At the end of 2023, feeling burnt out and in need of a peaceful environment to work on my book, I opted for a wellness retreat lasting just one day. Instead of spending $2,000 a night at a wellness center in the middle of the woods, I chose to retreat to my vacant old house.
For 24 hours, I immersed myself in the silence of the surroundings, and it proved to be a magical experience.
While I had always considered either renting out the house for semi-passive income or selling it, the invaluable nature of health made me contemplate a third option.
Creating A Wellness Center Out Of Old Home
A wellness center retreat is a specialized facility or program designed to promote and enhance overall well-being, encompassing physical, mental, and sometimes spiritual aspects. These retreats typically offer a range of activities and services aimed at improving participants' health, relaxation, and personal development.
Common features of wellness center retreats may include spa treatments, fitness classes, meditation sessions, healthy meals, educational workshops, and opportunities for relaxation and self-reflection. The goal is to provide a holistic experience that helps individuals rejuvenate, de-stress, and adopt healthier lifestyle habits.
While I don't have plans to operate a wellness business from my home, the convenience of summoning massage therapists, cooks, and various services through my phone, thanks to the tech companies in the Bay Area, is readily available.
I know the idea of turning a unrented home into a place for healing may sound absurd, however, it didn’t feel that way while I was regaining health. One of my nicknames is “the magnet” because wherever I go at home, my children and wife find me.
Apart from the wellness center concept, there are additional advantages to having an unrented house available close by.
A Place For Relatives To Stay In Private
Although my new house is more spacious, it lacks a guest house, resulting in all relatives residing under the same roof. This can be challenging for those accustomed to independent living for many years.
Having an unrented home nearby with all the conveniences would be an incredible luxury. They would have their own kitchen, bathrooms, living rooms, decks, and privacy, eliminating accidental encounters and unexpected surprises.
One common issue with family vacations is downsizing to a much smaller accommodation than your usual home. For instance, you might live in a four-bedroom, two-bathroom, 2,400 square foot house with your family of four, but on vacation, end up in a two-bedroom condo of 1,000 square feet or two studio hotel rooms of 350 square feet each.
Given that my home is about 2,800 square feet, it could comfortably accommodate a family of five. Additionally, such a house would likely encourage more friends and relatives from around the country and the world to visit. The allure of staying in a fully remodeled house with ocean views for as long as they wanted would make the prospect more enticing.
A Place To Quarantine When Someone Is Sick
The next time you're struck by a nasty illness, as I recently experienced, consider an alternative to isolating yourself at home and risking infecting your entire family—you could quarantine in a wellness house.
What price would you put on safeguarding every member of your family from falling ill? For those with immunocompromised family members, the value of a wellness house could be substantial.
Imagine having a pregnant wife with a history of challenging pregnancies. The availability of a wellness house for either you or your wife to retreat to could not only protect her but potentially contribute to a smoother pregnancy experience.
Having the whole family sick is no longer an inevitability with a wellness house.
A Place For Events And Entertainment
Your wellness house can serve as a venue for various gatherings – from parties to poker nights – without disturbing the peace at home. It's also an ideal space for hosting a wide range of fundraisers.
I attended a dinner fundraiser at a friend's wellness house, organized to support our city's district attorney. It was a pleasant event that provided an opportunity for networking, learning, and contributing to a cause aimed at convicting repeat offenders.
For those who enjoy entertaining guests but also value privacy, having a wellness house to host parties while safeguarding the address of your primary residence holds significant value.
The Cost To Have A Home As A Wellness Center
All of the above sounds appealing, doesn't it? Centimillionaires and billionaires frequently purchase neighboring homes for reasons like privacy, family, work, and investments.
However, the primary challenge with owning a wellness house lies in the operating costs. Even if you have no mortgage, there are still property taxes, insurance bills, and maintenance expenses to cover.
To determine if owning one is financially justifiable, you would calculate the annual cost of owning the unrented house and then divide it by the number of “events” you plan to host. Events could include retreats, parties, or visits from relatives. Cost will also include furniture and utility bills.
The cost per event tends to be significantly higher than simply renting a hotel room or event space. From this basic comparison, owning a wellness house may not seem financially worthwhile. However, it's worth considering that you still own the asset, which could appreciate or depreciate over time.
