Weekend Home - Good or Bad Idea

[FreeTime]

We have been on the fence for several years about buying a full time lake house. With the increasing prices though we are thinking we should stay full time in our primary home. For example, lake homes we looked at three years ago that sold for $325,000 are selling for about $550,000. We don’t want to pay that much as we will be heading until retirement in 15-20 . That being said, on the same lake we could buy a cash only vacation home for less than $200,000. The drawbacks are that it is on leased land, cash only so no longer having those funds on hand, and not able to be rented. Rent is $4000 a year with max of 5% increase. I have heard nightmare about leased land before. The pros are we could stay there for weeks at a time in the summer and still go to work and continue to grow equity in our primary home.

This lake is thirty minutes from our primary home so we woul visit often, this is why we are leaning toward this option.

Other options we have considered is a vacation home but the location we would want would require flights and I would not see us going more than 2-3 times a year. And the optionof an RV, we had one previously, but really don’t want to worry about having to book sites, always have a larger vehicle, etc.

Does anyone have a home on leased land? Do you visit your weekend home regularly? Would you run far away from doing this?

Thanks

 

[tcufrog]

My investment advisor would say that that's a terrible way to spend your money and that it would be cheaper to rent places when you wish to vacation. Very few of his clients get their money's worth from vacation homes unless they rent it out a lot somewhere for a lot of money.

 

[FreeTime]

My investment advisor would say that that's a terrible way to spend your money and that it would be cheaper to rent places when you wish to vacation. Very few of his clients get their money's worth from vacation homes unless they rent it out a lot somewhere for a lot of money.

Thanks for the quick reply. Mine would also. Which is why we are leaning away from the vacation home idea and more toward the weekend home. There are many limitations on the area for rentals unfortunately so it is difficult to find something to rent. At our regular vacation spot, we rent the same cottage several times a year.

 

[Sinder]

I would never own a home on land that was not owned by me so I would run far away from that option.
If my heart was set on a lake home I would search other areas within a certain radius, or look for land only on a lake and put a cabin on it.

We own land up north. We are building a cabin on it but until it is finished we have our RV parked there and use that. We are there almost every weekend from Spring through Fall. It is less than 2 hours away so not too far to drive for us.

 

[PollyannaMom]

At our regular vacation spot, we rent the same cottage several times a year.

Figure out how many years it would take to break even if you bought the lake house instead, and that will clarify your answer.

 

[OneOftheB's]

I would see if any of the homes on the lake are short (or long) term rentals and rent for several weeks or weekends to see if it’s really worth the expense. Remember it’s not just the initial buy in, but you’ll be paying 2x utilities, homeowner insurance, furnishings, and trying to rebuild your nest egg. And, honestly there is no way I would buy a house on leased land; that just seems like borrowing trouble

 

[LeslieLou]

I don’t think I would do what you’re discussing. It is all cost and there’s quite a bit of risk. Having a vacation home that we rent out, I’d consider if you can offset enough costs buying and renting out even at 500k. For us, we do very well making our 2nd home essentially cost nothing.

 

[_19disnA]

Sounds like an investment I would avoid. Not familiar with having a home on 'leased land' so would want to look further into that to see what exactly that means. Why do they require you pay cash, never heard of that requirement either. Not clear why you have to pay rent of $4,000/yr on a house you own. Owning any kind of 2nd home as a vacation location involves all sorts of expenses and time to manage. Even if you could rent it out, you will likely do no better then break even and then spend a lot of time trying to maintain it. Arranging things like repairs from hundreds of miles away can be a big challenge.

If it were me, I would just rent someplace when you want to go on vacation and avoid all of the other issues and financial burden of owning.

 

[Sinder]

Sounds like an investment I would avoid. Not familiar with having a home on 'leased land' so would want to look further into that to see what exactly that means. Why do they require you pay cash, never heard of that requirement either. Not clear why you have to pay rent of $4,000/yr on a house you own. Owning any kind of 2nd home as a vacation location involves all sorts of expenses and time to manage. Even if you could rent it out, you will likely do no better then break even and then spend a lot of time trying to maintain it. Arranging things like repairs from hundreds of miles away can be a big challenge.

