As summer approaches, it's easy to daydream about escaping the daily grind—whether that means sinking your toes into soft beach sand, casting a line into a quiet lake, or hitting the golf course after your morning pickleball match. One question we hear from clients time and again is: "Should I buy a vacation home or just continue renting?"
As with many financial decisions, our answer is: it depends on your goals, lifestyle, and finances.
Renting can be a low-commitment way to explore different destinations and avoid upkeep. But for some, the idea of owning a retreat that feels like "yours" is worth the investment. While we're not real estate agents, we are here to help you think through the big picture—financially and personally.
Let’s explore some of the key considerations.
The Case for Buying a Vacation Home
Beyond the Numbers: Lifestyle Considerations
Buying a second home is more than a financial transaction—it’s a lifestyle choice. Start by asking yourself:
- How often will you actually use it?
- If you're only planning to visit a few weeks a year, renting may make more sense. But if you’ll be spending extended periods—think months at a time—you may benefit from putting down deeper roots.
- Does it fit your travel style?
- Some people love returning to the same spot year after year. Others thrive on variety. A second home can give you familiarity and community, but it might also limit your flexibility.
- Will it add joy—or stress—to your life?
- Owning another property means dealing with maintenance, repairs, and unexpected costs. If you’re ready for the responsibility, it can be rewarding. If not, the stress may outweigh the benefits.
- Is it a gathering place?
- For many clients, a vacation home becomes a place to create traditions—hosting holidays, spending summers with the grandkids, or inviting friends for weekend getaways. That emotional value can be priceless.
Financial Pros of Buying
- Potential appreciation: Over time, real estate may increase in value. While there are no guarantees, this can be a long-term benefit.
- Offsetting costs through rental income: If you're not using the home year-round, you might consider renting it out. In the right market, that income could help offset expenses.
- Convenience: Returning to a home you own—furnished how you like, stocked with your essentials—adds comfort and predictability.
- Part of a retirement plan: Some clients use their vacation homes as future retirement residences, gradually spending more time there over the years.
Financial Cons of Buying
- Upfront and ongoing costs: Between the down payment, mortgage, taxes, insurance, maintenance, and HOA fees, the cost adds up quickly.
- Financing challenges: Second home mortgages typically require higher credit scores and larger down payments than primary residences.
- Seasonal or inconsistent rental income: If you’re counting on rental income, be prepared for seasonal fluctuations and possible vacancy periods.
- Management responsibilities: Even with a property manager, you’ll need to coordinate bookings, handle emergencies, and maintain the property.
- Limited aid in disasters: Federal disaster assistance typically doesn’t apply to second homes. That means more risk to self-insure or over-insure.
The Case for Renting a Vacation Home
Why Renting Might Be Right for You
Renting offers a lot of flexibility, especially if you're still exploring or don’t want the long-term commitment. Here are the perks:
- Lower commitment: No mortgage, no maintenance, no property taxes.
- More variety: Try different destinations each year—beach one summer, mountains the next.
- Cost control: You can choose rentals based on your current budget and travel goals.
Things to Watch Out For
- It’s not yours: That means you can't customize it, store belongings, or make changes.
- Peak-season pressure: Popular destinations book up fast and prices surge during high demand.
- Potential inconveniences: From figuring out the thermostat to dealing with unexpected fees, renting comes with some hassles.
If you value flexibility and simplicity—and you're not sure where you want to "plant roots"—renting may be your best fit for now.
Insurance Considerations for Second Homes
Second homes often come with higher insurance costs, and for good reason:
- Higher risk: Unoccupied homes are more vulnerable to damage or theft.
- Location matters: Beachfront or mountain homes face risks like flooding or wildfires.
- Rental use complicates things: If you're renting it out, you may need additional liability coverage.
Insurance for a second home can be 2–3 times the cost of your primary residence policy. Talk to an insurance pro about the right coverage for your situation and how to protect against location-specific risks.
Including Your Vacation Home in Your Estate Plan
If you buy a vacation home, make sure it fits into your legacy planning. Ask yourself:
- Who will inherit the property?
- Will your heirs use it, rent it, or sell it?
- Are they aligned in how they’d manage it together?
You might consider:
- Leaving the home in a will
- Setting up a trust to manage ownership and maintenance
- Creating an LLC to handle use rules and responsibilities across multiple heirs
Working with your financial and legal team can ensure your intentions are clear and practical for future generations.
Tax Implications to Keep in Mind
While we're not tax advisors, here are a few important things to be aware of:
- Mortgage interest: May be deductible on loans up to $750,000 (subject to IRS rules).
- Property taxes: Deductible up to the $10,000 SALT cap across all owned properties.
- Rental income: Renting for 14 days or less per year? It may be tax-free. More than 14? You'll need to report it and may be eligible for expense deductions.
- Capital gains: When selling, second homes don’t qualify for the same capital gains exclusions as your primary residence.
Always consult your tax professional to understand how a second home would affect your tax picture.
Markets for Luxury Second Homes
Luxury vacation homes—those priced over $1 million—have held strong even as interest rates have risen. In 2024, cash purchases dominated this market, and prices for high-end properties rose faster than the broader housing market.
Top destinations in 2025 included:
- Cape May County, NJ – classic coastal charm
- Gulf County, FL – relaxed beach lifestyle
- Washington County, UT – near Zion National Park
- Coconino County, AZ – outdoor adventure near Flagstaff
- Cumberland County, ME – coastal New England vibe
If you’re shopping in this space, know that competition remains high, but there are still hidden gems depending on your goals and budget.
Final Thoughts: Choose What Fits Your Life
We know that deciding whether to buy or rent a vacation home isn’t just about spreadsheets—it’s about how you want to live your life and spend your time.
Whether you're leaning toward buying or renting, we’re here to help you evaluate the trade-offs, model the financial scenarios, and decide what aligns with your long-term goals.
Reach out to us if you’d like to talk it through. We’re always happy to serve as a sounding board for life’s big decisions.
1Forbes, May 31, 2024
2New Silver, January 25, 2024
3 FEMA, August 30, 2024
4CRE Daily, February 21, 2025
5Policygenius.com, May 7, 2024
6Coughlin Insurance Services, January 2, 2025
7U.S. Bank, February 2025
8MSN, January 3, 2025
9PhotoAiD, February 14, 2025