For instance, let's say the wellness house is valued at $1 million and costs $36,000 a year to own (3.6%). If you host 12 events a year, each event would cost $3,000. If the house appreciates by 5%, or $50,000, you're in good shape. However, if it depreciates, the situation may not be as favorable. Nevertheless, owning such an asset can be a strategic way to decumulate.
Sell Or Rent Out
The reality is, I'm not rich enough to own a wellness house indefinitely. I need to either sell the house or rent it out. I would only go the wellness house route if the asset was worth 5% of my net worth or less. Making the house a short-term rental through Airbnb is one option, but I don't want to deal with turnover.
So far, I've had zero hassle owning my wellness house because I have zero tenants and nothing has broken yet. Once I get tenants, I'll have more passive income, but I'll have more problems too.
If I sell the home, I'll be able to simplify life and reliquefy my bank account. This would relieve some stress as I'll have one less thing to deal with. With less stress comes more happiness and an ability to focus my attention on things I enjoy.
The only problem with selling is that this is a fantastic house I'd love to keep in the portfolio long term, especially if we are past the real estate bottom. I’d rather sell an older, less attractive rental property in my portfolio. Also, selling requires paying commissions and transfer taxes.
I believe single family homes with panoramic ocean views on the west side of San Francisco are going to do well over the next 20 years. There are plenty of local economic catalysts on the horizon.
Once again, I must decide whether to rent out or sell as the new year is upon us. What would you do? And have you ever considered owning an unrented home nearby for wellness purposes? If so, I'd love to hear about your experience.
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Related: When To Sell An Investment Property
It sounds like you’ve already made your decision to rent which is great. I’ll just add few more points to consider:
Not selling house
1. Due to Prop 13, your property taxes will continue to be lower than any other property of similar market value
2. You likely have a low interest mortgage that you wouldn’t want to give up
Both competitive advantages compared to other landlords” listings
Selling house
1. $500K capital gain exclusion if you sell within 2-in-5 rule
Yes on the two points, and unfortunately, I don’t have $500K in capital gains yet. It’s too early.
After coming up with my investment thesis, I decided renting out the house and capturing the tech and artificial intelligence boom money that’s coming over the next decade is the smart thing to do.
I don’t want to be another landlord to another property, but I think single-family homes with ocean views on the west side of San Francisco are going higher over the next 10 years. The $4 billion UCSF Parnassus remodel, and the new Chinese American school with over 500 students are huge catalysts.
I’m on the fence on keeping our small SF starter home, but my sole purpose in keeping it is if my kids decide to stay in SF when they’re grown and can’t afford housing here.
I would definitely keep the property if you can afford it. Any property near a metro area with ocean views will increase nicely over time. If the property is close enough to the ocean where the ocean is accessible by foot it will appreciate even more. If the property is close enough where you can hear the sound of the waves breaking these will appreciate even more. Probably much more. The property just needs to be elevated 50+ feet over sea level and be on solid rocky ground. This will keep most conceivable ocean related disasters (hurricanes, tsunami, sea level rise, etc) at bay. Bring near the ocean will only get more desirable over time, all while there will be fewer and fewer homes like this (as a total percentage of housing stock) because all new housing is going inland.
Thanks. I’m leaning on keeping it. It has panoramic ocean views on three levels, but is not walking distance to the ocean.
I have this eye-opening post called The Problem With Beachfront Property: The Ocean.
After doing my research and observing one property, I wanted to buy for 10 years, I no longer feel good buying beachfront property
As long as that panoramic ocean view can’t be blocked by future development, it will appreciate significantly over time. I have read your piece on direct ocean front property and agree. Ocean front property that’s not significantly elevated is problematic in many ways. I can see these properties actually depreciating over time, giving favor to those ocean view properties that are nearby but elevated. It’s perplexing how little the premium is for non-ocean front single family homes with ocean views vs homes with no ocean views. I think this premium will grow many times over the coming decades. Next to location, views are by far the most influential feature when it comes to valuing real property. While new desirable cities can always be established and built, there will never be new cities with ocean views as those properties have already been claimed. It’s all about scarcity and ocean view property will hold that crown. It would be great if you could one day do a comprehensive write up on the correlation of views and real property desirability/values as it’s always been a fascinating real estate phenomena to me. And not something discussed often on blogs or forums.
