Landlording & Rental Properties

Wait! Before You Buy That Vacation Rental, Take a Look at the Pros & Cons

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I am currently spending the week with my family at a beach house we bought on the panhandle of Florida two years ago. As I sit on the back deck writing this article, it occurs to me that I’ve learned a lot about owning a vacation rental over the last two years and thought it would be worth sharing my experience with the BiggerPockets community.

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Let me first start by saying that I don't for one second regret buying this property. I was lucky enough to find one of the last low-priced, bank-owned properties along this popular stretch of South Walton County. This particular area of Florida was hit hard by the downturn, but values have since come roaring back over the last 2-3 years. As such, I've been lucky enough to experience some quick equity gain in my property as a result. In addition, this house is managed by a local property management company and has been rented for most of the peak rental weeks throughout the year.

However, even with a very favorable cost basis in this property and a high demand for weekly rentals, this endeavor has not been without its challenges. With a little bit of experience under my belt, here's my perspective on the pros and cons of owning a vacation rental.

Related: 8 Factors to Investigate Before Purchasing a Vacation Property

5 Pros of Vacation Rentals

1. They provide enjoyment!

I would venture to say that most people buy a vacation rental because it’s a location that they enjoy going to. In many cases, a vacation rental will not end up having the stellar ROI that many people hope. Being able to use the property throughout the year ends up being the primary motivation rather than possible financial gain. For us, we love having the ability to go to the beach on a whim and have our own place to stay.

2. They can facilitate time with family and friends.

Along the same lines, we’ve enjoyed having the vacation rental because it’s an opportunity to invest in something (arguably) equally as important as financial investments—and that’s family and friends.

Sometimes an asset needs to be looked at through the lens of personal investment rather than a financial one. For us, we’ve been able to spend lots of quality time with family, as well as bless friends and family with the use of the property.


3. They often have a good likelihood of appreciating.

OK, it’s not all about family and friends. We bought this property for multiple reasons, but the biggest decision factor for us was the potential appreciation we could achieve from this investment. Yes, it was calculated speculation that the real estate market in this area would appreciate over the coming years, and luckily for us, it has paid off so far.

It has been my observation that vacation areas like the panhandle of Florida tend to have big swings in home values (often based on what’s happening in the economy). If you buy as values are climbing, you can experience quick equity gain—but of course, you can also find yourself on the wrong end of a price swing.

4. They can provide rental income.

While there are some vacation rentals where the income produced covers all of the expenses associated with the property, this is definitely not the norm. If you are strictly looking to buy an investment property to create cash-flow, buying a vacation rental is not the way to go. You are much better off buying a traditional rental property. That said, depending on what and where you buy, you can at the very least offset a good portion of your expenses by renting the property.

5. They can give you a nice tax write-off.

Since this property is technically a business, you can write off most of the expenses associated with trips to your property. When we are at our beach house, I'm almost always fixing something, meeting with the property manager, talking to vendors, etc. As such, I keep receipts from restaurants, gas stations, etc. because they are expenses associated with the "business."

3 Cons of Vacation Rentals

1. They might be more expensive than you think.

I’ve learned the expenses associated with a vacation rental will almost always exceed your projections. Even after you’ve factored in your property management fees, utilities, mortgage payments, taxes, insurance, etc., there will inevitably be unplanned repairs, lost and damaged goods, unplanned maintenance issues, and more. Even if it pencils out on paper, producing enough income to cover all of the potential expenses associated with a vacation rental is simply harder than you might think.


2. They could pose a fair amount of risk.

There are a number of risks associated with a vacation rental that a homeowner needs to be mindful of. In many beach locations, you have the risk of adverse weather (hurricanes, flooding, etc.) affecting the condition of the property. You’ve also got potential liability exposure with a new set of strangers living in the property from week to week.

I would say the biggest risk, however, is the possible financial loss if the market crashes, values drop significantly and rental demand drops off. I know here in Florida it feels a little like playing the market. Right now, this market is on the upswing and we are enjoying the value increases and high rental demand. However, at some point in time we will have to make the decision to “cash-out” before the real estate cycle heads in the other direction.

Related: 3 Alternative Ways to Enjoy a Vacation Property Without Owning One

3. They might have unforeseen issues.

Ask my wife about the cons of owning a beach house and she’ll tell you all about the broken furniture, stolen pack-n-play, ruined linens, etc. Renting a property that you also consider your second home can be frustrating. I’m in contact with my property manager on a monthly basis discussing items that need to be fixed or replaced. From rusted vents to faulty electrical circuits, we are always dealing with an issue or crisis that needs to be addressed (and that inevitably costs money).

