Thoughts on the Second Home

[Fredster4]

Brand new to mustachionism and frankly, my greatest challenge appears to be getting my wife on board but that is a separate post.

In this post I'd like to solicit thoughts on the whole idea of a second home.

My wife and I have a cabin in the Adirondacks and we love it. We would hate to get rid of it. My wife grew up on the lake, there are tons of friends, memories, and wonderful time spent enjoying this beautiful part of the world.

I spoke to my "financial advisor" (non-mustachian type) about this second home and whether it is making it harder for me to achieve my retirement objectives (currently 56yo), and he said, sure it is costing you money every year to keep this cabin but in many cases, when I advise people to lose the second home because it is too expensive, I find that they now take all kinds of alternative vacations instead, completely consuming the savings from no longer having both the second home and the built-in vacation spot. So what you need to do is do is the math to determine what your real savings is going to be based on what you're going to do instead of going to the cabin and decide based on that.

I thought this was a great point.

So I began thinking in terms of what we could do to make the cabin cost much less if not free (or profitable), and the answer is to rent it out periodically. My calculations tell me that the cabin would pay for itself by only renting it out 7 weeks per year.

This seems like a no brainer to me - keep the cabin - rent it out at least 7 weeks a year - and enjoy a great vacation spot (when you can) for free.

The problem with this scenario is we have the place decorated with all measure of family heirlooms, expensive furniture, and even several pieces of original artwork. My wife is saying - are you nuts? - we can't have strangers in this place! They would wreck everything, break the furniture and steal the paintings.

Bottom line - in order to mustachianate the situation (rent it out) - we would essentially lose the cabin we've been enjoying for years if we have to take out all the items of sentimental value and original paintings.

Please offer your thoughts on this - the dilemna of the second home.

And please accept my apologies for being the annoying guy who sounds like he's looking for sympathy when he has a second home. Believe me, this is the most modest cabin you can imagine. Thanks.

[undercover]

This seems like a no brainer to me - keep the cabin - rent it out at least 7 weeks a year - and enjoy a great vacation spot (when you can) for free.

Well, obviously not free.

This is a very subjective question that only you can decide and any advice given would only be to help you with your goals (which we don't know). How are your financials otherwise? Acceptable savings rate? On track to meet your other financial goals?

There's nothing wrong with a second home per se if it's an expense you can continuously afford. You just have to define your priorities. If you want to keep it and you aren't otherwise meeting your financial goals then renting is going to be the only thing that makes sense.

You can have 10 computers, 5 homes, 7 cars, etc...it doesn't matter as long as it's what you would be spending your money (aka time spent working) on if given the choice of anything else. The main purpose of the blog is to cut expenses down as much as possible while still retaining happiness and not have expensive assets laying around that aren't make you money in order to gain more time aka freedom. Maybe you value working longer and the peace of mind of not renting out a sentimental spot than you do having freedom sooner. It's just up to you.

[Chris22]

FWIW, my wife's family has a 90+ y/o log cabin vacation home as well, and were very worried about renting it out as well.  They took out a few of the more fragile things, and then listed it on VRBO.  Their goal, like yours, was to basically cover the property taxes and some of the upkeep and have it be break-even.

What eventually happened is they now have 3-4 families that they rent to every year for a week or two, and it's basically "unlisted" otherwise.  Those families are now not CLOSE friends, but at least acquaintances (exchange Christmas cards, that sort of thing) and they've put back in most of the fragile things they at first removed.  Knock on wood, works great for everyone.

[Fredster4]

Thanks, undercover, for the response. To answer your question about our other finances, this is the reason I began researching and found the MMM website in the first place. We have a good balance sheet but are hemorrhaging on the income statement with 2 kids in college. We have about $500K saved for retirement and currently own outright, our primary residence ($900K) and our cabin (about $120K). Our current thoughts are to sell the big house (about 5,100 sq/ft) and move into a more mustachian home, and put all the excess cash (about $500K if we move into a $400K place) to work for us investing. I know from reading many blog posts on this site that many readers might think we can retire now with a net worth of $1.5M but with the college bills coming in at about $60K per year for both kids combined (after all financial aid and grants, etc.), it wouldn't take long to sustain a serious injury to that Balance Sheet. Thanks again.

[lizzzi]

My s-i-l used to have a second home on Cape Cod that was sometimes rented out and was sometimes used by the family. He had a locked "owner's closet" where things were stored that were only for the family's use and not for the people who rented. It seems fairly easy to re-think the decor of the NY cabin, and perhaps lock up the valuable art--or move it to the OP's primary home--and just make the cabin more casual and renter-friendly. My m-i-l and f-i-l had a primary home in Texas, but also a Colorado mountain home that was used by their five children and their families for vacations and get-togethers. It was furnished reasonably nicely, but furniture and art on the walls was not overly costly or of hugely sentimental value. I have great memories from both those second homes. Renters on the Cape and the different families who stayed at the Colorado house were harder on the places, and simply were not as careful or as particular as the OP and his wife would be in their cabin. Both s-i-l on the Cape and the in-laws in Texas used to freak out about what people did to their houses. I think it's just a reality that the OP and his wife will have to consider and plan for if they do rent out the Adirondack cabin. It is going to be a very personal decision for them, I think, as well as a business decision. 

