For years, my family rented condos to vacation in several times per year. While it’s really nice to visit somebody else’s place, there’s always the strange feeling of being in an odd hotel. You might not understand the owner’s choices of decor. The furniture might really deserve an upgrade. Or you might find that you have to bring a carload of kitchen appliances with you to accommodate your beachside cookout.
If you're an avid vacationer, there may come a point when you seriously consider purchasing a vacation rental instead of continually renting another person's property. When we finally gave in and purchased our own condo, it felt so much more like a second home.
So is it better to own a vacation home or rent? We've discovered that the answer really depends on your personal preferences, your financial situation, and your future travel plans, along with other factors. Let's take a look at some of the points you should weigh if you're trying to decide if you should buy or rent a vacation home.
What Are Your Travel Preferences?
Are you the type of person who enjoys vacationing in the same location, or are you more keen to travel the globe, visiting a new location on each trip? If it's the latter, buying a vacation home may not be the best choice, although it is possible to visit other locations by performing a “trade.”
You should also think about your needs as a couple or family. For example, if you prefer to bring your four great danes on vacation, then owning your own vacation rental gives you the ability to do this without restriction.
The same goes for special needs. If you need a wheelchair accessible vacation home or have a very large family that requires six bedrooms, then you may find that you're more comfortable in your own property versus trying to book one of the few vacation rentals that meet your needs.
Consider Your Vacation Schedule
When you own a vacation rental home and make that property available to other guests, you must consider if your preferred travel times will conflict with the most profitable peak rental times for your property. For example, if you have children, you may want to visit your vacation home during school vacation weeks in February or April. But this is also one of the most sought-after and profitable times for renting out your property. So you will be forced to decide if you should rent your home to someone else (and earn a significant profit in the process) or use it yourself.
If you are flexible about scheduling and are okay with planning trips for off-peak times, then owning a vacation rental may be a good option.
If you routinely go on “spur of the moment” trips, then owning a rental property may not be the best option because there's a good chance that your property will already be reserved by a guest. Conversely, if you rent instead of buy, then you can usually find a vacation rental whenever wanderlust strikes.
Account for Your Financial Situation and Goals
Buying a vacation rental is a great investment, whereas if you remain a renter, you're simply lining another person's pocket. The key is this: The vacation rental should pay for itself. Ideally, you should turn a profit, but this isn't always possible while you have a mortgage on the property. To maximize profitability, you must be flexible in terms of when you use the vacation home yourself. If you find yourself in competition with renters for the same timeframes, then you may find that your property actually costs you money. And once this occurs, you may find yourself in a position where it makes more sense to remain a renter.
The major benefit to buying a vacation home is the profit in the long term. Once the property has paid for itself, this property will become a money-maker, and you'll have a spot where you can vacation for free. These are important points to consider.
Know the Obligations and Tasks Associated With Owning a Property
When you buy a vacation rental, it's important to acknowledge the many issues that will fall onto your plate as the property owner. You'll be responsible for property taxes, insurance, property maintenance, cleaning, and you'll be tasked with finding, vetting, and interacting with the guests who rent your property.
This is no small feat, especially if you live a significant distance from your property. Fortunately, a property management company can handle a majority of the issues associated with tending to the vacation home, finding renters, and managing guests. But there will be times when a problem rolls onto your plate, resulting in some expense or hassle.
Conversely, if you remain a renter, you won't need to worry about any of these issues because the property owner (or their management company) will be tasked with handling any and all problems that arise. So it's important to evaluate whether you're willing to deal with the stress that can come with owning a property or prefer to avoid the hassle by renting.
One of the major benefits of owning a vacation home is the fact that it will feel like “home,” whereas you may not have this degree of comfort if you remain a renter. Ultimately, though, the best course of action will depend on your unique situation, finances, and travel preferences.
We've found that some folks are best suited by remaining renters, while for others, it makes more sense -- both financially and logistically -- to buy a vacation rental home. The key is to evaluate your needs and preferences, and carefully consider the financials so can move forward knowing you're making a financially-sound decision.
If you're leaning toward buying a second home as a vacation rental, stop by Rented.com to connect with a fabulous property manager who can tend to your new piece of real estate. Also check out our rental grader, which helps you estimate your vacation property’s short-term rental income based on nearby homes. Our income calculator helps determine your total cost and earnings from your Airbnb or vacation home.
Lead image: Flickr CC user Nick Kenrick