Now that summer is almost here, and we’re scheduling our vacations for the summer, we have the itch to buy our own vacation house…. again. (This happens every summer). Every time we rent a place, my financial brain starts spinning.
What if we buy our own vacation house, and rent it out when we aren’t using it? Wouldn’t that be a better investment than renting a place each time we go on vacation?
Pros to Buying a Vacation Home
Making Memories with the Kids. I have fond memories of going to our family’s cabin as a kid. I’d love to do the same for my kids. Scott cut back to 3 days a week, so it would be easy for us to go on long weekends.
Rental Income. When we aren’t there, we could rent out the vacation home on VRBO  or enroll in a rental program if we buy a place that belongs to one. I’m being realistic knowing that the rental income wouldn’t completely cover the costs of ownership, but hopefully, it would offset the cost of owning a vacation property. A little perk for second homes: you can rent it for up to 15 days per year, and the income is tax free!
Extra Tax Benefits. There are some extra tax deductions you can take on your vacation home depending on how many days per year you rent it. The IRS has different rules based on whether or not you use it more than 14 days or 10 percent of the time it was rented. See more on the vacation home tax rules .
An Investment? I would normally think of a 2nd home as a money pit, but I found an interesting calculation that estimated a yield equal to 9% per year after taxes  if you use the property only 15 days and rent it for another 15 days (at $150 per day). I’ll have to run some of my own calculations, but this could actually be a decent investment, right?
Cons to Buying a Vacation Home
Work. Vacation homes quickly become work. You end up spending your vacation doing “work” at the house on maintenance and upkeep.
Furnishings. Once you buy the home, then you have to buy furnishings. Extra costs that you don’t put into the analysis will always creep in.
Guilt. Don’t forget the guilty feeling that you have when you don’t use it enough!
Boats. Of course, when you buy a home on a lake, then you want to buy a boat to go with it. One more thing we won’t use. I should know, I used to have a boat, which we used a lot at first…. then not very much. The summer before we sold it, we only used it twice. Although part of me thinks we’d use it more now with the kids.
We’re also caught up on the location. We’re considering a place “up north” which would be between 3-4 hours from here. Although, since it’s such a popular destination, the prices for a place with decent lake frontage are pretty expensive.
We’re also considering a place at Lake Cumberland , where we go each year with Scott’s family, but it’s pretty far from here, so we wouldn’t get as much use out of it. However, when we’re there, our kids would get to see their grandparents more. And it’s considerably cheaper than any of the properties around here.
What do you think? Should we buy a vacation home? What would you do?