Will a holiday home provide a good return on life?
13 August 20  /  Insights

Holiday homes can provide years of enjoyment and fond memories for multiple generations of your family. They can also create an extra layer of headaches and expenses that prove more trouble than they are worth.  

Here are 4 reasons to think twice before buying a holiday home, even if doing so won’t break the bank:  

Full-time bills for part-time enjoyment.

Most employees receive around four weeks of holiday time from their employers. Self-employed “gig economy” workers or small business owners might manage to carve out a few extra days. Or, they might be so busy running their businesses that even a week of holiday time is a stretch.  

Regardless, the bills associated with your second home are going to be there 52 weeks of the year: mortgage payments, electricity, basic upkeep, etc. Are you going to spend enough time at your holiday home to justify those costs?

“Landlord” is a job.  

Many people plan to offset the expense of a holiday home by renting it when they are not using it. This can be an effective way to earn some extra money and make your mortgage payments if applicable without stressing your finances.  

But when you rent out a property you own, you are taking on a new job: landlord. That means vetting potential renters and dealing with any unruly people who slip through your screening process. That means more wear-and-tear on the house, appliances, and furniture. That means repairs. That means complicated insurance and tax issues.

And all that means more work while you are still working.  

Maybe taking on that job appeals to you, especially if you are retired and enjoy property maintenance. But if you do not want to add “landlord” to your job description, don’t use renting your holiday home to justify the purchase.  

Visit more, travel less.

Buying something new is exciting, especially when it’s a big-ticket purchase like a vehicle or home. But that excitement can be surprisingly fleeting. Take your new sports car around the block a few times, and it is suddenly just your car. Watch a few movies in your fancy home theatre, and suddenly it is just your TV.  

A holiday home could be an exception to that rule, especially if it becomes a focal point for family gatherings. In that case, what you are really buying isn’t a home: it’s an experience of time shared with loved ones. The same holds true if your holiday home is near activities you enjoy, like a cluster of great golf courses or a vibrant restaurant scene.
 
But if your holiday home is just a nice house, that “getaway” feeling is going to become just another part of your regular routine. Going on holiday will start to feel like visiting, or worse, like walking into another set of rooms in your house. When holiday time rolls around, it’s going to be hard to justify spending additional money on “bucket list” travel when you know your second house is just sitting there, racking up costs, waiting for you to replace the leaky tap!  

Retire TO, not FROM.

So if you don’t want to be a handyman, you dream of crisscrossing Europe, and holidaying for more than 10 days per year makes you nervous, then probably a holiday home would not work for you.  

Still, there is that voice in the back of your head saying, “We love that place. We have the money. If we don’t buy now, we never will.”

Why not?

Maybe buying a second home isn’t going to improve your Return on Life right now. But retiring to your favorite holiday destination could be an invigorating change of scenery. There is a big difference between putting off your goals until it’s too late and putting a plan in place that will let you hit that goal when the time is right.  

In the meantime, keep that favorite spot in your holiday rotation. Who knows? After a few more years, the shine might wear off and you will start dreaming about a new destination.  

And as your plans evolve, make sure you keep us as part of that thinking process. Wherever you decide to live out your dream retirement home, our planning process can help you get there.

 

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