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Should I buy a beach house?

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  • Should I buy a beach house?

    Hello guys,
    Please advise if this is a good idea.
    Some info about us: couple in our mid 30s with no kids, 3 years out as an attending with an annual household income of $450K though may drop to $350K in a few years as I plan to take on more research vs. clinical time, $750K net worth, paid off student loan and mortgage, no other debt, 40% savings rate. We usually spent 2 weeks of vacation at a local beach about 4 hours away from our home. We kept returning to this beach every year since we like the area and it's 3 hours from both of our parents/siblings. We like to spend our beach vacation with our extended family.
    My wife loves the ocean and due to her urging, I've been looking at several decent 3000 sqft beach house in the area that would cost around $750K. I have a HELOC with sub 3% interest rate that I can use to make a 25% down payment. I plan to use 2-3 weeks for ourselves and set it up for vacation rentals the rest of the year. This beach is a good market for vacation rentals. Would you do it?

  • #2
    i wouldnt personally. seems like you can do whatever.

    i would be happy to rent whatever for a month and enjoy the other 11 months stress free.

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    • #3
      Don’t do this. Plus if you listen to the pundits you might have beach home property in 12 years anyway. Oh wait, now 9 years.

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      • #4
        Sure if your plan is to invest in real estate and the numbers work out.

        But why on earth would you want the hassle of buying a beach house that you are going to use for only 2-3 weeks each year? Just rent and let somebody else deal with the storms and finding tenants and sterilizing coronavirus etc.

        For perspective, I have been looking for a mountain cabin that I would use for at least a long weekend every month, with longer stays interspersed through the year. And in an area where rentals are forbidden, unlike your beach.

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        • #5
          If you took 10weeks of vacation to this beach s year it might break even. But 2weeks not likely.
          we also just saw how bad the rental scene can be disrupted.

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          • #6
            No, don't be distant landlord and have an agent to do rentals ( for which you might have to pay hospitality tax in addition to agent's fee).

            Just rent. Invest the money you save and use some of those returns to enjoy vacations.

            And insurance might be expensive

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            • #7
              No, I wouldn't do it, especially at this stage in your lives and careers. Being so close to your siblings (and, presumably, childhood friends) is another strike against it.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Given how well you have done so far I can tell you that you can afford it. But don’t treat this as some sort of investment. It’s all going to be sunk cost. That’s also a huge size for a vacation home...why not try something that is 2000 sqft or less?

                all this said, if I were in your shoes exactly I wouldn’t do it. I’d just rent out a pricey and nice place for two weeks in that area every year. If you did that for 20 years you still come out ahead money wise compared to owning a beach home. What state is this? Hurricane prone area? That’s going to be pricey insurance

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                • #9
                  you can rent a nice place for 10k/month each year and do that for 75 yrs avoiding the hassle. Heck you can rent the same house each year if you play nice with the landlords. I'm assuming this isnt malibu or the hamptons since a 3000 sq foot house is only going for 750k. Plus no need for worrying about renters, electricity, cable, plumbing issues, hurricane damage, updating the house to keep up with area rentals, property managers, being forced to go there if you ever get sick of it, etc etc etc. Lots of potential cons for no real pro.

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                  • #10
                    Would I spend my entire net worth on a beach house for 2 weeks a year with some rentals to reduce costs? I'm not sure I can phrase the question in a way that doesn't sound ridiculous. That said if I really, really want the beach experience I might buy something smaller after I've doubled my net worth in a couple of years. Does sharing it with renters even get you what you want as an ownership experience?

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                    • #11
                      Thank you all. I was hoping to turn it into an investment property using a local property management company providing full service with us spending just a few weeks there for our own enjoyment. When we were looking for a beach house this year, we saw that all of the beach houses in this area were booked into the winter despite coronavirus slow down. We like to travel to different places so it's unlikely that we will spend more than 2-3 weeks at the beach. It sounds like a resounding "no" from everyone.

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                      • #12
                        The real question you're asking is "Do I want to get into real estate and be a long distance landlord?". Are you planning on having any kids? If so, there is a very good chance your travel priorities would change.

                        How do you feel about extended family and/or friends using your house for free because that's what will likely end up happening.

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                        • #13
                          To me it depends on your long term goals. As others have said it's unlikely to be a cash flowing investment and is more of a luxury. If however you think you'll have it long term and it may eventually be a retirement home it may be worth doing as the price long term will likely rise. We have had a lake home for 30yrs and in retirement I spend a lot of time there in the summer (like I am now) and some in the spring and fall. Our family had good vacations there and still come back to spend time with us there. Think clear eyed about it though as it is a luxury not an investment, but that doesn't mean you can't do it. I did.

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                          • #14
                            One of the new blog posts addresses this

                            https://www.whitecoatinvestor.com/on...pouse-one-job/

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                            • #15
                              Originally posted by CordMcNally View Post
                              The real question you're asking is "Do I want to get into real estate and be a long distance landlord?". Are you planning on having any kids? If so, there is a very good chance your travel priorities would change.

                              How do you feel about extended family and/or friends using your house for free because that's what will likely end up happening.
                              Better then owning a beach house is having an uncle/ father/ brother own one that you can use.

                              Or the female equivalent of those relations.

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