The Search Continues – Vacation Home part 2

If you followed my first couple vacation home posts, you may have got the idea that I was cooling off on the first choice. On the last week of June, I bailed out of the first Lake Almanor home. Too many issues for me. Dry rot, water leaks, bats, ants, wood pecker holes, septic problems….you name it.

Amazingly, a second home came on the market at the right time. I immediately contacted my agent and viewed the home. Although Linda had not seen the home, we agreed to make an offer. We are now two weeks into the purchase and things are looking pretty good.

It’s in much better shape than the first home, has a much better exposure and a much water beach/water access.

Yes it also cost more, but we’re moving forward. I’m glad we decided to reverse course on the first home and I’m hoping that this next contract will work out. Sometimes you have to fail in order to succeed.

Addition by subtraction.

 

Vacation Home Purchase, Septic Tank

During 37 years of selling homes, I don’t recall selling a home with a septic system. I did sell some rural property – the septic system was never a big issue.

Why not? I think it was not a major consideration in the purchase. The property itself was always a much larger concern related to the size of the investment.

That’s not so true on a vacation home, where the parcel size is relatively small and the septic is a major capital expense. It’s also a big project if it needs to be replaced.

In most rural property purchases, the agencies are not watching closely. That’s not true if you purchase a lake-front home where county agencies are very concerned about pollution of the lake.

That’s why I’m being fussy about the septic tank at my prospective vacation home at Lake Almanor in Plumas County.

The seller’s agent suggested that the seller pay for the septic inspection. That surprised me. Then the inspector checked a box saying it was “unknown” if there are any records about the tank on file with Plumas County. This is a big red flag. Unknown ?@#%&*

Looks like there will be more than one inspector.

The Search – Vacation Home

For years I’ve wanted to own a second home at Lake Almanor in Northern California. As a kid, my brother and I experienced the outdoors while staying with my grandparents during summers.

After they passed away, my folks decided it was too difficult to manage a home several hours away and sold my the home they inherited, which was located on the East Shore of Lake Almanor. At the time I didn’t think about it much.

Still young and able to camp and fish in the Almanor area, I didn’t need a house to slow me down. Later on marriage came along and the needs of my wife entered into the picture. She was and is not a camper and needed a house when we visited Almanor – we rented.

Renting is OK, but it’s different from owning and I’ve always preferred to be an owner. The problem? Owning a second home doesn’t create the same return as other real estate investments. Hence, we put off purchasing while investing in other real estate.

On the other hand, a good real estate investment is a good way to retain capital. That conclusion can reasonably be reached with the assumption that you are not forced to sell.

About five years ago Linda and I began to seriously search for a solution. We looked at many homes, but nothing really seemed to fit – until we checked out a house on the Lake Almanor West golf course.

It was a nice home with a good exposure, big trees and a nice view of the open space of the golf course. We made an offer. The asking price was $560,000. We thought the right price was $425,000 based upon our understanding of the market. The offer didn’t fly so we raised our offer to $450,000. Still no interest from the seller.

We let go of it and moved on. We began to remodel our home in Livermore and that ate up our money and energy. We didn’t get serious again until this spring. Ironically the same house came on the market. It had not sold.

We tried again, this time offering $475,000. The seller was still stuck on $560,000, but indications were that $535,000 might work. We passed.

We recently took a week’s vacation and revisited the entire program. This time we had saved up additional funds and had more options. After a few days we found a home I really liked and Linda could live with. It’s in escrow.

We concluded that nothing short of a lake-front home would motivate us to purchase. I had money in the bank that I’d been planning to invest in stocks, but I was having a hard time making that decision. As a real estate guy, stocks were not working for me.

So, our money market funds will be used to purchase a home at Lake Almanor West. It will cost just under a million dollars. The property will rent out for about $3,500 per week during the height of the summer season. Taxes will be about $11,000 per year. Insurance and HOA dues will be about $3,000 per year. Looks like we’ll need to rent it out for about five or six weeks each summer to break even.

We’ll come up with a management plan that, at least in theory, allows us to pay the major expenses and still have use of the property. The home will not require major work and it will probably meet our needs as is.

I’m fired up. Here’s a photo from the street. Not very good, but all I have for now.

109 Kokanee IMG_5306

View from the street. The house is about 200 feet from the front property line. Nice setback.

There will be more later. I’ll also post some info  related to escrow. We’re lining up septic, home and termite inspections. Most of the deferred maintenance is related to sun damage. At Almanor’s  4,500 foot elevation, the sun really beats wood up. There will be more later.

I’ll also post some info  related to escrow as things move along. It may be helpful.