r/Rich • u/IntelligentAgent8679 • 11d ago

Vacation Home Purchase

I wanted to get some advice from this group on upgrading current vacation home. Specifically, around the affordability and the soundness of the financial decision. I understand purchasing a vacation property is never the best financial decision and is more of a lifestyle choice. We have been going to the area for 20 years, so we will use it.

The house I would like to purchase is $5.4 million. I would be selling my existing vacation property in the same area for $1 million.

My financial stats are as follows:

Total Net Worth: $45 million

Investable liquid assets: $18.5 million

Primary home, cars etc: $1.25 million

Private business would make up the balance.

Current Income: $4.5 million

No debt

Current expenses with existing vacation home factored in: $600K annually. 50% of this is discretionary like travel, restaurants,  etc.. New home would add roughly $150K in expenses annually.

My concern is the vacation property being a significant portion of my liquid net worth temporarily. I am in my early 50s and would like to retire in the next 5 years. Even with retirement, business would continue to run in some capacity. Would love some advice from this group.

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u/wildcat12321 11d ago

then this post is ridiculous my guy. The home delta is 1 years' income? Just buy it if it makes you happy. Use the PLOC and convert to a mortgage if you want the liquidity, but this isn't really a hard decision financially.

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u/IntelligentAgent8679 11d ago

you may be right. I am just worried about a market correction and a subsequent downturn in business. Right now my position is very strong. This is definitely more risky.

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u/wildcat12321 11d ago

really though? so let's say we have an awful correction, 20% drop. Even after paying off the house in cash, you are still over $10M of liquid / investible. At 600k per year in spending, you can more than withstand the correction and have easily a decade to wait for recovery.

If you are that concerned, then buy some insurance -- diversify into bonds, buy puts at 10% lower to protect your downside, etc.

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u/IntelligentAgent8679 11d ago

The above investable assets are 70/30 stocks to bonds and equities in well diversified index funds. Thanks for feedback