The choice to buy a vacation rental is one that should not be taken lightly. While there is the potential to make money on an investment like this, there is just as much potential to lose money. Careful consideration should be given to determine if the investment is one that is more focused on the non-financial benefits of owning a second home or whether the objective is strictly for future profits. Either way, it’s important to understand and to be prepared for all of the time and expense associated with this type of investment.

What about you? How many of you have bought vacation rentals and what has been your experience?

Be sure to leave me a comment below!

Ken Corsini is a seasoned real estate investor and business owner based in Woodstock, Georgia. Ken is best known for his role on HGTV’s hit show “Flip or Flop Atlanta,” and has flipped over 800 houses in Metro Atlanta since 2005. With over 15 years of experience in the real estate industry, Ken has expanded his original flipping business into multiple independent real estate businesses, including Red Barn Real Estate, with over 180 agents in Metro Atlanta across four offices; Red Barn Construction, a custom home-building company specializing in modern farmhouses across North Atlanta; Red Barn Renovations, a full-service renovation company; Black Oak Mortgage, a direct lending company based in Woodstock, Georgia; and InvestorSumo, a technology company focusing on CRM and data needs for real estate investors.
    Michael Buffington Rental Property Investor from Lewistown, PA
    Replied over 5 years ago
    Hi Ken, You hit the mark on the pro and cons. I still consider myself new to the vacation rental market. We own a place on the Outer Banks in North Carolina and we are now in our third season of renters during the peak season. After staying there for years we bought when the market was still down, but things appeared to be pointing north. We decided to be a little different in the market and so far it has paid off. Our summer months have been completely full for the last three years and now our shoulder and off seasons are filling. Here are of some of the things we have been doing a little different from most of the rentals in the area and places we have stayed in before. – We went soundfront instead of beachfront. Not only did it make the property more affordable, but we have our own private beach without the crowds. I actually had one property management company tell me they would not consider our property because it was on the wrong side of the road from the beach. – We use our own cleaners. In exchange we receive a lower fee from our management company. Their cleaners do a good job, but they clean hundreds of houses. Our cleaners only take care of a few places and are good at taking care of the details that my wife expects. Plus, we communicate with them almost every week when our house is turning over. – We still market on our own. Our management company is great at marketing, but we like adding the little extra touch and it seems to help drive our reservations. Check out It is fun to watch when web traffic increases our bookings come in. – We offer extras most house don’t worry about. Kayaks, bicycles, beach chairs, books, movies, local information, garbage bags, towels, sheets, etc… – A welcome gift (currently coffee from a local roaster) and a personal note. We let the renters know they can contact us directly for any reason. This also helps remind guest they are staying in our home. Most of our renters reach out to us at some point just to say thank you. – Every December we send our renters from the previous year a custom calendar with beautiful photos from the area. My wife is photography nut so this is a task she enjoys doing. Great way to remind them they should come back to our place again all year long. Seems to work. Over half of our renters this year have stayed with us before. – We typically don’t allow more than eight weeks of renters before we make a personal visit to the property. Just to make sure everything is cleaned, fixed and put back in order. There is always something that needs done at that point. – Nothing is extremely high end, but the place is well furnished and very well taken care of. If it looks worn or like it needs replaced it goes. No exceptions. We are extremely happy we purchased our vacation rental, but it does not cash flow like my other rental properties. At this time after debt service the cash flow is slightly negative, but I just consider that a forced savings account paying the principal down since all the expenses plus some are paid for by our renters. We love spending time in the Outer Banks and this just gives us a good reason to be there. We personally don’t mind working when we are there. I actually find it relaxing in weird way, but I think you have to have a unique look on property management and maintenance to enjoy it even when you are getting away from the normal office work. Most times when I there I’m not on vacation. I’m just working remotely from my other businesses and properties. I would not encourage anyone to buy a vacation rental to truly vacation at. It is just impossible to get away when you are at your own property. We are now exploring the idea of exchanging time with other property owners. I’d be curious to know if anyone in BP community has had any luck with this. Take care, Mike
    rich black
    Replied over 5 years ago
