Our Second Home is One of Our Best Investments

Set For Life
A few weeks ago, Mitch Wasterlain, CEO of CAPFUNDR, asked and answered a question many physicians will ask. Is a second home a good real estate investment? While there are many individual factors to consider, the math points to a second home being less than ideal as a pure investment.

Today, I’d like to share the story of our second home, and why, for us, it has been a fantastic investment.

I never imagined I would want, let alone have a second home. Maintaining one home is challenging. Doubling the property doubles the work. And you need to have lots more stuff. We have too much stuff! A second home means duplicate sets of silverware, flatware, beds, sheets, sofas, etc… Why on earth would I want to complicate our lives like that?

I distinctly remember telling my parents (who commuted six and a half hours round trip to theirs hundreds of times before moving there eventually) how I didn’t see that ever happening for us. I was happy with one really nice home in a place where we wanted to be.

How did we end up with 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 the 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 go dependable tradesman who could do the work that would need to be done.

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

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.


from our closing documents


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.

Or so I thought.

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 landed on our feet eventually, but the second home dream lost some luster on that fateful day.

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


Second Home


Second Home Financial Analysis


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.


kitchen before

kitchen before


kitchen after

kitchen after


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.


bathroom before

bathroom before


bathroom after

bathroom after


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 to have, 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%, a reasonable expectation, the opportunity cost of having our money tied up in the cabin is $4,800 per year. I use 4% 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.

To me, that’s a bargain. We get a lot for our $9,000. 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.


boys' bedroom before

boys’ bedroom before


boys' bedroom after

boys’ bedroom after


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 roam the earth for a few years, and it seems more and more likely that we will, a small place as a home base would be ideal.


Second Home Lessons


We can live in a small space. 700 square feet, 2 bedrooms, 1 bath, a small porch and deck, and we’re perfectly content. We get by just fine without all the stuff that fills our primary home, which is roughly five times larger. This is key knowledge to have as we contemplate living in a motorhome and apartments overseas.

TV is optional. While I haven’t cut the cord at home, the largest screen at our cabin is the 13 inches of pixelated space on my laptop computer.

Less is more. Without all the distractions of home, we have time to just be a family. We talk, we read, we take family walks and runs. No hustle. No bustle. Simplicity.




Low maintenance is key. If our second home was anything like our primary home, we’d have a lawn to mow, snow to blow, and many little headaches that can add up to one big one. Our association dues pay for that work to be done, so there is very little for us to do but enjoy ourselves and our neighbors’ company while we’re there.

You can’t evaluate the value of a second home by looking at nothing but numbers. While this one looks pretty good under the financial microscope, there is value to our family in the boat rides, beach days, and sunsets that don’t show up on the spreadsheets.

What do you think? Did we make a good investment? Is it a worthwhile ongoing investment? Am I just The Luckiest* or what?

*Our first dance at our wedding reception was to this prophetic Ben Folds Five song.


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  • Wow, you got an awesome deal on that place! I think financials aside, the family memories you are building with your kids is invaluable! And being just a days drive away is still very close by imo.

    It just goes to show that rules of thumb like, “vacation properties are bad investments” are not always true and every situation is different. You always have to run the financials yourself.

    • It’s a full day’s drive, but we’ve done it many, many times. There’s also a small airport nearby and I’ve used it a few times to commute when the rest of the family is there most of the summer, and I only have a few days free.


  • Wow that was some deal. Several times we’ve looked at cabins somewhere on a lake, usually a long distance away. The maintenance and/or the risk of a condo association fee sudden in trade keep us out so far. How consistent have the association fees been to date? Is the dock something the homeowner’s collectively have to kick in to replace every so often? One final question, are you neighbors still 10k cabins or did the neighborhood also improve? Just curious as we may someday go this route.

    • Valid concerns and questions, FTF. The condo fees started at $175 / month, but have dropped to $150 / month. Any work on the dock comes out of the reserve built up with our dues. There have been a number of improvements around the property, many of them costing several thousand dollars, and there have been no “special assessments.”

      The cabins aren’t taj mahals, but all are in decent shape. There were a couple in disrepair that were torn down completely and rebuilt from the ground up.


  • The Green Swan

    Looks like a solid deal and that’s great your family gets so much use out of it. Hard to go wrong when the initial purchase price is $15k! I like the idea of that being your landing base when you begin to travel the world too, it should work out well.

    Also, I like the before and after pics! You folks made some fine improvements.

  • All sounds great to me, that is a great deal on a lake, would have a hard time buying a lot for that price.

    I know you pay for it, but putting boat lifts and docks is a great chore to avoid

  • Mr Crazy Kicks

    What a deal! I like the renovation work, and for a second home that’s far away it’s nice to have all the maintenance covered. Sounds like a perfect home base to have while traveling the world.

