If you're looking to spend less than one or two months a year in a vacation home, it's probably best to stick with renting. Think about how easy it is to travel from your primary residence to your vacation home, and if it's a trip you'd like to take often. But in some cases, buying vacation properties can be a smart move, according to Jirayr R. Kembikian, certified financial planner with Citrine Capital.
As you get closer to retirement, the amount you owe on your vacation home mortgage will be lower or paid off completely. Even if it's not a great investment, it could still provide years of family enjoyment and be seen as a labor of love. Lisa Ann Schreier, also known as the Time Share Crusader, reminds potential buyers that there is a big difference between buying a vacation home and a timeshare. The idea of buying a vacation home with friends has been attractive to many of us at some point, but the idea of shared bank accounts, responsibilities, and conflicting schedules usually puts people off.
As with buying a personal residence, vacation home buyers can check websites such as Zillow, RedFin, Realtor, and MLS to research different markets and pricing. Homes in popular tourist cities like Miami, Lake Tahoe, New York, and San Diego are often better rented as vacation getaways than as family bases. In short, for people who want to keep returning to the same place, buying a vacation home is the way to go. Even if you rent out your vacation home for part of the year (and it's not your main residence), it's still considered a personal residence by the IRS if you use it often enough.
If you plan on renting out your vacation home, there is the potential for earning more income - but there are also downsides such as marketing your home to guests (which can be time-consuming) and navigating complex local short-term rental regulations. When you buy a vacation home and decide to rent it out, you can create a new short-term rental income stream. After all, if you want to come to your vacation home to relax, paying guests will likely want to do the same - especially if you buy an attractive and pet-friendly property. When you buy a vacation home, you're making an investment that offers both personal and financial rewards.
Buying a vacation home allows you to diversify your income, build wealth, plan for retirement and - of course - take vacations at no extra cost. Different investors prioritize different benefits when making their decision - but once you know why you want to buy a vacation home, you can focus your search and match your investment with your goals.