    Ken, no pie in the sky in your post. Great commentary. Edward, good counterpoint. MIchael, you really shortened the learning curve, when it came to maximizing the occupancy in your vacation rental. When the market died in Surf City, NC, I started buying sound front and ocean front lots at extreme discounts. I’ve built houses on some of the sound front lots, flipped some of the sound front lots, and I’m still sitting on four sound front lots (one is deep water). I also bought four ocean front lots, that I picked up for 25K a pop. I know that sounds crazy cheap, so let me qualify that. These are not full lots. They are the last four 40×16 staggered townhouse lots, that were left over from a failed 1994 subdivision. I’m going to build 1,600+ sf townhouses on the lots, and, for the first time, keep them as seasonal vacation rentals. I’ve got five year round sound front beach rentals, but I’ve never had weekly rentals. My questions for Ken and Michael are, can you ask your weekly tenants to bring their own towels and bedding? Do you have to furnish a washer/dryer? Are land lines still required, or is wi-fi enough?
    Michael Buffington Rental Property Investor from Lewistown, PA
    Replied over 5 years ago
    For linens you can have your renters bring their own, pay extra to have linens upon arrival or just provide them. Personally I think vacation rentals should include linens. We just put this cost into our weekly rental fee. Who wants to go on vacation and worry about linens, especially if travelling any distance with a packed vehicle. We take it a step further and make sure all the beds are made and towels are hanging in the bathrooms. Just like a hotel. It is all about the presentation. Renters like coming to a house that is ready to go. If you have been traveling all day and fighting traffic who wants to make a bed. I’m guessing there are some weekly rentals out there that don’t have a washer and dryer, but it wouldn’t fly in our rental market. One reason people rent homes for a week instead of a hotel is they want the conveniences of home for their family. I can tell you when traveling and renting homes we wouldn’t consider a place without a washer and dryer. The demand for a phone in a vacation rental is minimal anymore with cell phones, but I wouldn’t get rid of it totally. You can do away with a land line and use a VoIP phone over your internet. We use Best part is it free after buying the equipment, except for taxes and fees. Make your internet and electronic as easy to use as possible. At our vacation rental we have an internet service provider that provides 24/7 tech support and will send someone to our home if it cannot be resolved over the phone. We have never personally taken any calls over internet problems. Good internet is also a must any more. Hope this helps.
    Nick Aceves
    Replied over 4 years ago
    MIchael, My wife and I have flirted for a couple years with owning in NC. One question I have is with the outside cleaning service I assume they just have a cache of linens and towels on site that they wash and replace? Also, do you provide extra linens and towels within arms reach for the renters if needed?
    Bob Laskowski
    Replied over 5 years ago
    Lots of great information here. I just purchased a three bedroom condo about two months ago in Windsor Hills just outside of Disney World. There is a lot that goes into owning a vacation rental I’m coming to find out. Let me tell you, if your in a high demand vacation market like Disney World, Outer Banks etc. it is very competitive. I thought this was going to be easy to rent and so far it is going slower than I expected. We are on VRBO, AIRbnb, and other sites as well as having a property management company. But so are the hundreds of other rentals in the area. Everyone is correct saying that you should NOT buy a vacation rental property if you are looking to make money from renting it.
    Marc Silsbe Investor from Ottawa, Ontario
    Replied over 1 year ago
    Hey Bob, It looks like they recycled this article. Curious how Windsor Hills worked out 4 years later.
    Replied almost 5 years ago
    Great list of pros and cons! I think a list like that is the best chance you have at making a decision about owning a vacation home or not. Thanks for sharing!
    Skylar Williams
    Replied over 4 years ago
    I’m planning a big trip for my family soon. I want to try out a rental home. It seems like it makes those long stays much more comfortable. You’re right in saying there is a lot of enjoyment in those prime locations.
    Derek Mcdoogle
    Replied over 4 years ago
    I really liked your statement about how an asset sometimes needs to be looked at through the lens of personal investment rather than a financial one. My wife loves going to the beach and a friend suggested that we look into finding some oceanfront rentals. Do most oceanfront rental properties have other perks that are not offered at just regular hotels? Finding a luxury oceanfront rental might be a good investment.
    Jasper Whiteside
    Replied about 4 years ago
    I have heard many stories about purchasing a vacation home in an area that was built up. Because the area around the vacation home was built up, the value of the house went up too. It would take some work to find an area like this, but this would be the situation that I would try to invest in.
    Kylie Dotts
    Replied over 3 years ago
    It makes sense that a condo vacation rental would end up being used by family more than being used for an economic increase. Being able to own a condo instead of a home for a vacation would be nice because it would be a little bit smaller and cozier. It would work well for a small family or just a couple. I don’t think it would work well if you wanted a large number of family members to come but if it was just your immediate family it would probably be quite nice.
    Julie McCoy Real Estate Agent from Sevierville, Tennessee
    Replied over 1 year ago
    Hey Ken! I've effectively retired off the cash flow from my four vacation rentals (quit my six-figure W2, etc). They can *absolutely* be huge cash flow monsters - if you're buying in the right area. I never bet on appreciation with mine, though it has happened with all of them. I'm glad you're enjoying your VR experience by having a home that covers some of its costs, but I could not disagree more with your Point #4.