Owning a Vacation Home - Pros & Cons
Corey & Scooter
January 30th, 2023
Owning a vacation home can be a thrilling experience, providing a place for relaxation and time with family and friends. However, like any investment, it also comes with its own set of pros and cons. It is important to carefully consider both before making a decision.
Some of the benefits include personal use, potential rental income, appreciation in value, and tax benefits, while some of the drawbacks include ongoing expenses, limited use, and responsibility for maintenance and repairs. By weighing both the pros and cons, you can make an informed decision about whether owning a vacation home is right for you.
The Short Version
Click on each quick-link to be immediately brought to the individual explanation!
"A vacation is having nothing to do and all day to do it in."
Pros, Explained
Personal Use & Enjoyment - Making memories with your family is the most important thing in life. One of the best advantages of owning a vacation home is to have a place to go that is just for you and your most cherished people. While money may be a factor in this decision, the potential for memories is priceless.
Potential Rental Income - Having passive income can be an easy way to bring in some extra money throughout the year. Your vacation property can help you with this, as you can rent it out while not in use! You might as well rent it out since it will just be sitting there for the duration of time that you're not vacationing with your family anyways. Using applications like AirBnb or Vrbo can help you advertise your short-term rental. You can read more here on how to rent out your vacation home!
Appreciation in Value - Possibilities are endless with real estate. Owning a vacation home allows you to build equity throughout time and opens the possibility for a great resell value. If you purchase your vacation home in a booming town or a beautiful tropical paradise, there is a very good chance that you could be adding appreciation while having potential passive income! To read more on building up your possible appreciation on your vacation home, check out this article.
Tax Benefits - If you do decide to rent out your vacation home as a short-term rental, you will now be able to write off all expenses paid to that extra revenue. It may seem like it's not that important, but all of the little things add up - like utilities, cleaning costs, property taxes, HOA fees, and so much more! Along with this, you may be able to have the benefit of long-term capital gains taxing rates. For more information on the taxing section of your benefits of owning a vacation home, there is some great information here.
Opportunity to Have a Getaway from Daily Life - Let's face it, life can get busy and stressful. If it's been a while since you have had the opportunity to take a break and breathe then you can run out of steam fast. Sometimes even taking a day away from the normal hustle and bustle of life can be enough to get you out of a funk. Everyone should have that special place they can go to be secluded in thought, which owning a vacation home will definitely provide for you.
Ability to Control the Property's Maintenance and Upgrades - Renting a home can be just as stressful as owning, yet it comes with less benefits! When you come to the decision of owning a vacation home, you now have the opportunity to control everything! Do you want a beautiful pool so you can lounge in the water while looking at the palm trees? No problem. Does the shower in the master bath need to be fixed? No more waiting on the landlord. With the ability to control the upgrades and maintenance, you don't have to wait on anybody but yourself and will be able to get back to paradise that much quicker.
Cons, Explained
Ongoing Expenses - Unfortunately when you have the luxury of owning a vacation home, it means you have to pay for it! Similar to your primary residence, you will have a few extra costs associated with your property. Your mortgage payment, taxes on the property, insurance, and so on. Depending on the area in which your vacation home is, there may be additional fees that you may not be used to. For other potential expenses to be considered, check out another article here.
Limited Usage Due to Distance and Schedule - Just like we mentioned before, life gets busy! You want to make sure if you decide it’s the right time for owning a vacation home, that you use it. Don’t let the normal craziness of life get in the way for the chance to zip on over to the property and relax. If you forget this important factor, you may be paying for a property that is simply not worth it in the end. You can do some quick math and decide how many times you should be going each year in order to make the expenses and work associated with it worth it for you and your family.
Responsibility for Maintenance and Repairs - We all knew this one was coming.. cost of maintaining the property and doing the necessary updates. Similar to your residential home, you will need to budget for the required maintenance and upgrades that will unavoidably need to be done throughout time. These can range anywhere from replacing the roof to the dishwasher and varies heavily in price. It’s a good idea to set aside money each month to allow for a maintenance allowance so you’re not stuck in a bad spot once something inevitably happens to your property. To research all of the possibilities for maintenance and upgrades, click here.
Potential for Property Value Depreciation - There is always the chance that your property will depreciate over time. Unlike your primary residence, though, you can calculate your depreciation and include this in your taxes if you’re renting out the property. If you are considering owning a vacation home, you will want to go through a depreciation calculator and see all of the potentials for this. There are many different ways to figure out these numbers, but here is an easy one to check out!
Risk of Market Changes and Fluctuations - Similar to a typical residential property, you will have to pay attention to changes in the local housing market. These changes can impact the value of your property if you consider selling it. These fluctuations in the market are impossible to avoid and every home-owner goes through this. The question is if this risk is worth it for you!
Extra Effort and Time Required for Property Management - Property management can be a time-consuming process. Regardless if your tenants are short or long-term, you will need to be on-call for questions, concerns, and possible repairs that may happen. You can hire a property management company that can take a lot of this stress off your shoulders and a cleaning company who can go through after each tenant has checked out. Depending on the amount that you are willing to expense, the general upkeep of owning your vacation home can start to be a taxing process.
Overall, owning a vacation property has its advantages and disadvantages. On one hand, it can provide a personal getaway, a potential source of rental income, and a long-term investment, and many more advantages.
On the other hand, it requires significant work, ongoing maintenance, and management responsibilities. Whether or not owning a vacation property is a good idea ultimately depends on the individual's financial situation, priorities, and lifestyle. It's important to carefully consider the pros and cons before making a decision.
