mortgage advice on vacation rental / investment property

2 Replies

Hi BP folks,

I'm completely new to real estate investing, so I'm still in the process of learning the ropes. I've learned a lot from the forums and podcasts so far, but before I pull the trigger on my first property, I wanted to see if anyone here had any wise words of advice for me.

I have recently found myself lucky enough and in the position to purchase a second home (lakefront property in the range of $500k to $700k) that I'd like to use personally (or make available to family/friends) throughout the year, but also rent it out on a weekly basis when there's demand. I have enough liquidity in my portfolio to buy the most of the houses I'm looking at with cash, but I'm hesitant to wipe out my savings entirely to do so. I also have no other debt to my name at the moment, so I'm just curious if anyone here has thoughts or good articles to point me to on the following questions:

1. What are the main benefits for me in getting a mortgage in my situation vs. paying all cash?

2. If I choose to get a mortgage, how should I think about or determine the best ratio to go with for down payment vs. mortgage? 

Most of the advice I've been reading on here so far is related to solving the opposite challenge (i.e. buying a home with as little to no money down), so I was wondering if my situation is any different or if I should still follow the same principles.

Again, apologies for super basic questions, and thanks in advance for any thoughts or advice you may have!


Before even thinking about purchasing a vacation rental I would check the rental rates in the area.

Also the location it's in will be a really good factor in how much you can get for rental rates.

Who will be showing the house, cleaning after guests leave, maintaining, marketing?


high turnaround, inconsistent renters from week to week

Owning free and clear would certainly free up more cash flow for you, but that really will depend on what kind of rates you get for rentals in that area.

Having a mortgage will allow you to only put 20% down and get a pretty good rate.  Freeing up more cash to invest in other properties, savings net in case of a shortage of renters, or improvements as needed

You've struck the big question I have, except in your case you're worried about using all your cash, but if you needed cash you could always GET a mortgage and get cash that way.  

I'm struggling with

You have a mortgage:   you get to write off the interest.  Your earned income minus your costs won't allow you to have as much profit to claim on taxes.  Cash flow is less. 

You pay cash:  Excellent cash flow, never have to worry about making payments, but have to claim taxes on your entire earned income.  

Is it really worse to pay cash?  I just don't understand how you can have multiple properties and not have your goal be to own them all fee and clear.  

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.