Hi Sam, Sell based on one word “Maintenance”.
#1 goal in life is peace of mind.
I would rent it out as an air b and b or short term rental.
It would give you a new experience to write about for the blog, and you can block out time as needed to use the house for guests or a personal retreat.
Hello hello, so short term rental (airbnb/vrbo). That way you’ll get the income and whenever you’ll need you can book it out for your own vacation/wellness.
If it sounds like too much hassle get an agency to manage the short term rentals although after the initial work it’s really not that much hassle. I am sure you can do it easily yourself and provide awesome customer service without ever meeting your guests (that’s how we do it;)) Veronika
Can we just kill the “centimillionaire” term? Because it’s very wrong. Centi is 10^-2, so this actually refers to 95+% of the U.S. population (net worth > $10,000).
The correct word would be Hectomillionaire. Even better would be Decibillionaire as it sounds less awkward and is still correct.
OK, let Merriam Webster dictionary and others know. Maybe you can create a movement!
https://www.merriam-webster.com/dictionary/centimillionaire
Perhaps the proper term for enough money is happy person with a pocket of $20 bills.
if its as good as you say and can take a little pain, keeping it (and renting to good tenants) is a no-brainer until something better comes along
Hi Sam,
Putting the FINANCIAL Hat on…
(If you can afford to keep it; I assume you can bear the short term holding costs)
1. From what I gather your house is ‘the perfect abode for a nuclear family’, and that too in such a great location. I really mean great location. SFO, beach view, walkable to beach, Tech hub of the World, Start up hub – The combination is unheard of, globally. Most beaches destinations of the World are not Tech Centers, and the vice-versa. I would have kept the HOUSE for sure, as Multi-generational Wealth. Financially, it may be the best interest for your next generation, and may your grandchildren too. As you said, “we’d likely never be able to buy it back if we sold it now.”
2. SFO home prices are not going down anytime soon. It is a center for AI activities and it will just attract more money into the area. Real estate will be going up disproportionately higher compared to other cities in US. And this is on top the already high base of real estate prices in SFO (literally it is unaffordable at this stage itself)
3. SFO housing, in all likelihood, will become more unaffordable for generations to come. Keep the ahome aside for your Generations.
Putting the FATHER’s hat on:
1. memories/nostalgia kept alive – nothing like these memories, especially as you grow old. I am not sure of the Wellness retreat idea. But I dont need to come up with other reasons. some rental income loss is ok for a future generations “Unaffordability insurance”
2. If either your son or daughter, when they grow up and have their own family, are able to use this house as their primary residence (at least the option is there for them), they will live near your residence. Living closeby to family is a boon, when one gets old. Grandkids can be wonderful experience and it is scientifically proven to be a life expectancy booster.
Lastly,
You already have the answer hidden in your own write up:
1. “we’d likely never be able to buy it back if we sold it now.”
2. There is nostalgia involved with this house given I raised our kids during the heart of the pandemic in it.
The above 2 indicates that both your financial intellect and heart doesnt want to sell it.
Financially, in short term it may seem like a drain on resources, but I think you may just be able to afford it at present. Please keep the house, for now. Dont sell; dont rent; as you are in a great financial footing currently (after almost a 12 year secular rally in stocks and real estate in America). you really dont need the cash. The cash may not add more value now. House is a store of Life Energy. and it will play out as your Children grow into adulthood, giving them a great bequest, and life nearby their parents.
Suppose in future your affordability condition deteriorates – God forbid – you can replan and rent it out then, or even sell it out.
Thanks and Regards,
Arun Aich (Hyderabad, India).
If my husband wanted to keep a vacant, furnished second home nearby, I might be worried about an ulterior motive. That aside, it sounds like a nice property to have for guests, or as a personal retreat, and I can understand the reluctance to let it go or rent it.
Rent it out but a hire property manager to take the burden off of you and to minimize stress while maintaining a great investment property.
