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Old 01-24-2022, 06:20 PM
 
86 posts, read 248,175 times
Reputation: 63

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Very happy to see this forum. We have some investments in stocks and have done well so far. However, we have very busy jobs and unable to track stock market regularly. Most stocks are long term holdings and so we haven't made much realistic gains from them. Recently we have been discussing liquidating some of those and buying a second home near Texas hill country. The housing market is hot (sellers market), but we feel that in the long run it may be on the upward swing overall. We currently live in Texas.

We have also thought about buying a second home somewhere that is a bit more cheaper (but then we wont get there very frequently). We have not decided if we would be able to do a short-term rental or just eat the cost of second home (while enjoying it) and then hope that it appreciates over time significantly more than what we put in. We may not have to pay mortgage as we could come up with enough cash.

Does this sound like a bad idea? These vacation homes (lake/river side or acreages) have really gotten expensive in recent years and we may have missed the boat. We are worried about the putting all our assets in stocks.

We are on a relatively high income bracket (due to our jobs- and not due to investments). Would buying a second home help in someways with tax benefits?

Any suggestions appreciated.
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Old 01-24-2022, 06:31 PM
 
Location: Victory Mansions, Airstrip One
6,647 posts, read 4,935,395 times
Reputation: 8979
I'm really confused. You say you "have some investments in stocks and have done well", but then "we haven't made much realistic gains from them".
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Old 01-24-2022, 06:47 PM
 
86 posts, read 248,175 times
Reputation: 63
The stock values have gone up. But what I meant is that we haven't liquidated any stock we purchased (so no cash realized from our stocks yet). So it is "virtual" gains and may fluctuate up or down.
We have not figured out a good exit strategy. Most stock we purchased have gone up. But we need to figure out if we should just buy more stocks if we exit some of these or buy properties.
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Old 01-24-2022, 07:00 PM
 
5,659 posts, read 3,490,687 times
Reputation: 16320
Quote:
Originally Posted by mandh View Post
Very happy to see this forum. We have some investments in stocks and have done well so far. However, we have very busy jobs and unable to track stock market regularly. Most stocks are long term holdings and so we haven't made much realistic gains from them. Recently we have been discussing liquidating some of those and buying a second home near Texas hill country. The housing market is hot (sellers market), but we feel that in the long run it may be on the upward swing overall. We currently live in Texas.

We have also thought about buying a second home somewhere that is a bit more cheaper (but then we wont get there very frequently). We have not decided if we would be able to do a short-term rental or just eat the cost of second home (while enjoying it) and then hope that it appreciates over time significantly more than what we put in. We may not have to pay mortgage as we could come up with enough cash.

Does this sound like a bad idea? These vacation homes (lake/river side or acreages) have really gotten expensive in recent years and we may have missed the boat. We are worried about the putting all our assets in stocks.

We are on a relatively high income bracket (due to our jobs- and not due to investments). Would buying a second home help in someways with tax benefits?

Any suggestions appreciated.
No, a second home that you use for recreation will not be any help with your taxes. However, it might still be a good long term investment if the R/E market keeps rising. It's possible that the price appreciation (if it happens) will offset your expenses of owning the second home and thereby be like getting to use the place for free for a bunch of years.

However, my crystal ball says that single family homes in most locations will not see anywhere near the price appreciation in the next several years that they have seen in the past 1 1/2 years. Some, in high COL areas, may see decreases in market value.
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Old 01-25-2022, 04:50 AM
 
Location: Censorshipville...
4,364 posts, read 8,047,166 times
Reputation: 4877
So liquidate investment holdings while they are lower in value and buy higher real estate properties? Send like you are chasing returns disguised as diversifying.
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Old 01-25-2022, 05:11 AM
 
105,688 posts, read 107,663,235 times
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Quote:
Originally Posted by oneasterisk View Post
So liquidate investment holdings while they are lower in value and buy higher real estate properties? Send like you are chasing returns disguised as diversifying.
i second that opinion
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Old 01-25-2022, 06:00 AM
 
