Part 1: Is a Vacation or Second Home Purchase in Your Future?

Posted by Duane Duggan on Wednesday, February 21st, 2018 at 10:37am.


If you’re a typical homeowner, you may have purchased a personal residence or two over your lifetime, or maybe even an investment property. As your children grow up and move out, you might be thinking about acquiring a permanent place for you and your family to gather for vacations. In fact, Baby Boomers have been buying second homes at a record pace as they reach their retirement years. Over the years, I have had the opportunity to refer many of my clients to Realtors in the locations where they want to buy vacation homes. I have learned that my clients who live in the Boulder area like to vacation at nearby ski resort towns and on tropical islands.

There are quite a few things to consider in order to make the vacation home buying experience a happy one. Here’s Part 1 of my two-part series about buying a vacation home.

Goals for the home

Families need to ask themselves many questions as they dive into considering the purchase of a vacation home. Goals can be immediate, such as the number of days of personal use. Or whether or not the property is going to become a legacy family vacation property to be handed down to the next generation.

Here are a few questions to help you decide.

Is rental income needed to financially support the purchase of a vacation property?

Even if someone pays cash for a vacation home there will still be several expenses. Those expenses include taxes, insurance, maintenance and landscaping, property management and homeowners association fees. With a mortgage on top of that, most people will need to rent out the property for some income to cover these expenses, especially in the early years of ownership. 

If rent is needed, will you manage the rental or hire a professional manager?

Some people choose to rent out their vacation properties by themselves by relying on a variety of online websites. If you want to do this, you will need to investigate local municipalities and homeowners association rules on short-term rentals because there can be many types of restrictions, occupancy limits, fines for violations -- and even prohibition. If you want to rent and manage the property yourself, you will need to assess your ability to market your property, clean it after every guest stay, repair and maintain it, especially if your property is located outside of driving distance.

In most resort areas, professional vacation property managers are available. They can market your property and put it into a rental pool. This enables you to keep your property rented on a short-term basis from a distance and with no personal involvement. These managers can guide you on pricing and tell you the average number of nights per year you might expect to rent out your property. You can pick the days that you would like to schedule for personal use. For example, you might have to decide if you want to use the home yourself over the holidays or rent if out during the holidays for premium rates and maximum returns.  

With longer term rentals you will have higher expenses for management, linens and cleaning, whereas daily rentals might bring in higher income depending on the season and number of nights booked. The advantages of a longer-term rental are consistent income and less turnover and paperwork.

In addition to marketing, vacation property managers can also handle cleaning and garbage; security; damage repair; maintenance including landscaping, pool cleaning, snow removal; guest emergencies; and even restocking linens, soap and paper towels. However, when choosing a vacation property manager, you should keep an eye on fees and contract terms. Fees can be 20-50% of rental income.

As you can see, there are many details to evaluate when buying a vacation property. In my next article on this topic, I will cover taxes, financing, succession plan and more. As you mull over the idea of purchasing a vacation home, I recommend that you pull together a team that includes a mortgage loan officer, tax accountant, financial planner, property manager, insurance agent, Realtor – and possibly an estate planning lawyer – to consult with.


About Duane Duggan: Duane Duggan has been a Realtor® for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: the Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, REALTOR® for Life. Also see his video podcasts about real estate topics on RE/MAX of Boulder’s YouTube channel.

For questions, email Duane at or call 303-441-5611


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