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Lawdog
09-05-2012, 12:40 AM
Just looking for some opinions from those who are smarter with money than I :) I have a pension through my job as well as a retirement account that I put money into. The wife and I have been looking at a small cottage on our favorite lake here in the area. With the stock market doing as crappy as it has been doing, we have been thinking about cutting back on putting money into the retirement account and going ahead and purchasing this small cottage. The amount we put into the retirement account is equivalent to a house payment. Speaking with the "financial advisor" with the company we use at work for the retirement accounts obviously doesn't want us to cut back on our investing and keep maintaing. I was thinking with the way the housing market is right now that it wouldn't be a bad investment not to mention we would use it constantly from April-October for boating. I have AT LEAST another 20 years before I can retire and start collecting my pension. Any thoughts or opinions would be great.

C.Hern5972
09-05-2012, 01:50 AM
We too are thinking along the same lines. We have been looking at buying a piece of land on the river and building a metal building with a living quarters in the corner of it(1200-1500sf).. We have some friends that have done this and it is nice as heck. So we are looking at cutting back on what goes into the retirement fund and putting it towardfs something we can have paid off and own outright when we both retire in say 20yrs...

zabooda
09-05-2012, 04:31 AM
If you know where you want to retire then I would recommend getting the property as the value should outpace the market and you have 20 years to build up your nest egg. A lot of things can happen in 20 years but you can't plan for the unplanned. When you get pay raises reward yourself but take a portion each time and put back into investments. Don't expect your purchase to be an investment for retirement but in 20 years it probably will be.

If I only knew where I plan to live when I retire then I would have bought about three years ago.

wolfeman131
09-05-2012, 09:27 AM
Make no mistakes about it, a second home is an EXPENSE. You can convince yourself and/or justify anything you purchase and I did the same as you are thinking with the purchase of our lakehouse. Based on an appraisal done last year when we refinanced, I have lost 10% from the purchase price. Additionally, I have put time, energy and money into various improvements. We've also purchased many toys that are all depreciating every day that they sit.

So, unless we again see the heyday of real estate, consider a lakehouse an investment in family & friends and great memories. NOTHING MORE may come of it and, for us, that is OK.

jmvotto
09-05-2012, 10:10 AM
Make no mistakes about it, a second home is an EXPENSE. You can convince yourself and/or justify anything you purchase and I did the same as you are thinking with the purchase of our lakehouse. Based on an appraisal done last year when we refinanced, I have lost 10% from the purchase price. Additionally, I have put time, energy and money into various improvements. We've also purchased many toys that are all depreciating every day that they sit.

So, unless we again see the heyday of real estate, consider a lakehouse an investment in family & friends and great memories. NOTHING MORE may come of it and, for us, that is OK.




Drew makes some good points. taxes utilities upkeep etc.
Its all a trade off, but to think your buying an investment in a second home can be dangerous. look at Florida for example.

FWIW the stock market (s&p 500 )is up 13.50% through Aug, 18 % YOY and 13.5 average of 3 yrs and 6.5% avg over the last 10yrs.

does not feel like it but the amrkets are doing ok.

mnpracing
09-05-2012, 10:16 AM
I think about it like this....your home(s) is/are your home(s), your investments are your investments....be careful not to confuse the two. At best, a second home is a forced savings (with a negative return), but something you can sell later to get some cash back. Over the long term, very few homes actually have a positive return once you factor in taxes, upkeep and utilities. At the end of the day, if you want it and can afford it, buy it.

ryan_8099
09-05-2012, 10:20 AM
as the cool-hip teens like to say "YOLO"

Buy it!

bergermaister
09-05-2012, 05:20 PM
With the stock market doing as crappy as it has been doing, we have been thinking about cutting back on putting money into the retirement account and going ahead and purchasing this small cottage.

Not to squash your dreams but maybe this can help to put that in a different perspective if you are talking about equities. You all believe in buy low, sell high right? With the stock market doing crappy guess what you're doing each time you add $ to your plan(s)....

