I’m on record saying that buying a vacation property is a terrible investment. But that’s also because I bought one in 2007, right before the market really took a dive.
Perhaps if I had bought my property after it declined by 40%, today I would be one of the biggest proponents of spending money on something you don’t need!
Alas, I think not because nobody spends nearly as much time as they think they will at their vacation property. It’s also much better to spend less money and have the flexibility to vacation all around the world in multiple new places.
The only saving grace about mistiming a vacation property purchase is that the error as a percentage of your net worth should get smaller over time. Even if you timed your purchase right, the vacation property as a percentage of your net worth should also decline to the point where you won’t sweat it anymore.
When I bought my vacation property in 2007, my vacation property accounted for about 30% of my net worth. At the time, I thought my income would continue to grow to the sky for years to come. Too bad that did not happen thanks to the financial crisis.
Although my income crapped out, the vacation property now accounts for less than 3% of my net worth. I no longer feel the pain of my financial mistake. In fact, I now feel excitement.
Buying A Vacation Property Is Irrational
For many, buying a vacation property is an emotional decision. I bought my vacation property in 2007 because the Resort At Squaw Creek is where I had taken my girlfriend and now wife on our first long-distance vacation in 2001.
When the Resort condo-converted in 2005, I felt like this was my chance to buy a fantastic memory once I saved up enough money. Eventually, I wanted to bring her back to the condo and propose up in the mountains.
The two bedroom, two bathroom, 1,050 sqft condo was first sold for $820,000 at the end of 2005. I then purchased the condo for $710,000 in 2007, which I thought was good value at the time.
As part of our passive income retirement portfolio, our vacation condo generates about $500 a month net. Not a lot. But better than hemorrhaging cash like it once did for the first six or so years.
After I proposed to my girlfriend in early 2008 up in the mountains, I began dreaming of one day starting a family. How amazing would it be to bring my son or daughter to play in the pool and go hiking to see the spot where their dad proposed.
But the financial crisis had other plans. In six months, it wiped out roughly 35% of my net worth. My life was put on hold because, at the time, I felt like an absolute failure. And when a man feels like a failure, it’s hard to consider even starting a family.
I held on to my now dear wife for dear life. It was all about regaining what I had lost and then some to feel like I had enough to take care of her and little ones. Thankfully, the market recovered.
Then in 2017, our son was finally born and we didn’t go up for the next two years. We were too busy ensuring his survival at home. The last thing we wanted to do was disrupt his sleep in a comfortable environment with a vacation he wouldn’t remember.
The Only Time You Should Buy A Vacation Property
We recently got back from a two-week trip to our vacation property and I’m excited to report it was an amazing experience!
After a 3.25 hour drive, we pulled up to the Resort, had the bellhop take all our bags, and had the valet park our car in the owner’s lot. The convenience was terrific.
Embracing the 78 degree weather, we walked down to the pool and hot tubs every single day. At the pool, we ordered food and drinks and played until it was nap time for all of us. The weather really improved our moods because it’s often in the 50s and foggy during the summer in San Francisco.
After we awoke from our naps at around 3:30 pm, we’d have a light snack and then walk down to the wide-open play area where there are plenty of games for everyone. We’d sometimes even go inside the resort’s 40,000 square foot conference hall to play hide and seek as well.
Because our boy had such a wonderful time, it’s made all the financial waste worth it. For those of you who have been fortunate enough to make money on your vacation property, every time you visit, I imagine you will feel like you’ve won the lottery.
I feel that any parent would give any amount of money or time to make their kids feel safe and happy. The resort made us feel this way every day.
If you haven’t guessed already, the only time you should ever buy a property is after you have children. To children, a vacation property is a wonderland, especially if the vacation property also has a pool and other amenities.
We love resort vacations because once settled, we don’t have to go anywhere. It’s easy, just like going on a cruise. All the food, entertainment, and accommodations are right there. Once at the resort, we don’t have to worry as much about safety either because there’s staff constantly looking out for you and your family.
It’s also really nice to be able to come home to a familiar property and have all your basic belongings, like your swim trunks and hiking shoes there waiting for you.
Over the next 16 years, I can’t wait to do the following at the vacation property:
- Take our boy on a hike to show him where I proposed to mom
- Go sledding
- Go river rafting
- Go mountain biking to the lake
- Go jet skiing or water skiing
- Teach him how to snowboard or ski
- Teach him how to golf and play tennis
- Teach him how to fly fish
- Teach him how to work remotely
Focus On The Vacation Property Lifestyle
On paper, owning a vacation property is a suboptimal move, even after putting down a recommended 30% or greater. But don’t forget that the reason why you save and invest so aggressively is to improve the quality of your lifestyle. Never forget the end goal!
Once you have a family, the value of your vacation property will increase immeasurably. For me, that increase feels like 3X. I feel so rich because seeing his joy is a dream come true 12 years after purchasing the property. There was a point when I thought I might never have a family.
Of course, I could re-create these experiences by renting a place at my resort. But it just wouldn’t be the same because most of the time I’d be renting a different apartment property. Further, there’s this indescribable feeling of having a property of your own that nobody tells you. This may sound mundane, but there’s something priceless to coming home to your own place and opening a drawer full of your own underwear! (owner units have a private wardrobe and lockers for skis and snowboards)
In 20+ years, I hope my son will look back fondly at all the great memories he had with his mom and dad up at our vacation property. Then, maybe one day, he’ll take up the love of his life there and make new memories of his own.
From now on, we plan to spend 45-60 days a year up at our vacation property. When our son turns five, we’ll start spending around 30 days in Hawaii so we can diversify our vacation spots between Lake Tahoe, Honolulu, and San Francisco. Then once he turns 10, we’ll start doing some long-term international travel so he can appreciate the trips more.
Planning ahead for your desired lifestyle is worth it. Just don’t buy your vacation property before having kids! Rent one instead.
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Readers, when do you think it’s worth owning a vacation property? If you own a vacation property, what has been your experience?
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