Buying a vacation home: A beginner’s guide for 2023

Published Date: January 6, 2023

A family takes a tour of a luxury home as they pursue their goal of buying a vacation home.
If you’ve bought a home before, you may mistakenly assume that it’s no different when buying a vacation home.Spoiler: While the process is similar, there are some differences in your approach and getting approved that you need to take into account. Read through these tips for buying a vacation home so that you’re prepared at every stage. 

Step 1: Decide if buying a vacation home is right for you

An image outlines the pros and cons people should consider when buying a vacation home.
Putting your money into another property is a big commitment. It’s important to fully understand everything you stand to gain and lose when buying a vacation home vs. renting.

Pros of buying a vacation home

Buying a vacation home has the potential to greatly increase your quality of life. Some of the major benefits include:
  • You’ll save money on vacations since you won’t need a rental or hotel room.
  • Having affordable vacations can lead to more frequent and longer trips throughout the year.
  • Property is a stable investment that will likely be worth more in the future.
  • Vacation properties can qualify for lucrative tax breaks, offsetting some of the costs of ownership. 
  • The house can be rented out to create a passive income source.
  • The house can become your primary home when you retire, and you’ll have a head start on the mortgage.
But all of these benefits can come with some drawbacks.

Cons of buying a vacation home

Home ownership is a large responsibility in itself, and adding a vacation property into the mix can increase that responsibility greatly. Make sure you consider some of the downsides that follow vacation home purchases:
  • All of the expenses associated with your primary home will recur with your vacation property. Think about the cost of utilities, property taxes, HOA fees and insurance.
  • Maintenance costs for a home that is vacant for extended periods are different from a permanent residence. Pests can infest the building, pipes can burst in winter or people can rob or vandalize it.
  • If you plan to rent the place out, you may need to hire a property manager to handle the brunt of the workload. 
  • If you have a lifelong case of wanderlust, you might grow tired of visiting the same location year after year. 
  • While you do earn equity in your second home, the large upfront purchase and maintenance costs mean you may have less cash on hand in case of emergencies
If you’re prepared for all of that, then it’s time to find the vacation home that’s right for you. 

Step 2: Determine what you want in a vacation home

An image displays the four most important factors to consider when buying a second home.
Perfect is a subjective term when it comes to property ownership. What is right for you and your family will largely depend on the purpose behind buying a vacation home. 


You should be well acquainted with any location where you plan to have your vacation home. Since real estate is a long-term investment, you’ll want your new home to have long-term appeal. Do you want it to be within driving distance so you can visit regularly on weekends? Or will it require plane travel so you can experience a different climate?


Do you have specific ideas in mind for what you want to do at your vacation property? Are you longing to be steps from the slopes, with a roaring fire after a day of skiing?Maybe you want to spend time in a larger backyard lounging by the pool, or biking to wineries on backcountry roads. Whatever you choose, make sure you have enough bedrooms and bathrooms to accommodate your guests in style and comfort. 

Intended use

Many people are looking to turn their second home into a money-maker, and the success of services like Airbnb and Vrbo make it easy. Once you turn the home into an investment property, the terms of your vacation home loan will change.A rental property is seen as a business, and it qualifies for different interest rates and taxes than vacation home financing. Make sure you understand the full implications if you plan to pursue this route, and discuss it with your lender. 


The style of a house can often take a back seat to the more important factors on this list, but it is an important one nonetheless. When it comes to architecture and interior design, are you drawn to contemporary or rustic chic? Mid-Century Modern or mountain chalet? Open concept plan with a great room or more traditional defined rooms?Having a home that you’re in love with visually can keep you happy with the purchase for years to come.

Step 3: Begin your process of buying a vacation home

If your mind’s made up that it’s time to own another property, the next step is learning how to buy a vacation home. It should feel familiar if you own your primary home.For instance:
  • Determine if you can afford the vacation home. Track your monthly income and deduct your regular expenses. Do you have enough leftover each month to cover another mortgage payment plus utilities and maintenance?
  • Get pre-approved for a second home mortgage. Talk to lenders to see if you qualify for a loan and how much that might be. They’ll look at things like your credit score, debt-to-income ratio and how much you’ll need for a down payment. 
  • Find your new vacation home. Apply the advice in step two to ensure you’re putting your money where it will have the best return on investment and add value to your vacation goals.
Have the feeling you’re missing something? Look into the areas where vacation house hunters go wrong.  

Common mistakes when buying a vacation home

Enough people have been in your shoes before that some reliable rules for buying a vacation home have been established. Here’s how to avoid their mistakes when buying your second home.
An image provides the four most common mistakes people make when buying a second home.

Letting emotions guide decisions

Having a house you love in a destination you love is a great goal to have, but letting that passion cloud your judgment can lead to long-term problems. Deciding to buy a vacation home while your emotions are high after a recent visit may feel like the right move, but you might get buyer’s remorse when those feelings fade. Approach buying a vacation home from a calm, rational perspective to successfully manage expectations.

Exceeding your budget

Once you’re attached to the idea of purchasing a vacation home, it can be easy to increase spending to reach your goal. Always remember that your budget is there to help guide your decisions and keep you out of financial trouble. Exceeding your budget will only increase your chances of biting off more than you can chew.  

Miscalculating expenses

There are many additional costs associated with vacation home purchases aside from the sticker price. Understanding that you’ll be paying throughout the year for your vacation property — not just when you use it — is important to keep in mind. Remember that you’ll need to furnish the house, pay for lawn care when you’re away and make repairs as needed. That’s all on top of property taxes, insurance and HOA fees.

Underestimating property management

If you live far away from your vacation home, you’re going to need help keeping the place in a livable condition throughout the year. For that, you’ll need a property manager. This is especially necessary if you plan to rent it out. While the service is well worth the expense, it will eat into your projected revenue.  When executed properly, buying a vacation home can be a fulfilling experience and financially rewarding. Following the advice in this guide can help make that happen. If being the sole owner of a second home feels out of reach, look into options for co-ownership. And with a fully managed ownership model like Pacaso, you can still reap the benefits of a second home while lowering the financial and property management burdens. 

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