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Will A Vacation Property Pay for Itself with Rental Income?

Will A Vacation Property Pay for Itself with Rental Income?

My family visits Destin, Florida almost every summer. We stay in the same condo each visit. I’ve often contemplated purchasing a condo so that we could use it as often as we want and rent it out the rest of the season.

But the real question is whether or not renting that property out will pay for the property? This has taken some research and a lot of soul-searching but here is what I’ve learned:

Will A Vacation Property Pay for Itself with Rental Income? A vacation property’s costs can definitely be offset by renting it out, but expecting it to pay for itself can be a risky approach to investing in a vacation home or condo. Management fees, seasonal demand, taxes, and your own comfort level with having others using your vacation property are all determining factors that you need to consider.

Let’s break these down and see if renting out a vacation property to offset costs is the right choice for you.

Don’t Let Emotion Overrule Logic When Deciding If A Vacation Property Will Pay For Itself

That old saying that people buy with emotion and justify with logic is pretty accurate. This is especially true when it comes to vacation properties. Whether it is a ski condo or a beach hideaway, people are often on vacation when they make decisions to buy properties.

The logic part comes in when we justify the purchase with the rental income we’ll get when we’re not using the property. After all, if we are only going to use it a few weeks a year, how else can we justify buying it, right?

Some will add up their costs to rent the same property, using that amount for a year to justify buying the property.  The math isn’t as simple though as just multiplying the number of available rental days by the nightly rental income. There are some significant costs involved.

Management Fees Impact A Vacation Property’s Ability To Pay For Itself

These are highly variable, mostly depending on whether the management is entrenched on the property. This is common with ski condos, as they are normally far up the side of a mountain, and it’s just better to have the management personnel on site. 

If maintenances personnel are also full-time employees, the cost goes up considerably. This is also common with more remote vacation destinations. Fees can easily run 45% of income, considering that cleaning is also part of the fee. Now that $100/night is down to $55/night, so the big ticket rental income just got smaller. 

Even if your vacation property is not managed onsite, you’ll still need to account for paying someone to fix leaking sinks, air conditioning repairs, and other occasional but inevitable incidentals.

And after every tenant vacates the property, you’ll need a Vacation Rental Cleaning Service to go in and make the vacation home ready for the next family. These costs eat into your income and need to be factored into your decision making.

Before you make the decision to buy, get some estimates. Do a web search for the area wher you are looking at buying. Search for “Vacation Property Management Services” to find all-in-one solutions. But also search for local plumbing and cleaning businesses and call them to get quotes.

Understanding the impact of maintenance costs will help to balance the emotional urge to buy with the logic of return-on-investment.

Seasonal Demand And It’s Influence On A Vacation Property’s Ability To Pay For Itself

It is nice to say that your use will be three weeks, so that leaves 49 weeks of possible income. For a beach unit on the island of St. Croix in the Virgin Islands where the average year-round temperature is around 75-degrees, it may at least be possible. But that’s not the case for most vacation properties. 

In reality, there are certain times of the year when vacation areas are more alluring. Beachfront properties attract more travelers during the spring and summer months. Winter, not so much.

Mountain ski condos suffer a similar dilemma. Sure, people do vacation in the mountains in the summer. However, they don’t pay full winter rental rates, and you will not enjoy heavy occupancy.

And don’t forget that many of the other owners are doing the same thing, so the competition cuts your income potential as well.

Vacation Property Taxes And Deductions As A Rental Income

Property taxes on vacation homes can be high. This is especially true of prime real estate locations. Before making the leap into vacation property ownership, check the tax rolls and find out what you may be expecting.

The Internal Revenue Service provides guidelines for proper taxing and deductions and I highly recommend you at least familiarize yourself with them. Ultimately, you will probably need to pay an accountant to help you with just how many nights you can use your unit before it creates a problem with the IRS. It’s not insurmountable, just another component to the buying decision process.

Do You Really Want Just One Vacation Destination?

This Youtube video from The Money Guy Show goes over three key truths about buying a vacation home. As they explain, investing in a vacation home is a significant investment that locks you into a single vacation destination.

This is an important consideration that should not be overlooked. You may love that beach or snow-covered mountain but do you really want that to be the place you are locked into going year after year? Sure, a vacation property that can pay for itself in rental income is enticing but make sure that it’s a location that you will still want to visit regularly a few years down the road.

Buying a Vacation Home - TOTAL GUIDE Pros Cons of Investing

Will It Still Feel Like A Vacation When You Are Doing Property Maintenence?

This has been a big one for me. As much as I would love to buy the condo where my family and I stay every year in Destin, I’m put off by the idea that I would end up spending a large portion of my time there dealing with maintenance issues.

Yes, you can hire services out but there are lots of upkeep items that are much cheaper to just do yourself. Fixes such as touch up painting, quick repairs of leaky faucets, and energy efficient upgrades are usually simply DIY projects that you can do yourself and save a lot of money.

Additionally, my wife has a decorative streak in her and we would likely spend time hanging pictures, replacing curtains, and other odds and ends. All of these types of projects stand to eat into your “vacation” time.

So, consider the time that you will be required to invest of your own and whether or not the end justifies the means.

Will You Like Having Others in Your Home?

One final consideration, but an important one, is whether or not you are comfortable with the idea of other people living in your home.

The idea of a vacation home paying for itself in rental income sounds nice. It’s like having a place to vacation for free, right?

But that amounts up to a lot of people constantly moving in and out of your home, moving things around and items getting stolen, broken, or lost. If the idea of that bothers you, then take that into consideration. People on vacation will not treat the property with the respect that you do.

Even though it’s a vacation home, it is your home. It is common for buyers who justify with logic to realize that they do not like the idea of having to lock up their personal belongings and let strangers use their vacation home.

Calculating Income and Expense Potential For A Vacation Property

Emotional influence aside, it’s important that you sit down and run the numbers to see if a vacation property is really the right investment for you.

Vertex42 is a website that creates, collects, and shares Excel spreadsheets for just about every purpose. They have an excellent Rental Property Cash Flow Analysis spreadsheet that may be just what you need to run through the numbers and determine if a vacation property can pay for itself in rental income.

I would encourage you to make calls and get quotes, not just ballpark what you think the expenses will be. This may take some time but we are talking about a considerable investment. Do your due diligence and get as close to an accurate estimate as possible.

Consider The Benefits Of A Vacation Property Beyond Financial Gain

Even if the numbers don’t bear out a profit, it doesn’t necessarily mean that your vacation property dream is out the window. It’s important to consider what you really want the property for.

If you are looking for a second home at a destination that your family frequents regularly and can offset at least some of the cost with rental income, then perhaps that is enough.


There is more to owning a vacation property than whether or not it will pay for itself in rental income. If you have a regularly frequented vacation destination and you are wanting your own place to stay at each time, owning a vacation property may be just the ticket to true relaxation and freedom.

On the other hand, if you are looking primarily for a business investment, determining if a vacation property can pay for itself in rental income comes strictly down to the numbers.

If you do decide to move forward with owning a vacation property, you can use my free downloadable worksheet to conduct your own home efficiency audit and make sure that vacation property rental income doesn’t go to waste!

Related Article:

Make A Beach House More Energy Efficient – 10 Tips That Work

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