During a depressed real estate market those who have a bit of money saved, or a nice-sized retirement egg stashed away, may think it could be the ideal time to buy that vacation (or future retirement) home. In a real estate market where prices have dipped into perhaps an affordable purchase range, the idea could be pretty tempting if there is a financial ability to do it. According to an Aug. 2014 article published by Bloomberg, the National Association of Realtors estimated sales of vacation homes in the U.S. rose 30 percent in the previous year (717,000). 1

However as alluring and appealing the idea might be, as with any investment, it is important to consider all angles of the venture to help determine whether or not buying a vacation property is a smart investment to make. Not only just the right time, but the right place or even buying at all. Once you evaluate, you may find it to be the perfect investment. But, on the other hand, you may find this type of investment is not worth the initially perceived advantages.

A few of the disadvantages to consider before committing your money to purchasing a vacation home include:

No Variety in Your Vacations

Buying a vacation home guarantees a nice spot to head off to in order to obtain some rest and relaxation, however it also can be pretty limiting. Once money is invested into one property, this means the home and grounds will need ongoing maintenance, especially if the property will be rented out when not being used (renters do not always take the same care you would and this will also increase routine repairs). All the money put into a vacation home won't be available to use to visit other possibly desired locations.

People who have perhaps already traveled the world, are buying for reasons of nostalgia, or have no interest in diverse vacations may not mind so much. However, for others, the novelty of a vacation home location eventually wears off and the desired R and R may get boring. An exception is perhaps for those people who visit the same place year after year anyway as a family tradition. In that case, it is probably a great idea to buy a home and solidify those family customs.

Beach sunrise
Credit: Leigh Goessl/All rights reserved

You might buy a property for its gorgeous views, but is this worth the trade-offs? In some cases yes, in some cases no. Evaluate all of the pros and cons before investing your money.

Renting Your Home

Renting your home for designated times of the year is a great way to recoup some of the investment money and use it to maintain the property and perhaps even profit, however there are also possible significant drawbacks to contend with.

  • What happens if the home doesn't get rented?
  • Damages are incurred by guests? Renters are also not always careful with the properties they stay in.
  • More use typically equates to more repairs through natural wear and tear which is what you'll get if you rent your home. 

When owning a vacation home that is rented out during the times of the year you aren't using it, you can also expect higher utility bills, repairs and other expenses you may not have counted on. There are many types of risks involved with rentals, so it is important to weigh all these factors in when considering a rental home.

Maintenance and Expense

Purchasing a secondary home is a serious commitment. Not only do you shell the money out for the initial purchase, there will be a regular expense to add to a household budget. It is important to keep in mind, this is double the furnishings, insurance, utility bills, taxes and the biggie, the mortgage. This may not be so bad for those who already paid off their mortgage, but there are a lot of the other duplicate expenses to consider.

Is the Home a Risky Venture?

Owning any property entails a level of risk. A vacation home is often empty, especially in the off-season and this means thieves may have an eye on it. Natural disasters could sweep through and cause damage, especially if precautions were not able to be taken. For instance, it's important to consider if your home is located in a location prone to hurricanes or other natural disaster and you won't be around to protect it unless you hire someone to do it in your absence. Even internal home disasters could occur such as leaky pipes, faulty wiring or other undetected problems. As with any property, do a thorough inspection and get the opinions of experts too.

[Related reading: Is Your Potential Home a Former Meth Lab? ]

Property managers or real estate agents can be a good solution, but this route is another additional expense to tack onto a budget. And, if your second home is purchased on a beach location, the wear and tear caused by wind, salt and sun could be harsh on the structure. Bloomberg noted one Virginia Beach homeowner was shocked to learn his windows had to be replaced every six years. 1

Window repair
Credit: soundfromwayout on Flickr/CC by 2.0 with Attribution

Unpredictable Market

Even if the property is located in a prime location, the resell value may not be as good as you'd think it would be. If for some reason you decided or needed to sell, if the market is currently not a good one, you could be stuck holding the bag and having to maintain and pay for the property. Or take a loss if you do need to sell immediately. Markets go up and down in cycles and putting a vacation house back on the market may not be very feasible. There are likely many other homes to compete with on the market during a downturn. Keep in mind, there are probably a number of other vacation homes located nearby, if not in the same community, as yours.

There are many great reasons to invest in a vacation house, especially if a steady secondary income can be made of it, however before jumping at the opportunity to buy a second home, it is a smart idea to carefully weigh all the pros and cons of this type of investment. Know what you are getting into before you invest your assets and/or take out loans for a vacation home.

Buying a Second Home: Income, Getaway or Retirement
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vacation condos
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