Owning a vacation property can feel like the ultimate dream. It’s a space to escape, recharge and maybe even generate extra income. But not everyone who thinks they are ready to buy a second home should buy a second home. We spoke with Ashley DeHart, a real estate agent from Realty from DeHart based in Fresno, California, to break down what you need to know before making this massive decision.
You must have rock-solid financials
DeHart says the first question to ask yourself is, “Is your financial foundation stable?”
“Sometimes people want to take on more than they’re really ready for, and then it puts them into a really bad situation,” DeHart explains.
In other words, buying a second home isn’t something you should consider if you’re struggling to pay your current mortgage. Signs of financial readiness include:
- Good income stability: There are no upcoming career changes that could impact your earnings.
- Low revolving debt: Credit cards and other debts should be well controlled.
- An emergency fund for two homes: This goes beyond covering a broken water heater. This means setting aside six to nine months’ worth of bills. This is especially true in states like California, where natural disasters occur, and having a robust financial cushion is critical to weathering unexpected events.
Deciding where to buy
A significant step in buying a vacation property is deciding where to purchase it. DeHart says it’s essential to strike a balance between personal satisfaction and financial opportunity.
She says if you’re buying this as a vacation property for yourself and also plan to generate short-term rental income, pick a location where you’d want to spend time. For example, if you are trying to escape the summer heat, a mountain home might be best, but if you want to wake up to the sound of water, then a home along the coast is the better option.
If you’re not attached to a specific environment or place, DeHart says find a less expensive area that could lower your initial investment while also offering short-term rental potential. And remember, buying in a market frequented by travelers (like spring break destinations) is key when hoping for a rental profit.
The indicators of a good investment
Not all vacation homes have the same income potential. DeHart suggests researching the track record of similar properties in your desired area.
“Look at other rentals in the area and see what they’re bringing in,” she says. “That’ll help you get a sense of what to expect from income and determine if the mortgage and upkeep will at least mostly be covered.”
However, DeHart warns vacation homes aren’t typically major income generators. “You’re not gaining wealth necessarily from the monthly income you generate. It’s more the appreciation of the property over time,” she advises.
DeHart says you should aim for a property that will let you break even. If you make more, that’s a bonus, not the norm.
Hidden costs of vacation home ownership
Before you sign on the dotted line, be prepared for expenses that might not be immediately obvious.
- Higher interest rates: Loans for secondary properties often come with higher rates.
- Property management fees: If you’re not nearby to handle guest turnover or maintenance, hiring a property manager can be costly.
- Climate-specific surprises: A home in a snowy region might require extra measures to prevent frozen pipes or roof damage—things you might not consider if you’re from a warm climate.
“Talk to someone local who knows what to expect,” DeHart advises. The more prepared you are, the less likely you’ll be caught off guard when something comes up, she warns.
This article was created in part using AI. A human member of our editorial team conducted the interview with the expert. The Q&A was then entered into an AI program, which generated an article. A human subsequently fact-checked and edited that article.
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