Would you stretch yourself????

V

valentine

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Came very close to buying a small holiday home in area that we know well, is about 1 hour fifteen minutes from our home and that we feel we would use a lot. Following the survey we pulled out as there was a huge amount of work to be done.

Another house in the same area has just come on the market - v close to beach, state of the art kitchen, 4 bedrooms, beautiful views etc and (without survey) seems in complete walk in condition.

Due to an inheritance we would have had a very small mortgage on the property we nearly bought. Our own mortgage has become a small amount of our outgoings.

This one is a different ball game. We would be able to afford it (we have built up a lot of equity in our home) and we have a solid deposit from the inheritance, but it would definitely stretch us for the first few years at least. Also we would (almost definitely) have to rent it out sometimes, but we know from experience that the rental market there is very strong, so that shouldn't be a problem.

I suppose that I feel a bit that a holiday home should be just somewhere to escape to and that if financially it is a bit of a burden, maybe we are missing the point.

However I do feel we would get lots of use from the place, it would appreciate in value and it is fabulous!

The big thing for us I suppose is taking on debt - its not really our style, our cars (not new) are paid off and our mortgage as I said is a small outgoing.

Would love peoples opinions on stretching yourself... Have people found that its almost always worth it?? Or to hear from people with holiday homes in Ireland? Many thanks in advance.
 
Forget about the intangibles (e.g. relaxing getaways etc.) for a minute and put hard figures on the more tangible things (e.g. purchase costs, other outgoings, maintenance, insurance, rental income - allowing for vacant periods, tax, potential capital appreciation, CGT on eventual resale etc. etc.) and see how viable the purchase would be. If it looks viable from a number crunching point of view then factor in other issues such as the work involved in managing a rental property, the benefits of having a place to get away to, how another property purchase fits in with your overall savings/investment portfolio (e.g. should you be concentrating most or all of your overall wealth in property in the same area?) etc. When thinking about relaxing getaways consider the annual cost not owning a holiday home and just paying somebody else for accommodation and other services and the advantages of not being tied to just the one place.
 
Thanks Clubman. I suppose I am aware of many people who stretched themselves a few years ago and it all worked out fine (which includes a lot of people in the past few years!). Wondering though if there are people who stretched themselves and regretted it afterwards. If we buy this house we wipe out the security of having savings and the security of knowing that rainy day money is available. When I read of personal debt out there maybe we are in the minority thinking like this. Interested in what others think?
 
Hi Valentine, You sound as if you have already fallen in love with the place and the house.
The only thing that would put a halt to my gallop, so to speak is , is the thought of renting it out to virtual strangers.
Is it possible to manage without this extra income for a couple of years?
You will probably be renting at times , when you would like to be able to use the house yourselves.
From listening to family and friends who rent holiday homes, the amount of hassle and lack of consideration for a holiday rental , especially the people who do not believe in leaving a place anything remotely like the condition in which they found it, is not worth the effort involved for the income it achieves.
I would only rent a property in which I had no personal interest/emotional attachment to. It would be a business proposition only.

Have you done the number crunching excercise as suggested by Clubman?
 
valentine said:
Thanks Clubman. I suppose I am aware of many people who stretched themselves a few years ago and it all worked out fine (which includes a lot of people in the past few years!).
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What precisely do you mean by this? Worked out fine how? From a quality of life point of view or from a financial point of view (e.g. they earned additional rental income and/or sold at a profit)?

Wondering though if there are people who stretched themselves and regretted it afterwards. If we buy this house we wipe out the security of having savings and the security of knowing that rainy day money is available. When I read of personal debt out there maybe we are in the minority thinking like this. Interested in what others think?
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What is your goal in buying a place like this? A getaway place of your own? Rental income? Capital appreciation? Something else? If some combination of all of these then prioritise those that are most important to you. If it's primarily a holiday home then do you really need/want one and can you justify the expenditure and ongoing costs (time and money)? If it's primarily an investment property then is property the most suitable investment compare to other alternatives for your right now given your existing financial and personal corcumstances?

As I say, consider the cost of buying a place to head off to (and perhaps feeling obliged to only go there) versus paying as required to go to other places when you want to get away. It also sounds like you value the security of having liquid savings/investments so this is another somewhat intangible issue to factor into your deliberations.

Nobody can give the correct answer for you except yourself regardless of other peoples' experiences in this sort of context. Have you run the proposal by an independent financial advisor who can give you a more thorough financial "health check" and perhaps suggest alternative and possibly more appropriate investments?
 
Hi there
My advice is go for it if you love it as much as it appears you do. You'll be dead long enough. Life is for living. If things go bad for you renting it out fulltime is always an option and you have suggested that it is in a good letting location. In 10 years time you'll be delighted you bought it.
nbc
 
As someone that is considering a similar situation, I think the clubman's post was very well put and raises a number of issues for consideration.
 
Thanks for all the responses to date. Clubman I am going to really examine the issues that you brought up. Did the number crunching and it is a stretch. Also ran it by someone who has successfully invested in property over the last few years - he advised us against it! We are coming around to that.

On holiday next week so can review it all again. I suppose I mean by things working out well is the security that many people have now. We "stretched ourselves" twice in terms of getting mortgages for the first property we bought, sold and for the current house we live in. Both were great decisions at the time, from both a financial and a quality of life point of view. If starting off again we would not be able to afford even the first house we bought when we weren't nearly as financially secure as we are now.

Our goal is a place of our own - away from the city where we can totally relax and our small kids can have a bit of freedom. We obviously want capital appreciation.
Arch - will be interested to hear how you get on... NBC - appreciate your comments - I am a real "life is for living etc" , but also don;t want this to end up as a noose around our neck. But feel a bit that in a few years time we might be saying why didn't we just push the boat out now when we could... who knows.
Mary Rose - I really don't want to be renting out to complete strangers etc and feel that I am probably very naive about the logistics\hassle of all this.
Will use all your comments to review this again
Appreciate it.
 
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