Before the days of the Fat FI/RE movement that headline would have seemed like blasphemy. I say the notion of a second home in the context of the Financial Independence movement is a rare fringe, but I am here to make the case that, for a % of us in this movement, purchasing a vacation home is the best use of our resources and could even accelerate your FI/RE date. It’s going to take some work, research, energy and effort but it can be done and it can be done A LOT cheaper than you think.
Our FI/RE journey was built on investing capital aggressively in businesses and opportunities regardless of geography with very few limitations. This has led us to our current position of owning 3 businesses that operate in 17 states and internationally, 4 rental properties in 3 states and family far away from our primary residence. We have kids, dogs, equipment to work remotely, etc. We travel heavy and FI/RE dad has enough committments that I need to be able to connect on a regular basis. Those are the logical reasons to consider a second home somewhere near some of the items listed. It so happens that the most time consuming business and lots of family are all within a 150 mile radius.
The icing on the 2nd home cake is that I built an Event’s Consulting business on the back of travel. Lots and lots of travel that took me to multiple countries and 30+ states every calendar year. It will take decades before I willingly want to spend a vacation in a hotel. Air Travel and hotels are not things I associate with fun and that is just a product of being a million mile traveler before the pandemic of 2020. It’s been 15 months since I’ve been on a plane and if I never had to fly again I’d be happy.
Everything seems logical, but from the lens of FI/RE it seems illogical to buy a second home just so you can keep working. Looking at current real estate prices the most modest home in the cheapest places in the US are at least $100,000. The time it takes to earn that extra capital plus maintenance should outweigh any potential savings so much that there is no way it could actually speed up FI/RE?
This is fundamentally a math equation where the purchase needs to directly contribute to an increase in earnings or reduce future expenses enough to offset the initial outlay of capital. Turns out, that math isn’t as difficult as it sounds if you’re willing to spend the time and energy. Let’s look at our costs:
$55,000 – Cost of 2br/1b cabin on 1 acre
$5,500 – Initial repairs
$1,250 – furnishings
$61,750 – One time investment
$1,200 – Utilities
$2,100 – Tax and federal land lease
$1,500 – repairs fund
$4,800 – Annual expenses
The vacation home we purchased is a cabin with central air, heat, plumbing on a national wildlife preserve. it is 25 miles away from my retail business and 30 miles away from 3 of our rental properties with a ton of family in easy driving distance.
Given the opportunity we would spend 6-8 weeks each year in this general area either working on our investments, visiting family and now, vacationing. The cost of lodging for us on the vacation home market would be enormous (we were estimating $7-8,000/yr) and would easily exceed the annual expenses of the cabin each year which helps pay off the principal investment from year 1.
Did you know that the federal government owns tons and tons of land? Did you also know that this land has been leased out to citizens for over 100 years? These programs are extremely cost effective ways to enjoy some of the most beautiful parts of America, having access to a second home and helping to protect and preserve public land.
Going through the 10 month process of applying for a lease I learned that these applications are dropping by my generation and younger. The programs are hard to learn about, there is little information online and most of the process is paper and phone calls.
The goal of this post is not to try to convince everyone they need to lease public land. Rather to give another concrete example of what my blog is all about. The tagline of this blog is “A Frugal Life of Luxury” and I can’t think of a better example than buying and maintaining a vacation home for less money than hotel stays.
Here are some photos from the first 36 hours we had the cabin.