Gather Little by Little

This is a guest post from Frugual Dad who blogs about taking the “conservative” approach to personal finances. If you like what you read, make sure you head over and subscribe via RSS or email!

My family has obviously caught the summer travel bug, and we have all kicked around the idea of setting off on a trip–ideally a family camping trip. Only one problem. We don’t have a camper. I’ve never been in the market for a recreational vehicle, but I know enough to know RVs can be extremely expensive to own. The frugal side of me kicked in and I immediately began to think of alternative ways to camp. There is always tent camping, which features a lot less amenities and can make for a long night in a cold, wet climate. I personally enjoy tent camping, but convincing the wife and kids might be a tough sell. We could stay in hotels along the way, but that can get fairly expensive. Instead of buying a travel trailer, perhaps we could just rent one. This idea seems to be much cheaper than owning one outright; especially considering we probably would only use it a couple times a year.

Renting Not to Own

We are an ownership society, and to a degree that is a good thing. However, it is a little misleading to claim we “own” something when the bank is still listed as a lienholder, and we are making payments to them. Just try missing a couple payments on your prized possession and you will quickly discover who the real owner is. Renting is a viable alternative to buying something, particularly something that will not be used but a few times each year. Beachfront real estate, RVs, and specialized gear and equipment can usually be rented or borrowed for a fraction of the annual costs of ownership.

A Real Life Example

Back to my RV rental idea. With a quick search of the web I found two or three local businesses that rent RVs for the weekend, or for an entire week. Weekly rates for a 2006 Coachman Cross Country SE 38′ Class A Wide Body RV/Motorhome run about $1,600. That’s about $266 a night, which isn’t bad considering you can take along your own food, entertainment, etc. While you could probably stay in a hotel cheaper, food and entertainment costs would likely make up for any significant savings.

The style of full-sized motorhome referenced retails for well over $100,000, new. A conservative estimated monthly payment could run in the $800-$1,000 a month range, with insurance, maintenance costs, etc. Assuming we take one or two trips per year in the RV we are passing up a $12,000 annual cost of ownership to pay $1,600 – $3,200 in annual rental fees. That’s a pretty easy choice to me.

Other Examples

Vacation homes are popular second home purchases for those looking to expand their real estate holdings. In past years waterfront property has appreciated at staggering rates. So staggering in fact that they are actually beginning to lose some of that value thanks to a market correction. While vacation home ownership might seem like a great deal, I have my doubts.

First, you have to vacation in the same spot every year (this is also my argument against timeshares, though I’m told you can occasionally move your “time” to another venue). Assuming you plan to rent out the location you will have to contend with property management fees, cleaning fees, maintenance costs, etc, or figure out a way to do those things yourself–not easily done from a distance. There is also the risk that the unit will not be occupied for a period of weeks, or even months, leaving you with the responsibility to make two mortgage payments with no rental income to offset the additional costs.

I vote for renting a hotel or condominium during the week or two you get to vacation each year. For the cost of one month’s mortgage payment you can likely rent a vacation home at any destination you desire. No land-lording to contend with; no property management fees; no cleaning/maintenance concerns. Simply pay for you lodging unit, enjoy your stay, and leave with no strings attached. That’s the best kind of vacation there is!

Photo by: ernestch