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I understand this has been asked in someway before. Now my turn...

I have lived under the impression that property is always good a investment.

Here are a few reasons I think I should buy a vacation home:

Have a place to take my family
Have something that will always have value
Escape my high tax state if I need to
Run from the next draconian flu measures
AirBnB it when I'm not using it
My inheritance is sitting in cash
When tired of it, my improvements will increase it's sale value
We travel; So better than timeshare or equity share.

Two friends have told me not to do it!

Dave Ramsey says don't do it unless you can pay for it in cash.  
One vacation solution
Taxes. Maintenance. 
Stock market a better return for my inheritance
Kids will get bored of going

I can afford a small mortgage on my salary. I'm pre-qualified for a $300k house.

Isn't property a safer more solid investment?

Marinaio
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    Investment advice is generally off topic here. It is usually subjective and requires information about your personal situation that we don't have and you probably don't want to share. Don't listen to Dave Ramsey though. He knows nothing about your personal situation either. – littleadv Mar 10 '23 at 17:47
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    You're making a good start enumerating the arguments. Keep doing so until you have made a decision. – keshlam Mar 10 '23 at 18:17
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    Your solution to someday escaping high taxes is to... buy another property that you'll have pay taxes on in the meantime? – chepner Mar 10 '23 at 18:20
  • If the real estate bubble pops and let's say all homes are worth only 10% (one tenth) of what they're worth today, will you be happy with the home, even though you lost all the money and you can't make a profit by selling it back? Because you do get to keep the home in this scenario – user253751 Mar 10 '23 at 18:44
  • @user253751 more like 50-60%. Your point is still valid. – RonJohn Mar 10 '23 at 19:10
  • Do it if you want to be a long distance landlord who can’t find a reliable and reasonably priced property management company in that area. I definitely would not do that. – RonJohn Mar 10 '23 at 19:15
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    If you’re already a local landlord, then you have experience in the area. *That* is when you expand to vacation rentals. – RonJohn Mar 10 '23 at 19:16
  • @keshlam Thanks for the observation. That was the purpose of my question to help me enumerate different possibilities. – Marinaio Mar 10 '23 at 23:39
  • @chepner To clarify - I want the vacation property to be in a lower tax state like FL. I'm about 8 years from retirement and would like retire there. – Marinaio Mar 10 '23 at 23:41
  • @user253751 Good point. I would. It would be a place to take the family and it would be our retreat. However, friends have told me to wait until the family is sick of going there. They think AirBnB for vacations is a cheaper option. – Marinaio Mar 10 '23 at 23:44
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    @RonJohn Yes. The mgmnt company I called wanted 30%. That is a real consideration – Marinaio Mar 10 '23 at 23:45
  • Let us continue this discussion in chat. – Marinaio Mar 10 '23 at 23:53

1 Answers1

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The financial bet with a vacation home is that the increase in value of the property (plus the money that you would have spent on lodging otherwise) and any income you get from renting it out minus the amount you pay in interest on the mortgage and other expenses (taxes, cleaning, maintenance, HOA fees, etc.) is higher than what you would have gotten in other investments ("mutual funds" being one possibility). There are too many variables to say with any certainty that one will obviously be better.

Plus they are illiquid - the only way to get your investment back (outside of rental income) is to sell it, which can be challenging, and puts you at the mercy of the market and your negotiating skills.

Renting a property outside of your living area is not cheap - you need to pay for property management, deal with renters, take a risk that it won't be rented enough to make it profitable, etc. There are services that reduce the hassle, but they are by no means free.

And keep in mind that lodging is only a portion of vacation costs. There's still travel, food, entertainment, lost work time, etc.

I have had family members and friends that absolutely lover their vacation home and spent almost as much time there as at home, and I've had friends that felt "stuck" going to the same place, and felt relieved when they finally were able to sell it. YMMV.

property is always good a investment.

Property is usually a good investment, but so are mutual funds. Both have risks and are by no means guaranteed.

Could it be better than "mutual funds" - more likely than not, yes. But it is by no means guaranteed and not nearly as passive as mutual fund investments.

D Stanley
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  • @D Stanley Thank you for the reply. I'm a tech person so doing a financial comparison on buy vs AirBnB is not in my wheelhouse. I appreciate everyone's input since a few points I had not considered. – Marinaio Mar 10 '23 at 23:51