The Pitfalls of Owning a Vacation Home

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Aug. 15 (Bloomberg) -- Kahler Financial Group President Rick Kahler and Bloomberg's Ben Steverman discuss the pros and cons of owning a second home. They speak on “Taking Stock”. (Source: Bloomberg)

Taylor, who has been ranked one of the top 15 most experienced planners by "businessweek." vacation homes -- these are the dreams people have.

When they go on holiday, they come back and say, "we must own a home." not necessarily a good financial decision.

It's not a good investment.

Expensive to maintain, expensive to pay these taxes and fees on rentals, and people say they will make their money back by renting it out, and they do not realize a real estate agent can make 40% of that take.

Stress and aggravation.

You have done a little work investigating the cost of having a second home.

Does that cost out way the dream of getting away and having your own spot in the sun?

Typically it does.

You can actually have your cake and eat it, too.

You can keep your money and simply rent a home, and the cost is usually much, much lower.

Then why do people choose to buy second homes?

It must be with their heart instead of their head.

Bragging rights.

You can have friends and family come stay there.

You get to be the person that invites those people.

I think that people have blinders on when they are on vacation, especially this time of year.

They are on vacation.

They are in this beautiful spot, and they think that they could live there, and they go around to local real estate agents and get the ideas in their head.

Also, the weather.

You do not necessarily foretell that the weather will change as you own the home and that the house will not be the dream that you thought in the summer -- it is not going to happen in the winter.

Winters are tough on these homes.

Saltwater is tough on these homes.

I talked to one planner whose client found out he would have to replace the windows every six years, and that was just wiping out all the event till income for that entire summer -- all the rental income for that entire summer.

If people decide they want to have a second home, should they just swallow and realize it's going to be very expensive?

There are several ways to do it.

In the first place, buying a second home can make a lot of sense if you are going to spend a lot of time there.

3, 5, 6 months out of the year.

Maybe that second home is ok, but people have to be really sure that that is the area they want to leave, the city -- the area they want to live, the city they want to the end, the neighborhood they want to be in for a long time because of course, you have locked yourself into that area.

A lot of this is done in emotionally.

90% of all financial decisions are made emotionally.

It is really taking a hard look at the dollars and cents and asking if this really makes sense.

Is it possible that many people who have a vacation home -- the money is not the issue.

They want a place to go to because it changes the venue and lets them hang out with family and friends.

A lot of people have the money to burn.

Why not spend it?

You just cannot think of it as an investment.

I want to thank you very much.

Thanks for "taking stock p or

This text has been automatically generated. It may not be 100% accurate.

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