Cost/Benefit Analysis - Do you really need it?:Vacation Home

We're thinking about the toys and accessories that people buy to enhance their vacation lives and asking the question "is it worth it?" To answer that, we're doing an analysis to determine if you'd be happier and if the extra money spent would make it worthwile.

 This time, we're focusing on that vacation home...the cabin in the woods, the beachfront condo, the place on the river...your second home away from home.

To be clear, we're talking about another house besides the one you're living in now. That means a second set of bills, a mortgage (probably), and maintenance.

I'll use a cabin in the woods as our example. Let's pick a cheap place other than our state of California for our hypothetical cabin. If you look hard, you can find a basic cabin for under $300 thousand in, say, Idaho or Montana like this 1 bedroom, 1 bathroom on 5 acres near the border of both states in Benewah County.

It's a vacation home so we don't need a palace, right?

So what to we need to pay for...

Mortgage (principal and interest with 10% down) at 3% - $1180 per month ($14,160 per year)
Property Tax - $1850 per year (.630% Idaho State tax)
Insurance - $2500 (more for a high fire risk area)
Maintenance - $1500 per year
Total $20,010

So, right off the bat, you're spending over $20 thousand dollars a year on this low-priced vacation home...Over $1500 per month before you even buy a tank of gas to start driving to it.

Let's not forget, you have to furnish it, pay utilities, and...especially if you have special needs...may have to adapt it, like getting the bathroom redone for a roll-in shower (at least $10k) or install a ramp.

You should also keep in mind that this will be your prime vacation destination for years to come...since you spent all that money, other destinations will probably take a back seat. 

Sure, you could offset some of that money if you're able to rent it out when you're not using it but you also need to think about that expense. Do you need to hire a local agent to manage it? Spend money for damages your guests cause? Local permits needed to run a business?

On the plus sign, real estate can go up in price making it a good investment. That's not a guarantee, but it can easily happen.

Now, think of it another way. To rent a cabin will probably cost you $200 a night, maybe $1,000 per week (like this riverfront place nearby). If you go 4 weeks a year, it'll cost you $4,000...maybe up to $6,000 if you get a nicer cabin...compared to over $20,000 a year being an owner.

There's the cost, is there a benefit for you to own or is it better to just rent when you want to? The decision is yours.

Darryl Musick
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