[slschierer]

You said "My wife and I have a cabin in the Adirondacks and we love it. We would hate to get rid of it. My wife grew up on the lake, there are tons of friends, memories, and wonderful time spent enjoying this beautiful part of the world."  None of that has anything to do with the things that are in the cabin.  I don't understand how removing a few items such as paintings and heirlooms changes the purpose of the cabin:  spending time with friends, making memories and simply relaxing and enjoying the beauty of the lake.

That being said, I do like the idea of an owner's closet. 

[honeybbq]

I do VRBO quite a lot, at least 1-2x per year.  Usually we do ski cabin rentals, but I have done some for regular vacations as well.

Most homes to have the owner's closet, as mentioned.

There are also usually rather large damage deposits that are refunded.

Other than increasing the normal ware and tear fund since the house will be getting used more, I don't see the problem.  I can't anyone stealing a whole painting. It should be included in your home owner's insurance.  Unless it's a Picasso or something, I can't imagine anyone even realizing it was more valuable than any other artwork in a home.

If you VRBO, you can require that people rent in 6 or 7 day increments. That should cut down on people just wanting a party place for the weekend.

[jodelino]

I inherited a condo in a popular tourist town that I rent out through VRBO. The condo is furnished with many antiques and valuable pieces of art, some that came with the place, and some that I picked up at estate sales. In two years of renting, I have had no theft, and the only breakage was after I broke my own rule & let someone with a toddler stay there. Here's what I think contributes to my success:

--I primarily market to couples, not families. I do not accept children under 13. I do accept dogs and have found dog-owners to be very grateful & responsible renters. At least one renter must be over 25 (most are baby boomers). I limit the condo to 3 guests, max, and price accordingly. Other owners with my layout list their condos as "sleeps 6," calling the room I call a study/guest room a second bedroom, and having a sleeper sofa in the living room. The larger the crew, the more likely you are to have damage. I do not try to squeeze every dollar out of the place. After only 2 years, I have many repeat renters and my calendar is fuller than those of the "sleeps 6" people.

--I removed anything that I felt I could not bear to lose. Anything I'd be heartbroken about is in my home or in the locked owner's closet.

--I treat all renters with respect and have gotten that in return. I, or my great, well-paid cleaner leave a personal note and a welcome basket of wine & snacks for all guests. I have several pages in my info book explaining what all the art is & where I got it. I thought this might encourage theft, but so far I've just gotten nice comments about the art & one request to buy a painting should I ever wish to sell it.

--I began by requiring all renters to buy VRBO's damage insurance (up to $5K insurance for $99), but I've ratcheted back to a $200 refundable damage deposit, and have never kept any of it.

--You do need to remove personal items like your toothbrush and pajamas. Renters do not want to work around that stuff, or around your clutter. The owners closet can hold these things.

I think your cabin sounds like a wonderful and important part of your life and history, and something you do not need to give up and can make work for you financially as well as emotionally and recreationally. In the future, it can be a place where your kids gather, where you & your wife can be for long stretches while you rent out the primary home if you wish, or after the kids are grown, you may feel great with a small primary home plus the cabin. Keep it!

 

[Fishindude]

We have our primary residence plus a lake home and another hunting recreation cabin.   Have not rented to date and don't intend to at the present as we don't want strangers messing with our stuff.  Everything is paid for, however expenses to keep all of these places can be substantial; taxes, utilities, lawn care, snow removal, routine upkeep and remodeling, etc.  All of the water toys and boats associated with lake place can get a little crazy too.

If we get to the point where we aren't using these places or they become too much of a burden, we will sell something and likely recover most of our initial investment.   It won't be a big money maker investment, but isn't a horrible place to have some money tied up.    You can't stay overnight and go fishing and hunting at your Vanguard account :)

I'd recommend you do your best to keep the place and enjoy it.
You could probably still do a rental or two to some select friends to maybe pay the taxes, or a few bills?

[Fredster4]

I'm really impressed with the quality of this forum. So many clear, reasonable, thoughtful and insightful responses to my original post and in minutes! Thanks so much everyone.

[soccerluvof4]

I was in your shoes in that for 18 years my wife and I had a cabin in the woods for 18 years. I miss it often BUT every time I look at why I sold it and the money I have saved its become a no-brainer. Now I have 4 kids heavily into sports so we went from using at least 20 weekends a year to maybe 2. There was no-way I ever could of felt comfortable renting it out and most recently a friend drove by and the people that bought it have let it go. Over the years I re-did a lot of it and made so many great memories.  The memories and items that matter I took and will forever have with me. Though it was paid for the money now is working for me and I could go on many many trips and still come out ahead.

This can be an emotional decision so I wouldn't begin to tell you what to do BUT for me though I miss it and often it was the right one and maybe someday I will buy a smaller place up there again. For now if I want, i would just rent.

[Tjat]

Here's an oddball idea and probably offensively unmustachian.