Howdy Sam, here’s another option for you that I personally favor / utilize. Why don’t you sell that house (you own it outright I think) you’ll clear a few million, then pump that into a NNN commercial property. I like doing CRE yourself rather than fundrise, ect. So far I only own 1 retail strip center, but it’s a DREAM compared to a residential property. You don’t have to fix things for tenants unless it’s the roof or parking lot. You do have to deal with BS from the city any time you need a new tenant (certificate of occupancy, fire inspection, ect). But that’s about it. The air conditioner breaks, BUMMER for the tenant, they are on the hook for fixing or replacing it. Electrical or gas problems, BUMMER for the tenant. It’s not perfect, you can have vacancies for extended periods of time. But you never have to deal with constant repairs and tenant problems the way you do in residential. Or just pump it into more venture debt / VC. I’m a glutton for punishment so I love the CRE but when I compare returns to my VC funds, they are almost the same and VC has NO WORK REQUIRED at all. But the CRE is a bit safer overall.
Sam, have you considered airbnbing out this property? It’s likely that you won’t need to rent it out daily to cover monthly expenses. Block out some days for your health and wellness days or use the vacant days.
Another option would be house swapping. Swap with friends and family to stay at their rentals or vacation homes!
the cost of mantaining an airbnb house and dealing with the people is not worth whatever extra cash might come in from it. Its better to rent long term to good tenants. but to each their own.
I think your wellness idea is similar to a short term rental. Sounds like you could do a hybrid airbnb and wellness mashup. Then use it for yourself when you want by blocking out dates. Cash flow (at least not as my cash bleeding) and flexibility. Potent combo.
I like the idea, I think basically having a second home/summer/winter home is similar, but in this case it may be closer to your primary residence, instead of in another state or hours away. I think ideally having a ranch house, or solitary retreat condo less than an hour drive away would be an ideal situation. Particularly with young kids having a space like this is a real luxury..
Regarding quarantining though, we all need to forget about that and drop the concept of quarantining. Everyone who is alive today has survived a true 100 year pandemic. It is currently circulating around and will continue to circulate around for probably another 100 years just like the flu from the last 1918 pandemic. So there is no reason to quarantine, it is traumatic socially, mentally, and physically. It also accomplishes next to nothing.
Would your parents or in-laws be more willing to visit more often if they could stay in your “wellness” house for a month or so at a time? Would other close relatives and/or friends be willing to stay a week or two?
The way housing is, it seems a shame not to keep it for your children to eventually live in (again) at some point in their lives.
Perhaps you could manage to hold onto your “wellness” house at least until your “good” tenants move out of their current rented property and you can sell that one? Hmmm … are those “good” tenants interested in moving to your “wellness” house??? ;)
I could use a different word, such as staying away from your pregnant wife, or your sick children, or your elderly parents, and they don’t get sick.
Most people don’t have the luxury to stay away because they don’t have a wellness house to go to.
My wife and I bought a condo on a golf course 10 minutes from our house. Initially the plan was to rent it out till we retired at which point we’d live in the condo for 6 months and a warmer area for 6 months. We then did a gut remodel on our primary residence and moved into the condo while the work was completed. We learned a couple things. First, it is a awesome place for short term visits. It is very freeing to just show up and do nothing but golf, drink and order Uber eats. We also learned it is extremely boring long term. No gardening, fiddling in the shop or working outside. The end result was keeping it as a vacation or “wellness retreat.” It gets a ton of use in the summer either by us or friends and family and in the winter it just sits empty. No short term rentals are allowed. It took a couple years to get over the fact that we aren’t optimizing it financially but when we finally did the enjoyment flowed.
Great to know Bill. A condo is a better alternative for a wellness retreat than a home probably. Easier upkeep and more efficient.
But I guess it depends on one’s level of resources as well.
It’s nice to not have tenants isn’t it? Just gotta make sure nothing happens, like a leak, when nobody is living in it.
No tenants is the best!
You also have to make sure no one decides to create a fake lease and move in if the property isn’t being lived in!
