Physician on Fire

s a second home a good real estate investment?

 There is no universally applicable answer, but the math suggests a second home is less than ideal as a pure investment.

But that hasn’t been true for my family and me. I’d like to share the story of our second home, and why, for us, it has been a fantastic investment.

Maintaining one home is challenging, so I never fancied I would own two of them. Doubling the property doubles the work, and you need to have lots more stuff, which we have too much of as it is. A second home means taking all that stuff and multiplying it by two. Why on earth would I want to complicate our lives like that?

I recall explicitly telling my parents —who have their own second home more than six hours away — I was happy with one really nice home in a place where we wanted to be. Then we bought a cabin.

A few months after that conversation, I saw a sign. Not one of those profound revelations that result in a new vision of how to live our lives. This was a plastic sign. On a wooden stick. It said “Auction.”

I also saw an ad in the newspaper detailing the auction and advertising a preview weekend. We toured the grounds of a resort-turned-summer-camp-turned-condo-association. Some time near the peak of the housing market, a developer purchased the property and attempted to sell individual cabins for a premium price. Only a handful of units sold in a few years. The rest were to be auctioned off in a couple weeks to the highest bidders.

While we had expressed little interest in a second home, this place was within ten miles of our home, on a picturesque recreational lake, with a bike path running right to and through the property. We could boat, bike, jog or drive to this place. The cabins were in pretty rough shape, but we had recently built our home, so we knew a dependable tradesman who could make it sparkle.

My attitude toward owning a second home shifted when it appeared I might be able to score a really good deal. This 

I was serious enough about it to take out the required $5,000 cashier’s check as a deposit to obtain a bidding number. There were about as many people with the same idea as there were units for sale. This worked to our advantage and made the auctioneer rather surly.

The auction style was bewildering. It was so strange that I’m not sure I can describe it accurately, but I’ll do my best. There was a first round of bidding that set a reserve price of sorts, but we weren’t bidding on particular units. We were telling the auctioneer how much we would pay for our pick of the units. Then there was a round for second pick, third pick, etc.

I had some idea of what was going on, having had the auction team explain the bidding process at the preview. I kept my number down throughout the initial bidding process. No need to drive up the reserve price. Other befuddled bidders thought they were bidding on the units, but all they were doing was unnecessarily increasing the reserve.

Once we had established a minimum price for the units in rank order, the actual selling began. The highest bidder in the initial round chose the unit they would prefer, and bidding began at the price they said they would pay. No one tried to top that opening bid price. Sold. Next was the second highest bidder from the first round’s turn, third highest, and so on.

There wasn’t much bidding going on until the prices dropped below $10,000. The auctioneer was literally scolding us for not bidding. It was awkward.

Those of us holding bid numbers realized that there wouldn’t be many of us going home empty handed. I ended up with the winning bid on one of the last places up for grabs and was able to get one of the units we preferred. At the time of our purchase, we were also in the market for a used minivan. 

We paid more for the van than we did for the cabin

We were ecstatic! We would have a cabin just down the road, on a lake attached to our primary home by a navigable river. We could take family bike rides there, choose to spend the weekend or just a night there whenever we felt like it. Our out of town guests could stay there. Our friends were more likely to visit. My winning bid was a sign. Not a plastic one on a wooden stick, but a sign of good things to come.

Our hospital, the only one in the county, had been struggling financially. I thought my status as the chief and only anesthesiologist (the only one in the county) was a bulletproof vest. I didn’t realize just how dire the situation was, and a couple months after we closed on our second home, I lost my primary job. The hospital shut down six months later.

There were no other jobs within commuting range. We 

, but the second home dream lost some luster on that fateful day.

We decided to fix up our fixer-upper, and while I worked 

 and found a new job, the cabin was transformed from dilapidated to delightful. A few years later, we had some exterior work done, installing cedar shakes and fresh layers of paint.

While our initial cost in 2011 was about $16,000, we put about $34,000 into it in 2012, and another $10,000 in 2015. We’ve got about $60,000 into it, and I would estimate its value to be right around twice that, $120,000. By that measure, we’re $60,000 ahead.

It’s not that simple, of course. If I hadn’t bought the cabin and spent the money to fix it up, it’s safe to assume I would have invested that money. Using the S&P 500 calculator, I can estimate how much we would have if our dollars were working for us in a low-cost index fund.

We’re still coming out ahead, even if we account for some realtor fees if we were to sell, but not by as much as I would have guessed. There are other financial considerations. We pay the electric bill. We pay property taxes and association dues. Those dues cover lawn mowing, snow plowing, dock in, boat lift in, dock out, and boat lift out. There’s a pole shed to store our boat in the off-season. The dues are money spent, but it’s spent on things that allow us to enjoy our time when we’re there.

If we didn’t have a second home, we would be spending more on vacations and short-term rentals. I don’t know if we would spend as much as the home costs us, but to answer that question, we need to know how much those annual costs are.

We need to take into consideration the aforementioned costs and add some opportunity cost to holding an asset that will likely appreciate at a pace slower than the stock market.

If we assume the market’s returns will outpace real estate by about 4 percent, a reasonable expectation, the opportunity cost of having our money tied up in the cabin is $4,800 per year. I use 4 percent because I’m not using leverage on our second home, and I would likely have invested in mutual funds if this opportunity hadn’t presented itself.

While there could be other expenses related to maintenance or repair, our experience is that they’ve been pretty minimal. We can round up and say the total cost of owning the cabin is around $9,000 per year.

My wife and I feel it’s worth every penny.

While we no longer live nearby, it’s a day’s drive away. I spend four to six weeks there every year, and my wife and boys spend most of the summer there, averaging around 10 weeks a year.

