By Tom Sedoric & Casey Snyder

We’ve all dreamt of it: the lake house, the cabin in the mountains, the beach cottage… a vacation home for you and your family to enjoy, year after year. It’s an appealing prospect, but before you sign on the dotted line and commit yourself to yet another mortgage, there are a few things to consider. 

Buying a vacation home is very expensive and doesn’t always pan out exactly as we hope. 

The alternative? 

Rent your fun. 

Renting can be a much more affordable option and may suit your needs better than you initially assume. If you have aspirations of a family vacation home, perhaps this blog post can guide you to the right solution for your needs. 

Is it Better to Rent or Buy? 

Every financial situation is unique, so it’s not up to us to proclaim that renting is better than buying, or vice versa. Depending on your finances, goals, and vacation wants and needs, one option may make more sense than the other. We’ve talked about this idea extensively on our blog in the past—be sure to ask yourself these questions as you begin the process of looking for a vacation home:  

  • Does my current and future financial situation afford annual maintenance and carrying costs, especially if property taxes and insurance premiums rise faster than the general cost of living?
  • Can I afford to replace appliances and make other necessary repairs as they occur? 
  • Would job loss or an unexpected life event disrupt my financial security? 
  • Am I able to responsibly save in pursuit of all my other life goals? 

You need to make sure a second home fits into your current financial plan and will mesh well with your future retirement plans. John Marotta put it quite succinctly in his Forbes article: “Before you even consider purchasing a second home, make sure that you are on track for your retirement. If you already aren’t on track for retirement, then buying a second home will make the situation far worse. If you are on track, you still may not want to get one.” Don’t let the prospect of a quaint beach house on the Cape ruin your retirement plans

Reasons to Rent a Vacation Home

The first thing you’ll want to consider is the financial impact of buying a second house. When you buy a vacation home, you’re incurring massive expenses—typically more than most people account for. Real Estate Scorecard estimates that a second home costs about $700 a month, not including mortgagerepairs, or improvements. That’s just for insurance, property taxes, utilities, HOA fees, and lawn care. Add your mortgage to that, plus a margin of error for annual repairs, and you’re closer to a realistic figure. Oh, and don’t forget to tack on the cost to travel to and from your vacation home! 

A vacation rental, in contrast, requires far less financial commitment throughout the year. You can enjoy the benefits of staying in a beautiful home in an area you love without the emotional and financial responsibility of caring for that house 365 days a year. It also enables you to stay in new or different areas instead of the same location year after year. 

Another critical factor to keep in mind is your family. When kids are little, a vacation home is a great way to get away for a week as a family. As children grow older, however, their laundry list of activities and responsibilities will grow—they might not be able to (or want to) spend a week every summer on the lake by the time they’re high school age and older. Renting gives you the flexibility you need as your family’s wants and needs evolve. 

Reasons to Buy a Vacation Home

Chances are, you’ll only be able to enjoy a second home for a couple of weeks out of the year. What about the rest of the time? Consider treating your vacation home as an investment with which you can earn passive income.  

Turning your vacation home into a rental property during the months you’re away can be an excellent investment, granted that it’s feasible to manage. Be mindful of tax laws and spend time drawing up spreadsheets of all your vacation house expenses to come up with a fair rental rate. 

Ownership is not one size fits all—it takes careful time, consideration, and planning to buy a vacation property. If you discover that ownership doesn’t work with your current or future financial plans, consider renting your fun. You’ll likely get a lot more satisfaction and relaxation out of a vacation rental, knowing that you’re not responsible for replacing the deck or painting the kitchen. 

Be sure to check out our guide to housing transitions, which will help you make a more informed decision in regard to your future vacation spot.