I would disagree here and say a true wellness retreat would not be a condo. Ideally you invest in a SFH property with an ADU (or build your own). If you have the resources you rent out the smaller ADU and keep the larger main house vacant for wellness use on demand. If you don’t have the resources you rent out the main home and keep the ADU as the retreat. SFH property that allows ADUs provides the ultimate in flexibility. Further, condos are problematic in many ways. There is no limit or end to how many can be built. There will never be a scarcity component to condos and therefore they do not make good long term investments. Without scarcity, real estate has very little potential appreciation long term. Add in the current and future systemic insurance industry problems that make condos bad risks. Plus the incredible and disproportionately high cost to maintain and repair condos (vs SFH) and ever-increasing HOA dues, condos are a terrible alternative to SFHs.
I think you answered your own question during your thought process. It sounds to me like you favor selling one of your older, less attractive rental properties, and replacing that rental income with your recently vacated home.
Just harder to sell a property that is currently being rented. And I’m happy to have those tenants. Very good ones.
So the timing is the issue.
One thing I know having rental properties in the Midwest, renters for yesteryears are not the renters of today. If you find a renter who treats it like their own it is a rare find and one to cherish. I have been lied to so many times. The rental agreement says no animals… they have had all sorts of things inside the house including goats! They used one room I had just put a new carpet in as a dog room. They left their excrement from one end of the room to the other. :( Took a lawsuit and seven months to get them out! That is seven months with no rent!!! I carted several trailer loads of trash to the dump, which had a fee. Had to replace the new before-they-moved-in carpet to get the dog and cat odors out. It took several cans of kills to fix the paint on the walls. They had painted one bedroom black and they had a drunken brawl that took out 10 sheets of drywall! They also broke the kitchen counter and the sink! Anyway, that is just a heads-up for some who have no idea how bad renters can be. Oh, the driveway is long and gravel; we had several truckloads of new gravel put down to help keep the road up. Guess what those great rents did? Yeppers they decided that made a great race track for their 4-wheelers at 2 am. A neighbor called to inform me! BTW the tenants in question both had wonderful jobs (post office and transportation) making great money; so the background checks did not show any problems!
Yikes, sorry to hear!
Your experience is why I’m very slow and careful now about finding good tenants.
I bought the condo below me to serve a guest house. My in-laws would visit frequently, and generally overstay their welcome. They are not easy guests. Turns out they were quite offended by this gesture. They don’t visit anymore, and now it’s a rental property.
Doh! Didn’t think about the aspect of “overstaying” one’s welcome! Thanks for that.
Hi Sam
So I voted for other. Sell it, sell all your properties in California. Leverage up in the southeast. Or if not 1031 into Southeast REITs
Spend the profits on spa treatments for your family that can come visit and pay for their hotels at the four seasons!!
Having space to quarantine and host guests is a great perk if the finances make sense. I like having family and friends visit, but I get stressed if people are in my space for more than 4 days. Hosting just isn’t my forte so it’d be nice to have a nearby space for guests to stay overnight. But I can see how there’s the stress of maintenance, security risk, and of course the financing of having an empty property most of the year. If I was in a position to choose, I’d probably elect to keep things simple and just offer to get a short-term rental nearby if I had guests wanting to visit for a longer stay. Good luck in your decision, lots to take into consideration.
Why not create a group share where you and friends create a club to rent your wellness center from you and share in its use? Rental deductions combined with social utility.
Smart idea! Like a WeWork or something.
We’re in a similar position (currently building a home on our ranch where we already have one home). Your post is quite interesting and something we’ve gone back and forth with as well. Ultimately, have opted for short term renting our current home when we move into our new home. Long term rental would bring in around $3,000 per month, versus short term rental brings in around $8,000 per month. We can always sell it later, but we’d likely never be able to buy it back if we sold it now. Plus we can block it off when we choose to allow for family / friends to stay there, or, like your idea, to use as a getaway / wellness retreat when needed.
That’s a big spread between short term and long term rental income.
Just be prepared for the extra wear and tear and work from ST renting.
“ we’d likely never be able to buy it back if we sold it now. ”
I think about this too. There is nostalgia involved with this house given I raised our kids during the heart of the pandemic in it.
We’ve been Airbnbing our primary residence when we travel over the past five years. 154 reviews, and over 800 guests. The biggest issue we’ve had is a broken wine glass. We’re grateful we attract a family demographic and welcome dogs, as opposed to a party demographic. We also live in a tourist town, so the spread is pretty crazy. We’ve had some $10k months during peak season. Pretty wild since our mortgage is only $1,400!