Four Reasons to Think Twice Before Buying a Vacation Home

When you spend most of your year toiling away at work, it’s natural to want to make the most of your vacation time. For many Americans, this means dreaming of the opportunity to own a vacation home where they can relax and recharge, while possibly earning rental income, too.

Before you pull the trigger on your own vacation home, however, you may want to think twice. While it certainly offers the opportunity for enjoyment and making meaningful memories, vacation homes also come with a few drawbacks.

Full-Time Bills

It’s important to remember that, although you might spend a few weeks or months each year at your vacation home, you’ll be paying the bills full-time. This means mortgage payments, homeowners’ insurance, utilities, and general upkeep costs will impact your bottom line year-round, regardless of how much use you get out of the home.

So, just how much vacation time do you get from your employer? Two weeks? More? If you’re self-employed, how many true vacation days can you carve out each year? These are important questions to ask yourself before you purchase a vacation home.

A Second Job

Many people who purchase a vacation property balance the costs by planning to rent the home out when they aren’t using it. This can be an effective way to manage the financial aspect, but it’s important to consider what becoming a landlord means. You’ll effectively be taking on a secondary job – one which can require quite a bit of time. Vetting renters, cleaning up potential messes, managing wear and tear on the homemaking sure it’s properly outfitted with furniture and amenities can take considerable time and energy. It can also make for complicated tax scenarios. So, if adding landlord to your resume and managing the paperwork for your taxes doesn’t truly appeal to you, don’t justify a vacation home purchase with a rental plan.


SEE ALSO: 5 Essential Items to Pack on Your Next Trip


The Novelty Factor

It’s always thrilling to make a new purchase – especially something big like a second home. Unfortunately, the novelty soon wears off. Eventually, it won’t feel as much like a vacation anymore. Instead, it will just feel like “home” and it will require maintenance when you’re there, rather than allowing for relaxation. If you’re in it for the “getaway” feeling of a vacation, you might be better off to save your money and go on a new and exciting trip each year instead.

A note here: If your hope for your vacation home is that it becomes a place for family gatherings and meaningful memory-making, the novelty issue becomes moot. If the home will provide more opportunities to share time with your loved ones, you should think about a vacation home as less of a home purchase and more about purchasing experiences, time and connection with your loved ones.


SEE ALSO: What is Your Desired Retirement Lifestyle?


Buyer’s Remorse

Sometimes, when you’re on vacation in a place you love and you aren’t ready to go back to “normal” life, your judgment can become a bit skewed. You may want to seize the moment and buy an available property so that you can go back whenever you’d like, but you should be sure to look before you leap. Go home, think hard about what you really want and, if you’re still dreaming about buying after you’ve been home for a few months, you can make a more clear-headed decision and avoid the buyer’s remorse that so often accompanies a spur-of-the-moment purchase.

Final Thoughts

If you’re thinking of buying a vacation home, make sure you consider all aspects of the purchase before signing on the dotted line. Having a special place for your family and friends to get away can be both a meaningful and practical purchase, so long as the positives outweigh the drawbacks.

Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661

DISCLOSURE:

All of the information presented here is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any security or financial product. The content is developed from sources believed to be providing accurate information. None of the information presented is intended to give you specific tax, investment, real estate, legal, estate, or financial advice but rather to serve as an educational platform to deliver information. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views on Peak Financial Freedom Group, LLC. Some of this material was developed and produced by Peak Financial to provide information on a topic that may be of interest. Every detail in this website is subject to change without notice. Seminar, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.

2nd Opinion Package available to Qualified Retirees and Soon-To-Be-Retirees may include free consultations, a free retirement income plan, risk analysis, and fee analysis. In addition, a comprehensive written retirement income plan may be provided to those who complete the entire process. Qualified Retirees and Soon-To-Be-Retirees must have a minimum of $500,000 of investible assets such as IRA’s, 401K’s from past employers, stocks, bonds, mutual funds, bank accounts, money markets, CD’s, etc., but DOES NOT include real estate, businesses, limited partnerships, 401K/retirement plans that can’t be moved to another plan, and other illiquid type assets.

Past performance is no indication of future performance and such information cannot be relied upon regarding future potential gains. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining market. Advisors and agents may only conduct business with residents of the states or jurisdictions in which they are properly registered or licensed and not all of the securities, products and services mentioned are available in every state or jurisdiction.

Nothing is directly or indirectly guaranteed by this information. The planning and ideas presented herein are not suitable for all individuals or situations. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is not a guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Please consult legal or tax professionals for specific information regarding your individual situation. Peak Financial does not offer tax or legal advice. Consult your financial professional before making any investment decision.

Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of any other asset including an annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. Different assets can be complex and carry fees, costs, and surrender charges. If you place assets under management with Fiduciary Solutions LLC, we are paid an advisory fee from Fiduciary Solutions LLC and if you purchase an annuity through us, we are paid commissions from an insurance company.

2019(1), 2020(2), 2021(3), 2022(4), 2023 (5) and 2024 (6) Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, 2021, 2022, 2023 and 2024 Five Star Wealth Manager Awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.

Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

© 2023 Peak Financial Freedom Group