Buying a vacation home has lots of upsides and some downs

Published Date: January 6, 2023

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If you’ve ever lugged suitcases through a hotel lobby or anxiously scanned a resort rental’s online calendar for available dates, you have probably dreamt of buying a vacation home. And you’re not alone: Sales of second homes are outpacing primary residences in the U.S. But before you join the ranks of vacation home owners, read on. While there are plenty of great reasons to own a second home, buying a vacation home also has its drawbacks. Here are some advantages and disadvantages to consider before you jump into a buying a second home. 

Advantages to buying a vacation home

  • Vacation like a local. Buying a vacation home in a place you love allows you to experience it in a whole new way and truly become a member of the community.
  • Spend less time packing. You can keep all the comforts and necessities you usually bring on vacation – clothes, toiletries, outdoor gear and more – at your vacation home so you can get away from it all at a moment’s notice. No suitcase required!
  • Enjoy guaranteed accommodations. One of the most stressful parts of vacation planning is availability. When you own your own accommodations, you always have a great place to stay (even if it’s a holiday weekend). 
  • Know what to expect. Unlike relying on reviews to choose a hotel room or short-term rental, you always know exactly what to expect when you arrive at your own vacation home, and there are no noisy neighbors in the room next door (unless your kids snore).
  • Invest and own.  Rather than spending thousands of dollars and having only memories to show for it, buying a vacation home is an investment in property ownership. Of course, housing markets fluctuate, so how much equity you build is dependent on where you buy.  
  • Earn potential rental income. If you don’t want your vacation home to sit vacant when you’re not using it, you may be able to rent it out to others and use the money toward the mortgage and maintenance expenses.
  • Take advantage of tax deductions. You can deduct any mortgage interest paid on up to $750,000 of principal mortgage debt, including your vacation home. Other tax benefits may include deducting property taxes and interest paid on home equity loans.
  • Enjoy home exchange opportunities. Owning a second home in a great vacation spot makes you a prime candidate for home exchange programs. Trade a week in your home for a week in someone else’s home in another city and enjoy traveling somewhere new.
  • Create family memories. One of the most popular reasons to buy a vacation home is to have a special place to bring extended family together for vacations and special events. You can also pass down your vacation home to your heirs.
  • Prepare for retirement. Why not retire somewhere you love? Your vacation home can become your primary residence once you retire, but you can start enjoying it and building equity in it long before it’s time to turn in your employee badge. 

Disadvantages to buying a vacation home

  • It’s expensive. No matter what kind of vacation home you buy, a home is a significant expense, and adding one into your budget requires serious consideration. 
  • Financing is tough. When buying a vacation home, you’ll find that mortgage requirements are stricter. You’ll need a higher credit score and a larger down payment, and you can expect to face higher interest rates than for a primary residence.
  • Utilities and maintenance are costly. Your vacation home expenses don’t end with the mortgage payment – you’ll also need to budget for utilities, insurance, property taxes, maintenance and possible HOA fees.
  • Rental options may be limited. Many towns are passing stricter ordinances prohibiting short-term rentals or requiring homeowners to pay hefty fees to list a home as a rental. Be sure to check local laws before banking on your ability to rent out your vacation home when you’re not using it.
  • Management is a pain. Since your second home likely won’t be close enough to your primary residence for you to stop by frequently, things like home repairs and regular maintenance (lawn mowing, snow removal, etc.) can become a hassle that can eat up precious vacation time. And if you’re renting it out, you need to deal with reservations, clean up and more. 
  • Travel is limited. Once you invest in buying a vacation home, you’ll probably want to use it to the fullest. That means you’ll be tied to just one vacation spot and you may not have as many opportunities to travel to new places.
  • Out of sight, out of mind? Just like a gym membership you never use or a new dress that still has the tags on it in the back of the closet, a distant vacation home can easily turn from a dream come true into a neglected money pit if you’re not committed to using it regularly.

The bottom line

While there are many tempting reasons to buy a vacation home, it’s clear that sole ownership of a vacation home comes with steep downsides, including a heavy financial responsibility and time commitment. But there are  options outside of traditional vacation home ownership that mitigate some of those issues.Pacaso’s LLC co-ownership model increases your buying power, and makes buying a second home more attainable. Pacaso offers true property ownership of private, luxurious single-family homes in choice locations. Buyers decide how much home they want to own, from ⅛ to ½. Pacaso handles all maintenance and management, and offers easy and equitable scheduling on the Pacaso app. Pacasos cannot be rented out, so owners and their guests can kick back, relax and make memories. 

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Kasey Tross

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