If it were me, I would just rent someplace when you want to go on vacation and avoid all of the other issues and financial burden of owning.

You don’t need to take on all the maintenance and trying to arrange things from hundreds of miles away, you can use a property management company. They get a large percentage of your rental income (upwards of 60%) but they take care of everything.
Obviously you would have to figure out if that’s financially the best option for yourself but it is a way to not have to deal with all the issues yourself.

OP, I was wondering if this lake home sits in a private community like a campground or something like that? Or is it just a house on someone’s land?
I know there are lots of people who own cottages and tiny homes within privately owned campgrounds, and pay rent for the space they occupy. That is something I would do because the “house” is mobile and can be moved if something occurred with the land owner.
At 200K I’m guessing no, but I have seen brand new tiny homes in coastal campgrounds for sale for over 100k so you never know.

 

[Mackenzie Click-Mickelson]

Usually when I think of leased land I think of mobile home parks and there's enough stories where they become disadvantaged with the lease land that I would be highly reluctant to do it.

With lakes it's just common to rent during times you wouldn't be there and a no rent clause on a non-primary home would be a no-go for me if I wanted/needed the income of the rental opportunity. I'm guessing either the community has a no-rent rule (maybe short term rental sort of thing issues) or the owner of the land has set that rule.

I agree with another poster about trying out renting down there for as long as you were thinking you would be for the lake home. This gives you an idea if what would have been before a quick trip away experience turned into now a longer term experience complete with grocery shopping, day in and day out living, food options if you like to eat out, etc.

My in-laws had a place at the Lake of the Ozarks (a common weekend spot for people in my area) and eventually they sold it. They used it but not quite as frequently as they thought they would. The distance is more like 3-3 1/2 hours so quite a bit different than 30 mins. However, I think it's common for people think they will just pop on down whenever they want and stay for however they want but reality tends to set in and suddenly 30 mins seems like not enough distance away and you end up saying "why go through the hassle of getting down there". Consider that this home will have to be kept up in good shape at all times of the year if you'll really go down there as frequently as you want. Father-in-law also had a property down at the Lake of the Ozarks and he did use it more frequently but for the most part it was just family that ended up down there the majority of the time. He did keep a boat down there but after rough wakes pushed it into the dock and punched a hole in it causing it to sink (not fully submerged but pretty well mostly) he never did replace it down there. He still owns the house (was awarded it in the divorce) but hasn't gone there for years; just family.

On insurance another thing you'll have to keep out for is restrictions on secondary properties. The insurance company I worked for would have not insured this lake house unless it was distinctly different than your primary home. So let's say you lived in a lake house already, they would not have insured it because it was too close to the primary along with it not being a rental property where a landlord's policy was more appropriate. But if your primary home was in suburbia for instance and then your second property was at the lake then that would have been acceptable.

 

[SandyinMonterey]

I stopped reading at leased land.....NO WAY! RUN! Run far and fast.

 

[Cadiewampus]

Sounds like an investment I would avoid. Not familiar with having a home on 'leased land' so would want to look further into that to see what exactly that means. Why do they require you pay cash, never heard of that requirement either. Not clear why you have to pay rent of $4,000/yr on a house you own. Owning any kind of 2nd home as a vacation location involves all sorts of expenses and time to manage. Even if you could rent it out, you will likely do no better then break even and then spend a lot of time trying to maintain it. Arranging things like repairs from hundreds of miles away can be a big challenge.

If it were me, I would just rent someplace when you want to go on vacation and avoid all of the other issues and financial burden of owning.

Growing up my uncle had a lake house and the land was leased. In his case what this meant was the lake it was on was owned by Georgia Power and they leased him the land for 99 years for $1. Not sure what Georgia Power is doing now though. The lake is now dotted by multimillion dollar homes so maybe they are acutally selling the lots now.

 

[_19disnA]

You don’t need to take on all the maintenance and trying to arrange things from hundreds of miles away, you can use a property management company. They get a large percentage of your rental income (upwards of 60%) but they take care of everything.
Obviously you would have to figure out if that’s financially the best option for yourself but it is a way to not have to deal with all the issues yourself.

