Buying a Vacation House

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  • Advice sought! My husband and I cannot afford to buy a home in the Bay Area. Well, we may be able to stretch and get a small condo or a fixer, but it doesn't make financial or practical sense to us at this time (we have a good, stable rental in a nice neighborhood, and anything we'd be able to buy would likely be significantly more expensive AND in a less desirable area). We have managed to save a small chunk of money and one of the things we have considered is buying a vacation rental that we can use as a family and also rent out as an AirBnB. Our goal would be to own a (hopefully) appreciating asset that we can also enjoy, and at the very least break even or come close in terms of the rental income. We'd even consider relocating there permanently down the road. We'd be looking in the Sierra foothills most likely, where we'd have an easy drive to the snow. Has anyone done this? If so, any advice for what we should be thinking about? I don't really know where to start thinking through the financial, tax, and other implications of a decision like this. Curious if anyone else has considered something like this, or done it, and how the experience has gone for you. Thanks!

    Not exactly your situation but we own our house in Oakland and also decided to buy a second home as a vacation/rental. Lots to consider here, but first is that if you want to rent it on Airbnb/VRBO, you should check the local ordinances (and HOA rules if applicable) to make sure short term rentals are allowed. Many municipalities are starting to restrict any rental that’s for under 30 days. You’ll also need a local cleaner and handy person. Our rental did great this year and covered our entire mortgage. Happy to talk more!

    I think it's a brilliant idea! My partner and I own a home in (what I find to be) a very undesirable area. A number of years ago, after decades of me begging to have us move back to the country (where I thrive), we made a compromise: we bought a weekend place in the country - just outside of Sonora. I'm happy to share our experience with you - the good, bad & ugly parts. Mostly, we're very pleased. Reach out if you want to discuss it more.


    mailisha.chesney [at] 

  • We are in the very fortunate position to be receiving a sizable chunk money in the near future ($225k), but it will need to be invested via an IRC 1031 exchange in order to defer a huge tax hit. We are hoping to find a rental property that checks the following boxes:

    1. the funds cover at least 75-80% of the initial cost of the home;

    2. the home is in a desirable enough area (recreation-wise) that we could rent it out part time to help defray some of the costs associated (taxes, insurance, mortgage, maintenance, property management); and

    3. it's within a 2-3 hour drive of the bay area, so that we might be able to use it some weekends too. 

    So far, we've identified the Murphy's/Arnold area, but would love to hear any other thoughts or ideas about places that fit these criteria. . .if there are other criteria that we should consider, we'd love to hear those too.

    Thank you!!!

    Be careful with a mix of rental and personal use; check to see if that will break the rules for 1031 exchanges, which are predicated on investment property for investment property swaps.  Here's a bit from the IRS:

    Grass Valley, Nevada City, Angel’s Camp. A little bit further drive gets you to Truckee, King’s Beach and other Tahoe towns. 

    Or you could go west instead and look at beach towns: Mendocino, Little River, Pt. Reyes, Bolinas. 

    Have you looked into the Monterey area?  When we had three kids at home, we used to travel there frequently for weekend trips to visit the aquarium, beaches, hiking trails, etc.  After paying for meals out, parking and hotels, we bought a small condo so we built equity and got to go to one of our favorite places, too.  We went the condo route because we didn't want to deal with yard maintenance and the like.  It was a little challenging to pack up kids, dogs and a weekend's worth food every Friday, then turn around and do it in the opposite direction on Sunday, but overall, it always made for a nice weekend.  Bonus:  the place we bought had a year round pool >and< was in (longish) walking distance to downtown Monterey.  If the weather wasn't "beach-y" we could take the kids to the pool.  We could walk to tourist-y events and enjoy the cheese and tacky without dealing with parking and traffic.   

    It definitely meets your requirement for a short drive:  if no traffic, about 2 hours from most places in the Oakland/Berkeley area.  That was also key for why we chose Monterey over Tahoe:  half the drive (Tahoe is about 4 hours) and you don't have to deal with weather in the winter.  

    Seven years later, we have bought our future retirement home (single family residence) in Seaside, a city just north of Monterey.  Seaside used to have a bad rap (think west or east Oakland) but there are many nice neighborhoods (think Rockridge, Montclair, Crocker Highlands) that are quite nice without the priceiness of a Monterey or Pacific Grove zipcode.  We rent out the condo for the same cost as the mortgage, so when we retire and the mortgage is paid off, we'll have a tidy little income property.    Many of the single family homes are currently selling in the high $400k, low $500k range, which is a little high, but you could start with a condo or town home as we did, you would likely find something cheaper.

    You can consider Pine Mountain Lake gated community in Groveland, CA. It is about 2.5 hours away from the Bay Area and 40 minutes from the entrance to Yosemite park on route 120. The community itself has a lake with 3 beaches, kayaks rental and kids’ playground. There is also a golf course with a restaurant and a pool. Good luck with the search!

    The obvious place is Lake Tahoe and even better tax wise is Lake Tahoe on the Nevada side.  Not sure that property in Murphy's/Arnold would be such a good investment in terms of appreciation and rental income over the years.  While it is a tourist destination it's not like Lake Tahoe, Santa Cruz or Napa.

    We have rental income and thought about buying a vacation/income property and never did it.  We family and friends who have and they are always complaining.  If you rent out the property then you can't really leave any of your clothes, food or personal items or keep the place nice.  Renters are hard on properties and just don't take as much care as you would.  While it sounded good in the beginning, they all decided to stop renting.  Remember there are hidden expenses such as property manager, advertising, emergency repairs, and upkeep.

    When we looked into it the advice I was given was to make sure you buy in a place you like to visit.  Look at hotel and Airbnb prices and then figure out how many nights per year you will be staying there.  Compare that to the hotel/Airbnb rates and see where you stand.  If the hotel/Airbnb is a lot less than it's not worth it.

    If you like Murphy's/Arnold are you night want to take a look at Grass Valley or Groveland.  But you know where you might want to invest?  Where property values will be increasing and housing is in demand?  That would be Paradise, Chico, Biggs and Gridley.  But not sure if that's where you would want to go on weekends. 

    Hope you find this useful.