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Everything you need to know about buying or renting a weekend home

Wondering whether a vacation home is right for you? Here are five questions to ask before you buy or rent a place.

The COVID-19 pandemic has prompted many of us to rethink the way we take vacations. Some of us have embraced the staycation, setting up movie theaters in our backyards and learning how to create restaurant-quality meals. (Or at least halfway decent sourdough.) Other people have used their vacation time to explore the great outdoors, sharing the trails while staying at least six feet away from other hikers. Now, with another coronavirus summer on the horizon, some families are asking themselves whether the best way to have a low-risk getaway is to buy — or rent — their own vacation home.

“Vacation destinations are very popular right now,” says Amanda Pendleton, a home trends expert at Zillow. “Zillow page views to traditional vacation destinations such as Key West, Florida, or Cape Cod, soared nearly 50% last year. That suggests a lot of people are either considering a second vacation home or remote work is allowing them to put down roots in a vacation destination.”

If you’re thinking about buying or renting a vacation home in 2021, you probably have a lot of questions about the process. We asked Pendleton to answer five questions many people have about vacation rental properties and homes — so take her advice into account the next time you’re scrolling through Zillow (like the people in a certain Saturday Night Live sketch) and asking yourself whether it’s time to invest in real estate.

In this article:

Is it better to buy or rent a vacation home?

Many people assume the decision to rent or buy in your favorite vacation destination is primarily emotional — do you want to buy the kind of home that can be used as the launching pad for family memories, for example, versus spending your vacations at a different rental property every year? While memory-making and other emotional factors should be considered, the question of whether you should rent or buy a vacation house might actually come down to hard, cold numbers.

“The way we typically look at this buy-rent question is with a breakeven analysis,” Pendleton explains. “We’ve found it makes more financial sense to buy versus rent if you plan to stay in the typical US home for two years or more. That equation changes with a vacation home, since chances are, you’re looking at short-term rentals instead of a year-long lease.”

The equation that Pendleton is referring to can be quantified. “Short-term rent, home value appreciation and interest rate play a role in the break even question, along with the hefty transaction costs of buying, then selling, a home. Home shoppers can do the math here. If your short-term rental costs over the course of the year are significantly lower than your mortgage interest costs, plus the additional costs of homeownership like HOA dues and maintenance, then it makes more sense to rent — and vice versa.”

What if the costs of renting and buying factor out to be roughly the same? “If both costs pencil out about the same, it may make sense to buy because you can build equity in the second home.” That said, you should also consider your current financial status — and your long-term financial goals — before making any big purchases on a new vacation house. “If your first home is already paid for, you don’t have any outstanding debt, you have maxed out your retirement savings and any college savings plans, then you’re probably in a solid financial position to shop for a second home.”

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How close to home should your vacation home be?

Some vacation buyers want a weekend getaway that can be reached in an hour’s drive. Other people dream about buying a vacation home in a part of the world that they would like to visit more often. Both options have their pros and cons — which means that before you start scrolling real estate listings for your potential vacation home, you should consider both the costs and the benefits associated with buying property in a particular vacation destination.

“Your travel costs are going to be higher if you’re interested in a condo in Hawaii versus a destination you can get to on a tank of gas,” explains Pendleton. “Those travel costs and travel time are also going to limit how often you’ll be able to visit your second home.”

On the other hand, don’t let the idea that you have to buy “close to home” keep you from getting the vacation property of your dreams. If you and your family aren’t the type to enjoy spending every weekend packing up the car so you can make it to your lakeside cabin by lunchtime, why not ask yourself what it would cost to rent or buy that condo in Hawaii? It’s only a vacation if it feels like one, after all — and if you aren’t thrilled with the property, the location or the amount of travel it takes to get there, your vacation home could end up being an expensive chore.

Who takes care of your vacation home when you’re not living in it?

On the subject of chores: If you aren’t planning to use your vacation home every weekend, it’s probably worth asking yourself whether you need someone else to keep an eye on your home when you’re not there. In some cases, setting up a simple video surveillance system or using smart devices like Amazon’s Alexa can help you track what’s going on in (and around) your property. In other cases, you may want to work in tandem with another human.

“You can hire a professional property manager to check in on your home when you’re not living there, and manage any home projects, landscaping or pool maintenance,” Pendleton advises. If you don’t want to hire out, consider asking a friend or relative to lend a hand. “Many second homeowners lean on friends, family and neighbors to do the job.” If you’ve got a friend who is happy to stop by the house now and again to ensure everything is as it should be, make sure to thank them for their efforts. (A case of their favorite beverage goes a long way.)

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Should you buy a vacation home with another family?

While sharing the costs of a vacation home with another family might sound tempting, Pendleton suggests thinking carefully before co-buying a vacation home with friends or relatives. “A house share can definitely help make a second home more affordable, but there are thorny issues that you’d want to sort out well ahead of this kind of purchase.”

These issues include:

If you feel comfortable enough to have these potentially difficult conversations with another family, you might be ready to consider going in with them on a vacation home. (You might also want to talk to a real estate expert and/or a lawyer, just to make sure you’re considering all of the potential hazards.)

Can you save money by renting your vacation home when you’re not using it?

If your investment property is less of a weekend getaway and more of a seasonal escape, you might be able to make a little extra money by renting the property to other vacationers. “Renting your vacation home when you’re not using it is a great way to recoup your costs or even make a profit on your second home,” explains Pendleton.

Of course, becoming a landlord comes with its own expenses — and a little extra work. “You’ll want to factor in additional maintenance costs and property management costs, plus you’ll need to depersonalize the home and ensure it is stocked with all the amenities a renter would need.”

While sites like Airbnb make it easy to turn a vacation home into a vacation rental — and our guide to making money with Airbnb can help you get started — don’t assume you’ll be able to make enough money with your rental to offset the costs of owning the home. “This year we learned how unpredictable rental income can be,” says Pendleton. “Many people were forced to cancel their vacation plans in the early months of the pandemic, which meant vacation homeowners could not rely on this income to make their monthly mortgage payments.”

In short, it’s best to treat your vacation rental as a source of a little passive income , not a primary means of earning money. “If you plan to rent your home to cover certain costs, plan for unpredictability and ensure you can pay all your bills without that rental income.”

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About Nicole Dieker

Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.

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Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

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