  • As you point out in your closing paragraph, you have to move on from financials and look at the more important intangibles. As much as a great deal it was to secure the purchase, the value of family time can not be quantified. Our second home purchase has a different flavor and that is because it is going to be our permanent home once we relocate in two years. We absorb the costs of running two homes for a short period. That strategy / philosophy does not sit well with everybody though.

    The upgrades look grand and the sweat / dollar equity is clearly compensated in greater amounts by the awesome family experiences.

    • That’s a great plan, PIEs. By using the second home now, you have the additional benefit of finding out what it’s really like to live there. Some people fantasize about life in the mountains / forest / secret underground lair, etc… The reality and the dream can be miles apart. It’s best to learn that before up and moving. The extra money you’re paying by owning both places is insurance against that happening to you.

      I’d write more, but I’ve got to get back to digging.


  • That is a heck of a deal. I have a lot of same concerns that you had about a second home. But I also have good memories at about my grandparents cabin. Maybe if we find a great deal, we will pull the trigger one of these days. Although, it would be cool if we could rent it out. =) Our area has a really strong tourist industry, so that is a possibility.

    • We did get pretty lucky. There’s no way we’d have the place if it hadn’t been an incredible bargain. Rental income can be useful to offset a lot of costs in some rentals, but the wear, tear, and logistical issues (cleaning, repairs, replacing items gone missing) can offset the monetary reward if you’re not able to line up a good property manager and quality tenants. If you live close by, you could do much or all of it yourself.


  • Wow, great deal on the cabin! How lucky for you that they auctioned all the cabins in one shot, instead of splitting it up on separate days. Sounds like you did a great job reading the room, too, so you didn’t end up overpaying. 🙂

    The remodel looks nice, too. That was very smart to move the toilet over so it’s not the first thing you see when you open the bathroom door.

    • Thanks, Snow Monster!

      Yes, we were very pleased with how the place turned out, including the toilet placement. The vanity is a dresser I found and refinished when I was between jobs. The mirror is straight from Ikea. $20.


  • For you, looks like it has been and will continue to be a great day. You were even able to use it to help someone else get back on their feet, that is awesome. But everyone, has to make sure they do the math and that they can afford not only to buy the second place, but maintain it. We just got back from a weekend at a condo we found on Airbnb. It was really nice. More are even being built. Very close to a ski resort, but still we aren’t in that place where buying makes sense yet.

    Great job on the remodel, too.

    • Glad to hear, Chris! I love AirBNB and the whole concept of the “sharing economy.”

      Before we had this place, I much preferred the idea of spending our vacations in different places. But our second home gives us great access to my wife’s extended family, and friends in the town where we lived for several years and started our family. It’s a great place to visit, and we still vacation in other places enough, given my schedule which has long workdays, but generous time off.


  • Convincing analysis POF. Of course, a second home is two homes too many is where I stand on this issue! I realize I am among the minority renters in the FIREd community but these are highly subjective decisions – congrats on finding your own cabin paradise! Maybe someday you’ll invite me over to see what I am missing! ?

    • You and Jim Collins 🙂

      I have shifted my thinking from RE being a good investment to RE is something you pay for. There are ways to come out ahead, but if you add up the true cost of home ownership, particularly in states with high property taxes, you have to be lucky or good to win in real estate. Just simply being a homeowner doesn’t make you better off.


  • Wow. I always wanted to go to a RE auction! Seems like you made out well. Wonder why he was auctioning them off and not selling separately.

    • Worked out for us. It’s the only RE auction I’ve attended, and I wouldn’t want to go again. I have no interest in managing more than two properties (again).

      The developer tried to sell them individually, but the market wouldn’t tolerate the asking prices. Only about 20% sold in several years.


  • POF, you successfully demonstrated two key rules, and you hit the cover off the ball on both of them:
    1) The best way to earn a good return on a real estate is to buy it right
    2) Don’t buy a second home that you can’t get to for the weekend
    Amazingly, you outperformed the stock market at a time when the market produced “once in a lifetime” returns (2011 to 2016). Your purchase opportunity was certainly related to the real estate market cycle, but you also created a lot of value with your renovation. Way to go!

  • S.G.

    Did you remove the shower stall in that bathroom remodel, or tuck it in differently? If you removed it, do you miss it?

  • Wow, I’m jealous! We purchased a vacation home so we could escape the cold, snowy winters in the Colorado mountains. Our requirement was that it be within a day’s drive of home so we ended up buying in Arizona. Even though we purchased deep in the real estate downturn, it hasn’t proven to be the financial windfall we expected. But, even in spite of that, it was the right decision for us. We feel a connection to the community and have made friendships that wouldn’t have been possible without purchasing.

