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Buying a vacation home is a common dream that is rarely worth the investment in time and money. The only time it might be worth it is if your last name is Musk or Bezos, or you’re some other person just looking for fancy ways to spend your riches. Otherwise, if you’re still on the way to amassing a vast fortune, you should sell your vacation dream home and use the money to invest in true assets.
Selling Your Dream Vacation Home Frees up Cash To Invest
Owning a vacation home isn’t actually great in terms of investing. In fact, some financial experts say that a home is not an asset at all. Think of all the expenses related to homeownership; maintenance, repairs, insurance… the list goes on and on. Assets bring in money, while liabilities cost you money. Based on what you know about homeownership, would you call it an asset or a liability? We’d call it a liability.
Oh, sure, there can be tax benefits to owning a vacation home. You may be able to deduct the interest on the mortgage and the property tax. Or maybe you could become a landlord and start renting and deduct other expenses, but that is another job! Coupled with the added work, costs, and issues with depreciation, things will get complicated quickly.
So, unless you run a business out of your vacation home or want another job—and really, that’s not the point of a vacation home, is it?—then there aren’t enough tax benefits to justify the fact that it doesn’t provide any return on investment once you run the numbers.
Now, plenty of wealthy people own vacation homes. Heck, the billionaires of this world own multiple residences around the world. Bully for them. But I can promise you that they didn’t get rich by buying up vacation homes for themselves. Because rich people don’t buy liabilities to grow wealth, they buy assets.
Now, if you own a vacation home and you want to grow your wealth, you should sell that liability. Why? Because your vacation home is literally a box of potential just waiting to be utilized. Once you sell it, you free up cash that you can leverage in order to build your wealth. You can use that cash to invest in true assets that will make you money! All you have to do is realize that your dream vacation home is a liability, not an asset. Convert that liability into an asset now and let your money start working for you.
Accessibility Is Always an Issue
Let’s say your vacation home is situated in what your spouse likes to call, “Paradise on Earth.” You’ve got views of the ocean, verdant, sloping hills in the distance, and friendly locals who don’t drive like New Yorkers on fight night in Manhattan. All good, right? Unfortunately, no.
How exactly are you getting to this idyllic locale? And how often? You probably have a job to go to from Monday to Friday, so you can’t travel down to your vacation dream home then. It’s too far away to make it worth a quick Saturday, Sunday visit. Ah, but you have vacation time, right? Two or three sweet weeks once a year when you can spend five hours on a plane, an hour in a rental car, and finally arrive in Paradise on Earth. For the next several days, you’re patting yourself on the back for having the wherewithal to afford this amazing, beautiful dream vacation home. Well done, you! And just when you’re getting into the swing of being able to relax all day long… Bam! It’s time to pack up and go back home to real life. Talk about a wake-up call.
Face it. Accessibility to your vacation home will always be an issue. Until and unless you can figure out a way to work remotely from anywhere in the world (e.g., your dream vacation home), you’re just working to pay for that second home, which doesn’t seem as nice, does it. And having access to it for just a few weeks out of the year isn’t worth it, is it? What if you want to visit other places one year? Isn’t Tahiti on your list? And these issues never go away, because you live here and your vacation dream home lives there, far away in Paradise on Earth. The answer is counterintuitive but profoundly true. If you ever want to be able to stay in Paradise on Earth—wherever that is to you—then you need to sell your dream vacation home and take the money and invest it. You’re literally sitting in a powerful asset that you can leverage to grow wealth to live permanently in Paradise on Earth.
Security Is a Nightmare
You know those times when you leave the house for a weekend trip and you stress over whether you left the oven on? We’ve all experienced that. It’s terrible because you don’t want to come back to a pile of ashes where you left all your worldly possessions. Well, owning a vacation home in a remote location is like having that feeling times a gazillion, 24/7. You know, and I know that security experts always recommend leaving some lights on and holding mail at the post office. Why? Because burglars and teenagers target empty houses, that’s why. And what is your dream vacation home eleven months out of the year? An empty house. Security is a nightmare when you own a remote house. Smart vacation homeowners employ security guards or nosy/willing neighbors to keep an eye on the house while they’re away. But is that really enough to help you sleep at night, knowing how much your vacation home means to you (not to mention how much it cost)? And the truth is, burglars shouldn’t be your only concern.
Your vacation dream home could be in the wrong spot when a tree falls or when a local fire breaks out. Flooding could be a risk if a tropical storm develops. And you won’t be there to mitigate the risks or to remedy the damage when it happens.
Look, I know that owning a vacation home feels like you’ve achieved something. You feel like you’ve “arrived” after years of hard work. But I can tell you from personal—and professional— experience that your vacation dream home isn’t doing you any favors. If you sell it and take the cash and invest that money, you’ll be able to take lots of vacations and stay in gorgeous locations since you’ll be using that freed-up money to invest in your future.
I really hope you’ll at least think about it. I want you to succeed, and I want you to get wealthy. But at this stage of the game, your vacation dream home is an impediment to your future wealth. Please give us a call so we can talk about ways you can use that money to invest. Don’t let the liability of a vacation home turn your dreams of leisure into the drudgery of obligation.
Related: Read This Before Buying a Boat