Buying a vacation property often seems more romantic than practical, as I’ve learned from personal experience. I bought a vacation property in 2007, which turned out to be a financial misstep since I did so just before the market plummeted. If you’re considering purchasing a vacation property, you might want to hear about the only time it might actually make sense to take the plunge.
Most people don’t use their vacation properties as much as they anticipate, and it could be more economical and enjoyable to explore different places around the world. But here’s a scenario where buying a vacation property might not be such a bad idea: if you have a growing family. As your kids grow, the memories created at a vacation home can become invaluable, and the cost is spread over more individuals, enhancing its value.
In 2007, the vacation home I purchased represented about 30% of my net worth. I anticipated a continuous income increase, but unfortunately, that didn’t pan out as expected. Fast forward to 2022, after the real estate market surged post-2009 and especially during the pandemic, my financial outlook shifted. Although my income did not increase as hoped, the percentage of my net worth represented by the vacation home decreased significantly, making the financial sting less painful. Now, it accounts for less than 5% of my net worth, and I no longer feel burdened by the purchase. Instead, I’m thrilled that my two children can now enjoy the property.
However, purchasing a vacation property is often an emotional decision rather than a rational financial investment. I bought mine because of sentimental reasons, linking it to personal memories and future aspirations involving my family. While the property does generate some income, it’s not substantial, but it’s better than the losses it once incurred.
After my proposal to my girlfriend in 2008 and the financial crisis that followed, my plans were put on hold. The crisis impacted my net worth significantly, making me reconsider starting a family under financial strain. But life went on, the market recovered, and our family grew. Recently, we enjoyed a fantastic family vacation at the property, which reassured me of its value now that we could share it as a family.
Reflecting on the joys of family time spent at our vacation home, it seems all the financial calculations fade into the background. The laughter of our kids in the pool, hikes to memorable spots, and relaxed days are priceless. That said, buying a vacation property might not be for everyone. It requires careful financial consideration and should ideally not constitute a significant portion of your net worth.
The memories and joy it can bring, especially if you have children, might make it worth considering. But for those without the obligations of family, the flexibility of renting might be a more financially sound option. As you ponder whether a vacation property is right for you, think about not just the cost, but also the potential for creating lasting memories.