  • I really like how your second home has worked out as a nice little test as to whether you guys could live in a smaller space. It must give you more confidence that you’ll all be fine in a much smaller space when you go travel the world.

  • It’s interesting how things turn out, and it’s pretty awesome that you turned a nice profit with a low-cost purchase. It’s also good to hear that even though your department closed its doors, you found a way to survive. I’m currently in a similar situation, and I just sunk in a relatively large amount on a new house! It is a nerve-wracking feeling being uncertain about my working career future.

    • Ouch! Sorry to hear, S$MD. I ignored the “RENT, DON’T BUY” mantra for your first “permanent” job as well. Cost me a lot of money.

      Fortunately, our services are in relatively high demand in many places. Best of luck with the job search!

  • Wow, great deal on that bit of property and nice job on the renovations! It’s a shame you can’t rent it out!

    For the S&P 500 time period your comparing with, does that include dividends reinvested?

  • This looks amazing! I wish we could find such a good bargain here in Canada. We were shopping for a cottage an hour away from the city but quickly lost hope seeing the sacks going for over $250,000.

  • TheRetirementManifesto

    Am I just The Luckiest* or what? Ya Think!!?? Crushing it! Great deal at the auction, great story! We had a second home for 4 years, before selling our primary home and moving to our mountain cabin full time. The cabin has paid for itself (mortgage & all expenses) for the past 3 years. Now, it’s our downsize move for retirement. 2nd homes can work well, but have to be “The Luckiest” on the buy price, or have a plan to migrate as a downsize move..

    • TheRetirementManifesto

      I should add: it “paid for itself” via rental income, as our cabin is in a popular “mountain retreat” town just 2 hours from a major city, and we’ve rented it extensively until we moved in full time.

      • Great! No catastrophes with renters then, I take it?

        I’ve actually had pretty good experiences overall with renters in other places I once lived, but have heard stories from others that would make Steven King cringe.


  • We didn’t get anything like the deal you did, but we have a vacation house on the Oregon coast that we love. We were based in Seattle before our move to the Bay area, and have held onto it. It’s obviously a much bigger trek to get there now, but my family is close by, they use it a lot, and we use it as a landing pad when visiting. We are also on the fence about moving back. That said, best family memories, for all of the reasons you’ve described. SO many amazing family times at that house. . . love it!

  • Jacq

    My dad’s family vacationed at this place, and we eventually went there. The owner was selling a few cabins and my parents decided to buy. Within a few years they added a bedroom, made the kitchen bigger, and moved the bath, but it’s still under 1100 square feet. My mom was a stay at home mom, so we would spend the first 5 weeks of summer up there. 4th of July weekfriends and relatives would rent other cabins and visit. Over time most of the cabins were sold. We would rent it and the money went to upkeep, utilities etc. A few years ago the owner wanted to sell the peoperty. The cabin owners banded together to create an llc/hoa to buy the land. Now the cabin is my mom’s summer retirement house. 🙂
    When I was a kid, it was 2.5 hours away, but I moved, now it’s 4 hours each way. I generally go up for 3 days weekends and try to take a day or two, to make the drive feel more worth it.
    My sister has declared lack of interest in the business / hoa, and my brother doesn’t say much, so I expect to take over the financial side of things someday. For now, mom is happy and I love going up there, so with running no numbers, totally worth it!

  • I’m a real estate investor and dabble in index fund investing. I think you’re analysis with opportunity cost and other considerations was spot on.

    I agree with most other comments that given both the finances and the priceless family memories you get, it’s a worthwhile investment. The main thing I don’t like is the inability to rent it out. Rental income is so fundamental to the value of real estate for me, that when I can’t rent it – it becomes much less attractive. You just lose the flexibility to know you can cover your costs for periods of time while you wait for a better day. Even though stocks give small dividends, at least you know the earnings they retain continue to be used and reinvested. Real estate without income, on the other hand, only has value when it’s resold. But given that your basis is about 50% of the value, you’ve compensated for that negative pretty well.

    I enjoyed stumbling upon your website from friends at 1500days.com and eatthefinancialelephant.com. I look forward to following and recommending this to some of my physician/dentist family members.

    • Glad you stumbled on over, Coach!

      Our inability to rent it out is disappointing, but I can understand the rationale. The owners don’t want weekend or week-long rentals with partiers or people who don’t abide by the rules / bylaws. We can have tenants for a 90-day minimum, but summer is the only time we could demand a decent price, and that’s when we use it the most!

      Thank you for sharing my site with your MD & DDS family.


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