Our extended family uses it, too. My wife has many relatives in the area, and they not only stay there on occasion, but they also help with tasks when we’re not around, like winterizing the cabin or putting the boat away.

We’ve invited friends to stay there when we’re not, and a few have taken us up on the offer. We actually had a family live there for eight months straight when they were in need of a place to stay. Short-term rentals are not allowed, but we can be charitable with our property by letting our friends use our second home for free.

Our second home could become our primary home for a spell. If we follow through with our plans to 

 — and it seems more and more likely that we will—a small place as a home base would be ideal.

Articles

With compounding costs and extra work, purchasing a second home is not on the average person's to-do list. But for some families, the joys of a home away from home outweigh the stressors that accompany owning a second property. Physician on Fire and his family are amongst this small population. Continue below to learn about POF's journey to owning a cabin. 

Why I Love My Second Home

Time passes quickly when you have a full schedule. In the next few years, my schedule is certainly full.

In addition to working full time and blogging part time, my boys will be in more after school activities. We’re learning Spanish together as a family, so the next few years will fly by.

, I won’t be retiring from clinical medicine to escape a job I dislike. I will retire to free up over 2,000 hours per year to spend in any way that I please. How will I spend my time? Doing the things I wish were doing now. Those things are as follows:

. I’ve got a stack of unread magazines and probably read a book a month. I’d like to be like Zuckerberg and 

. I might even find time to read fiction, although I generally prefer 

. I enjoy photography, and most of the photos on this site were taken by me.

. We probably average two or three nights a year. I’d like to up that to two or  three weeks.

. With more time to prepare meals, and fewer meetings and surgeries at mealtimes, I anticipate fewer convenience foods in early retirement.

 full of great day hikes. Have boots, will travel.

. We have a great network of paved bike paths, and world class mountain biking nearby. Most of my biking is to the hospital and back.

, but I’ve been pretty stingy with my time. I look forward to feeling like I have time to give, and following through by doing so.

. I do my best to say Yes when the boys ask me to play. In retirement, it will be much easier to give them all the time they desire. Hopefully, they’ll still want to play with Dad in a few years.

. Our poor dog is a good walker, but she rarely gets walked. A daily walk could be part of our morning routine.

. I’ve actually walked a marathon, but have never run one. I’d like to change that.

. I alternate between rising at 0515 for work and 0715 or 0915 to make up for lost sleep. I look forward to a healthier, more consistent sleep schedule.

. I’ve got friends and family around the country, and I don’t do a great job keeping in touch or seeing them. When I’m retired, I should have the time if they do.

. We’ve been fantasizing about a full school year of road schooling the boys. History and science will be all around us. This fantasy can easily become a reality.

. Living in a motorhome will help us realize what we really need, and what we can live without.

. There’s no better way to become proficient in a language than to live where it’s native. The boys would benefit from the exposure to a different culture. It wouldn’t be a permanent move, but a few months to a year would be fantastic.

. Last year, I attended four of my alma mater’s home football games, and one away game. One year, I’d like to make it to every home and away game. Might have to hang onto 

. I know, I know, how lame and unhealthy, and blah blah blah. I keep hearing about these great series that I’m missing out on. I won’t spend hours in front of the 

from Series 1, Episode 1 without any knowledge of what’s about to unfold.

. I read about people who have walked great distances for charity, like Steve who is 

. I think I would enjoy walking a great distance to raise some money and awareness for a worthwhile charitable cause.

. Minimizing is step one. Organizing what’s left is an important step two.

. Less time working means more time to write. Or maybe not, with these other 49 ideas. But I imagine I will be better able to focus on writing, and perhaps writing something bigger than a 2100-word blog post.

21. Represent a brewery at the Great American Beer Festival

. I’m invested in two microbreweries. Plus, 

knows a guy who knows a guy who is involved with the granddaddy of all brewfests. I should be able to make this happen.

. I’ve got all the equipment, but we pretty much gave up the hobby when we had kids. In a few years, the boys should have the stride and stamina required to get properly lost with us in the wilderness. I actually proposed to my wife after an 18-mile hike in a remote area. A “No” would have made for a long, awkward walk back.

. I will continue to donate half off this site’s revenue to charitable causes, including our donor advised fund. As the fund grows, so does our ability to 

. I’ve got a five-year old who can read sheet music and play “

” on the piano. I’m still working on the 

. I forgot to do this in my twenties, but it’s never too late. Do they still sell Eurail passes? Is there a senior discount for this 

. I think I know a little bit about how to cook food, and then I see 9-year olds on 

 throw together some duck breast, molasses, and Twinkies into delectable entrees. I have a lot to learn. From 9 year olds.

 When I talk about retiring, I’m referring to a retirement from clinical medicine. I doubt I’ll ever have a traditional 40-plus hour a week job, but I wouldn’t rule out some sort of rewarding work that aligns with my interest and talents, whatever those may be.

. I’ll have lots more time to teach my children about things they won’t learn in school. Personal finance, for example. There’s a good chance my wife and I will take the place of their teachers for at least a year if we follow through with the motorhome dream.

. A funny thing happens when you teach. You learn. Touching on a topic will pique my curiosity, and I’ll have the time to dive deeper into a subject.

 Some of our nation’s greatest scenery has been preserved to be enjoyed by generation after generation. Did you know that all National Parks are free to visit this weekend 8/25 to 8/28? Or that 4th Graders can get a 

? And seniors over 62 can buy a $10 lifetime pass? If you are none of these, you can purchase an 

when you are ready to tour the nation in a motorhome.

Time flies when you're having fun. Or, as Kermit tells us, time's fun when you're having flies. Physician on Fire has a few ideas about how he wants to spend his time after retiring from his anesthesiology career. If you, too, are thinking of retiring early, continue below for some inspiration. 