That is basically the point I was making. Either way you are going to spend some of your time (which is worth something) managing repairs/upkeep on your own or pay some property management company to do it for you. There would likely still be coordination needed with the management company regarding repairs/upkeep/etc. If it is only 30 minutes from where you currently live, seems it would be just as easy to handle on your own.

In either case, these are added expenses/time you wouldn't have to bother with if you simply rented someplace when you wanted to go on vacation. If this location doesn't let you rent out your property, it will be sitting empty during the times you aren't there and not generating any income to help pay for itself.

 

[CdnCarrie]

We have a cottage. Very common in our province to have a cottage. But we own the land. I do know people with trailers homes on leased land. They are in private campgrounds or for one a national park.

 

[MillauFr]

Why do they require you pay cash, never heard of that requirement either.

Maybe because no bank in their right mind would ever issue a standard mortgage on a house with leased land. That is more akin to a mobile home.

 

[MillauFr]

I wouldn't buy it. Owning 1 house is hassle enough.

 

[Disneybuckeye]

We bought a lake house 7 years ago. Tore it down and rebuilt. 4 beds, 2.5 baths, large covered porch, 1800 square foot dock with half under cover and electric lifts for our boat and jet skis. It is less than a 60 minute drive from our main home. All in about $300k paid in cash.

Best money we ever spent. We are down there every weekend we are not on vacation or at OSU football games from March thru November. We work from there most Fridays and some Mondays. Our kids and their friends come visit often. So do our friends. We can easily sleep 14. Our neighbors have been getting $375 a night on ABNB but we don’t need the money or want strangers in our house.

Life is a big party down there and we love it. We have made friends all over the lake. We were recently offered $600k for it. We laughed and said no. They said ok, how about 7. We said not for sale.

OP I think a weekend home in a popular location is a great buy if the price is right. Leased land is a no go. Look at what rentals go for. I am a firm believer in owning real estate If you can swing it. Just remember location, location, location.

 

[HerRoyalHighness]

My investment advisor would say that that's a terrible way to spend your money and that it would be cheaper to rent places when you wish to vacation. Very few of his clients get their money's worth from vacation homes unless they rent it out a lot somewhere for a lot of money.

we were *this* close to buying a lake house about 10 years ago and decided against for this reason. had also bandied around the idea of buying a beach condo and renting it out when we weren't using it, but have decided to just rent when we retire. can move around and if we get the december-february rental, it's pretty inexpensive (considering) and don't have to worry about upkeep.

 

[FreeTime]

You don’t need to take on all the maintenance and trying to arrange things from hundreds of miles away, you can use a property management company. They get a large percentage of your rental income (upwards of 60%) but they take care of everything.
Obviously you would have to figure out if that’s financially the best option for yourself but it is a way to not have to deal with all the issues yourself.

OP, I was wondering if this lake home sits in a private community like a campground or something like that? Or is it just a house on someone’s land?
I know there are lots of people who own cottages and tiny homes within privately owned campgrounds, and pay rent for the space they occupy. That is something I would do because the “house” is mobile and can be moved if something occurred with the land owner.
At 200K I’m guessing no, but I have seen brand new tiny homes in coastal campgrounds for sale for over 100k so you never know.

It is a similar set up to this. The cabins and tiny homes are all circa 1970 or earlier. You own the home as personal property. You lease the land by paying an annual fee that gives you access to the amenities, they care for the road, etc. I will look into the property management route if we decide to go the “far away” vacation home versus “weekend getaway” option. Thanks!

 

[FreeTime]

Maybe because no bank in their right mind would ever issue a standard mortgage on a house with leased land. That is more akin to a mobile home.

Correct. There are banks that will issue mobile loans versus mortgages. This would be similiar. They do not want the risk on something they can’t foreclose on. They could come after the collateral but wouldn’t want the hassle in most of these cases. Some people get HELOCs on their existing property, we don’t want to do this for any type of second home. It needs to be cash whether it is a $25k RV or $500k house.