Vacation Home - Torn

[David A.]

Hey all! I'm coming at you with a dilemma I'm experiencing right now about whether I should purchase a vacation property or not. 

Context: I live in CT, and the market is ROUGH for buyers right now - I'm not seeing anything worth throwing my money into, or if something does come on the market at a good deal, it gets snatched up over asking price in cash within a couple days. I'm not too optimistic that this will change in the next six months or so. I'm selling a flip (closing in a few weeks) and profiting ~$50k on it, and looking at what to invest that in. I live in a duplex that I own and rent out the other unit - will be moving in with my partner in a couple months and renting out the unit I'm currently occupying at that point. 

I found a house in upstate NY right by Lake Champlain in a really quiet town. The real estate market in that town seems pretty sad/slow - lots of properties under 100k/150k available, many sit on the market for many many months, etc. This one house is on sale for 65k, has been on the market for nearly a year with no price changes, and has been more or less abandoned during that time. I drove up to see it last week and really loved it - it's a nice and quaint plot of land, the house needs lots of TLC that I can do 95% my own, and it just seems like a really charming place to escape to during summer/fall weekends for a change of scenery. I am fairly confident I can rent this out on AirBnb for around $120/night on weekends during warm months and $80/night midweek and get a fairly decent income from it - I'd estimate conservatively being able to net $1,500/month on average from May - September and $800/month October through April (would love to find monthly tenants, but acknowledge that won't be at 100% capacity during off months).

I put in an offer for $40k, which is what I feel like the house is worth in its condition and location - there are a lot of houses in similar condition but with more square footage (this guy is just 650 sq ft) that have sold in the $20k-60k range in the last year. The seller came back and said she can compromise, but only go down to $55k, which is what she needs to pay off the mortgage. I'm envisioning putting in $25k worth of materials, which would give me new floors, new bathroom, new kitchen, expanded rear deck, drywall in almost the entire house, and updating HVAC and plumbing - this doesn't include my labor of course, but I work remotely, and July through October is my slow season, so it kinda falls into the perfect "pack the dog & your tools and go up to the house for 2-3 weeks to get some work done" calendar for me. 

WHY I'M NERVOUS: The financial insecurity. If I pay 55k for this house, that locks up all my profit from this past flip, and I'll probably need to take out a 15k loan in order to get the work on the property that I want done this summer. I figure I can also refinance the home and take out whatever I've put into it at the end of the year to free up some cash, but the risk just feels rough for me to wrap my head around. I just don't have anywhere in CT to put that money (trying to lean more into buy-and-hold vs. flips in my LT strategy), so I'll be sitting on it until I have to pay capital gains otherwise. I feel weird buying a vacation home for ME when I feel like so much of my strategy is 'work hard, save money, build equity, expand REI' - but at the same time, this could potentially be a small income-generator from AirBNB - I just don't have enough faith in that to really push me over the edge into moving forward. In my ideal world, this is kind of a neutral investment - I get some use out of it, but more or less I'd land even in what I would pay potentially on say an 80k refinanced mortgage down the road and AirBnb income.

So yeah, thanks all for listening to me blab. I just have a lot of thoughts (as you all can see hahaha) and don't know if I'm so eager to move forward with this just to keep myself busy/to have somewhere to retreat to, or if it's because it has the likelihood of being a smart way to spend my money. Appreciate any and all thoughts, pushes, feedback, etc. you want to share!