is a better way to go in my opinion, especially if you can get in on a private one, as their real estate appreciation is usually greater than with a public REIT. We have 15 - 20% of our portfolio in real estate through REITs.

Here is a recent article on it:

http://money.usnews.com/money/personal-finance/mutual-funds/article...

Especially relevant paragraph on vacation homes:

Vacate vacation homes.
Just because you can kick back at a recreational abode doesn’t mean profits will recreate themselves. “Vacation homes are nothing more than a whimsical retreat and a low-tier income option,” says Kurt Westfield, managing director of WC Equity Group, based in Tampa, Florida. “Seasonally, they do have the capacity to generate decent returns, but the vacancy and holding costs coupled with typically premium pricing tend to equate to a less-than-stellar rate of return.”


That said, if you really LOVE the place and want to spend a lot of time there in the future and can afford it, go for it!

Long term, we will sell our big home and get a small home or condo more in the city, spend a lot of the summer at the cabin, and various places we like or want to experience in the winter.