Dave Weighs In on Owning and Renting Out a Vacation Home

October 11, 2017

 

Dear Dave,

What is your opinion of buying a vacation home, then renting it out when you’re not there?

J.P.

 

Dear J.P.,

I see nothing wrong with it, as long as you’re buying with cash and you’re also debt-free. A vacation home is a wonderful “extra” as you start building wealth. Remember though, it’s still basically a very large, very expensive toy. In most cases it will go up in value, and if you rent it, it might become something of a money maker for you.

But here’s another side to vacation home rentals. You’ll probably make some money, but in most cases there will be several weeks during a year when it sits empty. You’re not going to get rich renting it out. So, they’re not really great investment properties. What you’re talking about is more of a plan to offset the annual costs of your toy. If you look at it that way, I don’t think you’ll be disappointed.

If you’re determined to go this route, be ready to deal with spills on the carpet and damage from your guests, along with general maintenance and repairs. There’s always something that needs attention when you own a property. But if you can handle all that emotionally and financially – and you’re not looking for it to be a big-time investment that will make you rich – you’ll be fine.

—Dave