{"id":36532,"date":"2013-01-28T11:47:27","date_gmt":"2013-01-28T18:47:27","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=36532"},"modified":"2024-01-27T10:28:43","modified_gmt":"2024-01-27T17:28:43","slug":"2013-01-28-vacation-home-investment","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2013-01-28-vacation-home-investment","title":{"rendered":"Buying a Vacation Home as an Investment: Fun, Sun, and Income?"},"content":{"rendered":"<p>I\u2019ve heard it a million times, heck, I\u2019ve even said it myself, \u201cI am going to buy a house on a beach, and rent it out when I don\u2019t want to use it.\u00a0 I get to go on vacation and tenants pay for it.\u00a0 Business combined in perfect unity with pleasure.\u201d<\/p>\n<p>Here is the musical version of what you may envision your vacations will look like:<\/p>\n<p><iframe loading=\"lazy\" title=\"Mamma Mia! - Trailer\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/jXOP2ss8HM0?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Slow down there Jimmy Buffet, before you pull the trigger on your home away from home, let us run through the numbers as well as the qualitative factors that go into buying a rental\/ vacation home.<\/p>\n<h2>The Math Behind A Vacation Home<\/h2>\n<p><b>Gross Income (Less Vacancy)<\/b><\/p>\n<p>Be realistic here; often vacation homes rent on weekly or monthly terms and are very seasonal, this means you will experience a much higher vacancy rate than a typical <a title=\"Keys to Getting Started in Multifamily Apartment Investing\" href=\"https:\/\/www.biggerpockets.com\/blog\/2012\/01\/12\/keys-to-getting-started-in-multifamily-apartment-investing\/\" target=\"_blank\">apartment<\/a> with a one-year lease.<\/p>\n<p><b>-Commission\/Management Fees<\/b><\/p>\n<p>As with vacancies, you will need to account for higher rates of commissions since you will most likely have high turnover.<\/p>\n<p><b>-Repairs\/Supplies\/Maintenance\/Furniture<\/b><\/p>\n<p>Due to the high turnover, as well as you being an out-of-state-landlord, don\u2019t count on something as simple as a leaky faucet to be equal to the cost of the parts to fix it.\u00a0 You will need to pay for a repairman to go to the unit and fix the faucet.\u00a0 Don\u2019t underestimate repair costs or assume that all tenants will be as handy as you.<\/p>\n<p>Keep in mind that you will also need to furnish your unit, which will result in higher overhead costs as the furniture will wear out more often that if you were using the unit exclusively by yourself.<\/p>\n<p><b>&#8211; Taxes\/Utilities\/Insurance\/Other<\/b><\/p>\n<p>These expenses will be very similar to if you were an in-state landlord.<\/p>\n<p>When you sit down and run the numbers, does it still look like a pretty picture of palm trees and margaritas?\u00a0 Will this unit cost you money out of your pocket every year?\u00a0 Take the bottom line figure and divide it by how many nights you will be using the unit, compare this cost to what it would cost to rent a similar unit in the same complex.<\/p>\n<h2>Questions to Ask Yourself Before buying a Vacation Home<\/h2>\n<p>I hear a lot of people want to buy these vacation\/rental homes so they can retire there when the place is paid off.\u00a0 In the mean time, they convince themselves that they are \u201clocking\u201d in today\u2019s prices for future gain.\u00a0 I don\u2019t know about you, but often times, I don\u2019t know what I\u2019m doing on my weekends.\u00a0 Forget peering into the year 2030 and ask me what state I will be living in.\u00a0 My point is that life happens and it is extremely hard to predict where you will be in the future.\u00a0 Think back to where you were in your life ten years ago, did you expect to be in your current situation a decade ago?<\/p>\n<p>Is buying a vacation\/rental home the highest and best use of your investable dollars?\u00a0 Would you be getting better return with your money elsewhere?<\/p>\n<p>Do you want to lock your vacation time into this rental for the rest of your life?\u00a0 That trip to the Smokies, skiing in CO, relaxing on a beach in Hawaii?\u00a0 Consider those trips on hold because you will have a sense of obligation to go to your vacation\/rental unit.<\/p>\n<p>This article is not to say that you shouldn\u2019t buy a vacation home.\u00a0 Just don\u2019t buy on the grounds that you will be renting it out part of the year to justify your purchase.<\/p>\n<p>Anyone have similar thoughts on this topic?\u00a0 Disagree?\u00a0 Leave me a comment.<\/p>\n<p>If you have suggestions for topics you want me to cover in future articles, please let me know.<\/p>\n<p>Thanks for reading.<\/p>\n<p><span>Photo: <a href=\"http:\/\/www.flickr.com\/photos\/40467171@N00\/4225999896\/\" target=\"_blank\" rel=\"noopener\">laszlo-photo<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>I\u2019ve heard it a million times, heck, I\u2019ve even said it myself, \u201cI am going to buy a house on a beach, and rent it out when I don\u2019t want [&hellip;]<\/p>\n","protected":false},"author":779,"featured_media":36802,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[226,190,790,487,569,415],"class_list":["post-36532","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-business-management","tag-investor","tag-landlord","tag-rental-property","tag-retirement","tag-tenant","tag-vacation"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/36532","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/779"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=36532"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/36532\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/36802"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=36532"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=36532"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=36532"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}