I used to tell people that when their funds/companies are down it's like a sale. Would you rather wait until they jump up 20% higher and then buy? Didn't think so. This is if we're talking strong companies/funds, not crackpot get-rich-quick gambles.

Then again you may want to jump on that cottage and enjoy it as much as you can up until Dec 20 because the next day will... :eek:

Nobodyrides4Free
09-05-2012, 07:33 PM
We bit the Bullit last July 2011. Could not pass up the Great Deal we got on our place. Think about the Doubles too before you take the plunge
Insurance times 2
Payments
Taxes
Utilities
Lawn
It was worth it for us. We spend so much more time better lake because we have the place.
Good luck on Decision

BobP
09-06-2012, 09:10 AM
This is the 5th year for our lake house/cottage. We love it....but... the travel time, the upkeep of two homes, taxes, insurance, etc are both physically and financially draining. We are lucky enough to afford it, but once/if that changes we will need to decide which place to sell, not looking forward to that day.

kaneboats
09-06-2012, 03:06 PM
Thought about a place on the river. It's a 45 min. ride. Told the boss I really don't wanna go up there and mow the lawn every Sat. Right now I use the river for free.

maxpower220
09-08-2012, 03:36 PM
I think now is a great time to purchase property, especially waterfront property. If you can pay cash, then do it. Even with low interest rates on homes, you would really be losing money in the long run if you divert funds from real investments.
The only way I could justify a property is to make it a rental. If you can find something that you can rent part of the year and generate income, then this is really a different discussion. As others have mentioned, a second home is expensive. A rental home can help make a nice income or provide the funds to pay for itself over time.

kaneboats
09-10-2012, 02:07 PM
I think now is a great time to purchase property, especially waterfront property. If you can pay cash, then do it. Even with low interest rates on homes, you would really be losing money in the long run if you divert funds from real investments.
The only way I could justify a property is to make it a rental. If you can find something that you can rent part of the year and generate income, then this is really a different discussion. As others have mentioned, a second home is expensive. A rental home can help make a nice income or provide the funds to pay for itself over time.

The problem with trying to rent waterfront is that all the good weather peak times of the year are whey you want to use it too.

Lawdog
09-11-2012, 12:11 PM
I think now is a great time to purchase property, especially waterfront property. If you can pay cash, then do it. Even with low interest rates on homes, you would really be losing money in the long run if you divert funds from real investments.
The only way I could justify a property is to make it a rental. If you can find something that you can rent part of the year and generate income, then this is really a different discussion. As others have mentioned, a second home is expensive. A rental home can help make a nice income or provide the funds to pay for itself over time.

We can possibly use it as a rental if need be. Alot of people that live/rent around the lake are from the greater Chicago area. We can afford the property without touching the money we are investing, we would just have to tighten our belts a little more. I spoke with a guy at work who seems to be an investment guru and he stated that if I can I should wait to see who becomes our next President or at least wait until the start of next year to see if the tax laws change/expire. Basically stated that it is possible that the second home tax credit may or may not be there after this year which will affect how much tax credit I can receive. So I am going to look into that as well. We would use it so much to be perfectly honest I wouldn't care if we rented it out.

jmvotto
09-12-2012, 11:10 PM
We bought ours with the intention of rental income, then with all the hard wok and upgrades we tightened our belt a bit and just used it every weekend, could not come to rent it.

It looked sketchy in 08 an 09 after the purchase in march Of 07, but it has worked out greatand we use it fom April til October...

Lakes are reall nice around IN and MI should be able To get a great deal.

maxpower220
09-13-2012, 09:59 AM
At one point, I owned 6 rental homes. Presidents come and go and tax laws change slightly. I took a position that I needed to break even in monthly costs vs monthly rent to make a purchase (at a minimum). As, over time, the renter is paying for the asset. For my first rentals, they were generating a surplus each month. I saved that money to a minimum that I set and then I used any money over that to purchase more property.

I sold my rentals due to too much moving (military) and to meet other financial goals. I will be buying rentals again soon.