I’m not sure where I first heard it, but whenever I get the urge to “invest” in a lake place, or do something similarly extravagant, I always fall back on this saying:
“Own your investments and rent your fun.”
I’ve mused in the past about buying a vacation home, but the harsh reality is that such endeavors are rarely as wonderful as you’d expect.
Yes, it would be great to have a weekend getaway, but second homes can easily become a money pit. You need to furnish them. You need to heat and cool them. You need to pay property taxes on them. You “need” to buy a boat to tie to the dock. Etc., etc., etc.
Sure, you can offset a portion of the costs by renting your place out, but let’s be honest… The most attractive rental periods are when you’d most like to use it yourself. Plus, there are tons of headaches associated with being a landlord, even if it’s just part-time.
You also need to cut the grass, trim the shrubs, and otherwise maintain your weekend getaway. These things take time and/or money. And for what? So you can be saddled with an illiquid “investment” that will throw your portfolio out of whack, and will also likely underperform the alternatives?
Instead, I suggest that you do what we do. Rent your fun. Instead of “investing” in a lake house, spring for a week’s rental every once in awhile. Instead of “investing” in a condo at the beach, rent one over Spring Break. You get the idea.
Yes, these things sound expensive – and they can be – but if you consider the alternative, they don’t look so bad. You get the fun without the maintenance headaches, the extra mortgage payment, the extra insurance policy, the extra property tax bill, the extra… Everything.
Don’t get me wrong, I’m not writing this to encourage people to take vacations they can’t afford. Rather, I’m writing this to encourage people to consider their alternatives, and to avoid justifying an huge impulse buy that they’ll like regret as a “investment” in their future.
Instead, you need to develop a clear investment plan. Look at how much time you have until retirement (or whatever other goals you have), consider your ability and need to take risk, and so forth. Then put your plan into action.
If you want to invest in real estate, fine. But realize that it’s a business, and that buying a place at the lake on the expectation that it will appreciate like crazy isn’t the same thing. Not even close.
Own your investments and rent your fun.
11 Responses to “Own Your Investments, Rent Your Fun”
Also applies to RVs. Most of them end up sitting in the driveway 50 weeks of the year, minus the random weekend (or, worse, in a storage lot you have to rent). I can take a LOT of really nice vacations for the equivalent cost of owning an RV.
My in-laws just lived this idea out in the past couple of years when they sold their lake home for many of the reasons you suggest.
They didn’t want to continue paying the mortgage, property taxes, maintenance costs, boat, etc. When it was all added up the lake home was owning them – not the other way around. So they sold the home for a nice profit (luckily) and now they just rent their fun – renting a lake home for a week when it’s convenient.
They used to own a condo in Florida as well, which they also sold. The funny thing is, they now actually rent the exact same condo they used to own. They rent it for a week here or there – but now they don’t have all the costs associated with owning it. Much more relaxing when they go for a visit now.
Betsy and I are embracing this mindset in all facets. We’re planning to keep our utility vehicle, sell our 2nd car, and rent a gas saver for trips.
I like it. I have never heard it expressed this way before, but I believe in the same thing. Now I have a catchy little saying to go with it.
I think renting is a great way to ‘try out’ a hobby or lifestyle. You can always buy later, after you’ve figured out that you love to do something. For example, no need to own a top of the line kayak right off, you can rent a few and see what you like before buying the one you really want and will actually enjoy.
There are principles guiding any investment decision, including the decision to invest or not in a place on the beach. But this is a short and easy rule to remember, like a shortcut. I like it!
Wow! You echo my sentiments exactly. I started thinking about this when my friend bought a timeshare in Hawaii. “It was so cheap, and they gave me a free week, a free room” etc is what he told me. But I immediately wondered if he would be taking those vacations every year if he didn’t have the timeshare.
With large luxury purchases like these, you feel obligated to go out and use them when you may otherwise opt to do something else.
Very excellent advice! And the above comment by photomiser is so true. I’d much rather have the freedom to roam vs. being locked into one property for every vacation from here on out. At least, for this time in my life, anyway.
Wise words, it is best to enjoy a vacation rather than having to do (or spend money on ) maintenance.
Excellent advice. Another strike against owning a vacation property is now you feel you have to go there every vacation to justify owning it! We much prefer going somewhere new each summer. We might return to a favorite spot from time to time, be we don’t have to.
I agree with you 100% Nickel. I am a big fan of renting vs. buying, especially for those things that are rarely used or if buying would be an overwhelming expense vs. how much return you get on that expense. Most people I know who own a vacation rental rarely use it; it just sits there. Talk about a waste of money.