9,272 posts, read 8,170,071 times
Reputation: 18910
Quote:
Originally Posted by oneasterisk View Post
So liquidate investment holdings while they are lower in value and buy higher real estate properties? Send like you are chasing returns disguised as diversifying.
You beat me to it. If you had asked this question when the stock market was at an all-time high and the housing market was in the dumpster, I think that would be a fine suggestion. But right now, you're doing the exact opposite of what you should be doing.........remember, buy low, sell high.
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Old 01-25-2022, 10:27 AM
 
Location: Portal to the Pacific
8,736 posts, read 8,611,305 times
Reputation: 13006
In my limited experience 2nd properties, ones that don't receive revenue that often, are a drag on your net worth. We have many residents in my neighborhood that have 2nd homes equal to the value of their primary ($1.5m) in a nearby ski resort village. It's very similar to our own neighborhood... master planned community with lots of management. They can lease out their units, but I read it's not common to rent more than 1/3 to 1/2 of the year. Otherwise you pay taxes, mortgage and steep HOA. You also end up having guilt for traveling to other places when you're spending so much money to keep the 2nd property. I fail to see the upside other than it's cool and fun (every now and then) and cool and fun to brag about.

There are those that are committed and truly live at both their homes in which case it makes more sense. Still don't know if it makes financial sense, but certainly more than those that just visit their 2nd homes a few times each snow season.
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Old 01-25-2022, 10:30 AM
 
185 posts, read 131,558 times
Reputation: 648
Quote:
Originally Posted by mandh View Post
Very happy to see this forum. We have some investments in stocks and have done well so far. However, we have very busy jobs and unable to track stock market regularly. Most stocks are long term holdings and so we haven't made much realistic gains from them. Recently we have been discussing liquidating some of those and buying a second home near Texas hill country. The housing market is hot (sellers market), but we feel that in the long run it may be on the upward swing overall. We currently live in Texas.

We have also thought about buying a second home somewhere that is a bit more cheaper (but then we wont get there very frequently). We have not decided if we would be able to do a short-term rental or just eat the cost of second home (while enjoying it) and then hope that it appreciates over time significantly more than what we put in. We may not have to pay mortgage as we could come up with enough cash.

Does this sound like a bad idea? These vacation homes (lake/river side or acreages) have really gotten expensive in recent years and we may have missed the boat. We are worried about the putting all our assets in stocks.

We are on a relatively high income bracket (due to our jobs- and not due to investments). Would buying a second home help in someways with tax benefits?

Any suggestions appreciated.

You say you have jobs that keep you so busy you are not able to pay attention to your stocks. A second home/vacation rental will need more attention than stocks. And there are no tax benefits to having a second home that is not rented.

If you use the second home as a vacation (short-term) rental, who is going to manage that? If you use a management company for short-term renting, they'll take a considerable cut of your profits, and the tax benefits are not all that. If you go to sell the short-term rental down the road, you'll be hit with cap gains unless you do a 1031 exchange, so you're kinda stuck there.

But like others have said - this is the worst time scenario for unloading stocks to buy into a hot second-home market.

If you would like to buy a second home just for yourselves I would say what Dave Ramsey would say - just keep saving cash from your busy jobs, pay cash for the home, and keep your stock holdings. Win-win.
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Old 01-25-2022, 12:20 PM
 
Location: North Carolina
2,987 posts, read 1,954,738 times
Reputation: 11161
Buying a second home is somewhat like buying a boat, both require time and money. You may get enjoyment from both but they are not really investments, although some people call them that to justify the purchase. We have owned both and never called either an "investment."

If you are busy with well-paid work then do not buy real estate investments, the kind that require hands-on. You could buy REIT stocks after doing research and deciding that type of investment fits your strategy.

Start reading to find which stock portfolio fits your situation, both to minimize taxes and save for retirement. Stocks are what people in your high-paid careers invest in. Second homes are for fun not profit, even though they do appreciate.
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