Playbook #099: Vacation Homes
🖼️ The Big Picture
Ask any real estate investing guru if you should buy a vacation home, and in most cases, they’ll probably tell you no. Yet we saw a massive spike in 2nd home purchases during the pandemic when interest rates were low, and in some situations and for some people, a vacation home can be a great purchase that not only adds joy for the whole family but also builds wealth over time.
We already have a CAPITALIZE issue on Airbnb and short-term rentals so we’ll only briefly discuss that option here (though that’s certainly a strategy that a lot of vacation home buyers use to pay for some or all of their mortgage - and if you’re interested in a 2nd home that pays for itself then you should definitely look into that.)
Instead, we’re going to focus more on using 2nd or 3rd “vacation homes” as more of a wealth preservation strategy. See, the main reasons investment experts will tell you not to buy a vacation home are:
- It’ll require work and/or a team to run properly as a short-term rental that cash flows (ie: it needs to be run like a business, which you’re less likely to do if you’re intending to enjoy it as a vacation home with your family)
- Unless it’s run like a business, it won’t cash flow and you’ll be counting on appreciation and mortgage paydown to earn a return (which is more of a long-term strategy)
If you’re trying to reach Economic Independence as quickly as possible, then a vacation home won’t be the best strategy for you. But if you’re sitting on a large amount of capital and need a place to park it for the long term (and especially if you could use the business for other purposes like a mastermind for your business or client retreat)... then it could be a fit.