Can you remortgage the vacation home? This would free up ~$100K to invest and you'd get to keep the vacation house, plus possibly rent it out. If you're then moving to a smaller home, you're freeing up $600K! You'd add debt, but in your situation, who cares? Worst case scenario you become ill or something and need to sell the place then...or, you just get foreclosed on. It's not like you need a high credit score during this phase of your life.

 

[alewpanda]

So, a different perspective I guess.....

Is the cabin in an area you would ever consider living full time?

It seems like it holds a ton of sentimental value, is in a beloved and beautiful area, and is likely a "downsize".

Would it eventually make sense (after FIRE) to sell the primary residence and live in the cabin?  You could use it as a smaller home base, while still traveling around and seeing people.  Everyday would feel like a vacation! 

And with your FIRE money earning you money, the sale of the primary residence could simply be your slush fund for a few years of living expenses so you can delay pulling from your investments even longer!

[Goldielocks]

Also consider moving out of your primary home, to a smaller rental, in town, and keeping the cabin as a (more) frequent retreat filled with your special memories.   

Two homes is a lot to maintain!

[flashpacker]

I agree with the person who said you need to not leave personal clutter around the place but we sublet lots of apartments during a period of being nomadic and I prefer staying in places that are primarily used by the owner vs empty, generic places only used as short-term rentals.

Try renting to friends of friends if you'd prefer not to rent to strangers.  Don't charge people inflated AirBnB rates but still get your income requirements met and make it win-win for everyone.   Maybe someone in your social circle would like to use it for a longer period (eg a month) for a writer's retreat or something like that too.

[Pigeon]

We rent a house on a fairly secluded lake in the Adirondacks every summer.   We like going back to one particular house, but we have rented others on that same lake.  We find them on http://www.adkbyowner.com/

The owners, as others have mentioned, have a couple of locked closets that house their personal stuff. The house is nicely furnished, but with fairly sturdy, but comfortable furniture and nothing particularly fancy or expensive. 

Most of the houses that get fully rented come with things like canoes and kayaks for use.  Many of the ADK lakes are threatened by invasive species, and this is an environmentally friendly thing for the owners to do, to keep strange boats from being put in the water.  The homes that rent faster also tend to be pet-friendly.  It is typical that the owners charge a $200 refundable damage deposit.  Most have the houses professionally cleaned between visits and most supply linens.

I don't think the people in our favorite house have much of a problem with theft or breakage from guests.  Everything seems to be pretty much the same from year to year.  They have a log book for guests to write in, and they seem to get a ton of repeat business besides ours.

I would personally not leave valuable paintings or other items in a house that it unattended most of the time.  While the crime rate is pretty low, property owners we've chatted with tell us that occasionally there are break-ins during the off season when nobody is around.  Where we rent is very close to where those two convicts holed up last year and that was unsettling.

[EnjoyIt]

Sell the cabin, take the $120k and invest it.  With the 4% return on that investment you will have $4800 per year to travel anywhere you want instead of the same cabin every time.  This is your opportunity cost.

I also agree that selling the 5,100 sqft. home is a good idea.  The cost of maintenance of that place is astronomical compared to something at 2,700 sqft.  I wold strongly consider moving into a home you are willing to retire into so that you don't waste money on having to move again and on real estate fees.  It may make sense to hold off until the kids are out of school to do this.

between the revenue of selling the homes and cutting your expenses drastically you will find yourself in a much more comfortable situation. Hopefully with about $1 million in assets.  In short order your kids will be out of college and your expenses will drop by $60k/yr.  Hopefully in those few years your nest egg will also grow well beyond the $1 million mark and you can evaluate if and when you can retire.

All in all I think you are in great shape.  Realistically you can retire today if you are willing to have your kids take on some school debt.

[LiveLean]

As a kid my family had a beach home four hours away. Loved the place, but we rarely vacationed anywhere else. I never thought I was missing out on anything, though.

In my 20s, I traveled the country and the world. Two years ago, we bought a place two blocks from the beach house my family once owned. Of course, we now live a 14-hour drive from the place.

We rent it out on a weekly basis through a management company, mostly from mid-June to mid-September. There's wear and tear and we have owner's closets. We look at it as a future FIRE home or at least someplace we will spend more time at when the kids are grown. As it is, our careers give us the flexibility to spend about five weeks a year there. From a financial standpoint, there are a lot of moving parts to the analysis. With rentals, we break even. But we do get five weeks of use out of it. And because I knew the area better than most Realtors that handle that market, I bought what I believe is the best value there in years.

[adamcollin]

Renting is a good idea to cover the cost of your second home

[former player]

My second home became my retirement home.  It's a one-off location, whereas my main home was interchangeable and replaceable.  If your second home is a one-off that you couldn't replace, I'd suggest keeping it, and renting it out if that works for you.

The one to lose is that 5,000 sq ft monstrosity you currently live in.  Sell it, downsize to something small (three bedrooms, 1,500 sq ft max, now the kids are leaving), bank half a million plus big savings on expenses, and live happily ever after.