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Should You Buy a Vacation Home? Key Questions to Ask Yourself First

Should You Buy a Vacation Home? Key Questions to Ask Yourself First.

As summer arrives, many people begin dreaming of a getaway spot they can return to year after year. From beachfront retreats to mountain cabins, the allure of owning a second home can be powerful. But is buying a vacation home the right move for you?

As financial professionals, we often tell clients, “It depends.” The decision isn’t just about money—it’s about lifestyle, long-term goals, and the realities of ownership. Here are key considerations to help guide your decision.

Lifestyle Questions to Ask Yourself

  • How often will you use it?1 If you only plan to visit a few weeks a year, the cost and hassle of owning may not be worth it. On the other hand, if you plan to spend months at a time and integrate into the local community, ownership may offer lasting rewards.
  • Do you want to keep returning to the same place? 1 Buying ties you to a single location. If you value flexibility or enjoy exploring new destinations, renting might be a better fit.
  • Can you handle the stress of a second home? 1 Maintenance, utilities, repairs—it all adds up. If the idea of managing a second property feels overwhelming, reconsider.
  • Will this enhance your relationships and experiences? 1 Vacation homes can become gathering places for family and friends, but only if you’re intentional about how you use the space.

Financial Pros of Owning2

  • Real estate appreciation. Your property could grow in value over time, though this is never guaranteed.
  • Potential rental income. In high-demand areas, short-term rentals can generate income to offset costs.
  • Long-term convenience. Familiarity, comfort, and the ability to personalize the space can add value.
  • A retirement plan. Some clients transition their vacation homes into full-time residences later in life.

And the Cons…

  • High upfront and ongoing costs. Think mortgage, taxes, insurance, HOA fees, and maintenance. 2
  • Challenging financing. Vacation homes often require larger down payments and higher credit scores. 2
  • Property management fees. Renting out your home may require hiring a manager, which can cut into profits. 2
  • Seasonal income fluctuations. Rental income isn’t guaranteed year-round. 2
  • Limited disaster assistance. FEMA disaster aid is only available for primary residences.3

A vacation home can be a great investment in both lifestyle and financial terms—but only if it aligns with your goals and resources. Before jumping in, weigh the pros and cons carefully and consider spending a longer period in a rental first.

In our next post, we’ll look at the vacation rental route and how it compares.

Sources:

  1. Forbes, May 31, 2024. https://www.forbes.com/sites/johnjennings/2024/05/31/is-a-vacation-home-right-for-you-key-factors-to-consider-before-you-buy/
  2. New Silver, January 25, 2024. https://newsilver.com/the-lender/buy-a-vacation-home-or-rent/
  3. FEMA, August 30, 2024. https://www.fema.gov/fact-sheet/questions-and-answers-federal-assistance