Before you buy a vacation home, you need to know these three things!

The American Dream

I once read that the American dream has changed over the years. It was always to be able to buy and own your own home. And somewhere in recent decades, it has switched. And most people now think the American dream is owning a vacation home. And, I get it! Who wouldn't love a vacation home? A place to call your own, spend time with friends, family, relax, and do whatever makes you happy.

The Hope

Many people think, well, I'll buy a vacation home and I'll rent it out when I'm not using it. And it will basically pay for itself. So, I'll have my vacation home for free. Well, I thought that too. And in fact, I actually did it. I bought a ski house up in New Hampshire back in 2002 and I kept it until just recently when I've sold it. I have to say it didn't work out exactly as I had envisioned it.

The Reality

In fact, it actually caused more stress in my life rather than less. It locked me in for 17 years that I owned it. And, it didn't pay for itself. If I look at it purely from an investment standpoint, there are far better investment options I could have chosen. Let's take each one of these one-by-one and I'll tell you more about what I mean.

Stress

Let's start with the additional stress. What is it like to rent out your home? Well, to be honest, renters, don't take care of your home the way you would. So every time you show up to enjoy your vacation, relax and so forth, you go in with a pit in your stomach, wondering what's broken, what's stolen. What am I going to find? For instance, I had a very expensive wicker chair that I liked a lot. And one day I came in and the entire bottom was blown out on it. When I talked to the rental company, they said, "well... we didn't notice. And we don't know who did it. So tough luck. You'll have to fix it yourself."

One time I came in and I found a huge oil stain in the middle of the carpet, in the living room. Presumably, somebody brought their motorcycle into the living room. I don't know who would ever do that, but then again, there wasn't much I could do at that point.

And a funny story. I had a picture from a hundred years ago of the town that this house was in. I really liked the picture. It was up on the wall. And one day I came in to find it was gone. Again, we don't know who took it... could have been anybody. What makes it funny is that it showed back up on my doorstep eight years later! To this date, I still don't know who took that picture and where it went for those eight years, but I'm sure happy to have it back!

Rental Property or YOUR Property?

So if it was just a rental property, perhaps you check in once a year, you look at what's been damaged or broken or stolen, put a little bit of money in and fix it back up to make sure that it's all set for your renters. But when it's your home and you're using it, you don't want to live with those things. So you're constantly trying to bring it back to the way you want it to be. Or, you end up living with the damaged goods and being extremely annoyed that you didn't break it, but now you're going to live with it.

Lock-In

The second thing is the lock-in. And what I mean by lock-in is that once you're invested in a vacation property that you use, that becomes the only place you go because you've got a lot invested in it. Not only was it the purchase price, but also association dues, in my case, it was a ski house. So I had investments in ski passes for the family, ski equipment, dues at the pool spa area that we needed to be a member to use. And once you have all that investment into your vacation home, that becomes the default place you go. In fact, I didn't ski hardly anywhere else throughout the 17 years that I owned that property. And when I did want to go somewhere warm instead, maybe go to Florida or the Caribbean, those were rare events because there was already so much invested in and tied up in the vacation home. The third issue I found is the financials. In order to have your vacation home pay for itself, it pretty much has to be available all the time. And it needs to especially be available to rent during vacation weeks, school vacation weeks, holiday weeks, because that's the time where they'll make the most money and you can pretty much guarantee that it will get rented.

The problem is those are exactly the weeks that you want to use your property. I mean, you bought the vacation home because you wanted to go there, right? Ultimately the rents never did cover the expenses for the house.

But, what about the appreciation?

It did appreciate. In fact, I sold it for nearly double what I paid for it. But when I look back at how much money I put into it during that time, whether it's renovations, maintenance, fixing all of those things that the renters broke. It was not a good investment. In fact, if I lput the money into the S&P 500 during that same time, the S&P 500 more than tripled. So it really wasn't a great financial choice. Now, I did get to use the property a lot. And for that, I had some great times and enjoyed it.

What I would do differently?

Now that I've sold the vacation home, I think about it differently. I think it's fun to have the freedom to go anywhere I want and stay wherever I want. I'll stay in somebody else's Airbnb and not have to worry about my own. No headaches, no maintenance, No lock-in, no worries. Just show up and be on vacation. Now, that can get expensive.

How to vacation affordably?

So how do I fund it? Well, I took the money that was in my vacation home, and I've invested it in passive real estate syndications. A passive real estate syndication is when a sponsor sources a property and makes it available to investors to invest in. The investors are owners of the property, but the sponsors do all the work. The investors just get a return on their invested capital. So, now I use the income from my real estate investments to go on vacation wherever and however I choose. If you're interested in learning more about real estate syndications, grab my free ebook, the insider secrets to real estate investing to live life on your own terms.