Vacation Home Dreamin’

Vacation Home Dreamin’


There’s a place in Alaska that’s been in our family since 1939. A beautiful lake-front spot on the Kenai Peninsula. It’s eight acres of land originally purchased for $500. Not long ago the old miner’s cabin was torn down and replaced with a big log cabin. The cabin was a family getaway for generations. But then three siblings found out they weren’t compatible with joint ownership.

When the siblings’ parents were alive, they hoped that the cabin would be a place for the family to gather for decades to come. Eventually the siblings, who are now adults with their own families, started to differ in their feelings about the cabin. One wanted to VRBO it. Another started using it to host church retreats. They didn’t agree on how much to spend on cabin upgrades, or on who gets the best room during fishing season. Eventually one of the siblings offered to buy the cabin from the other two. It turns out, the parents’ hopes for family harmony were overly optimistic.

The siblings have a cousin who inherited her parents’ condo in Mexico. It had also been a place for family gatherings and vacations. But when the parents died, the cousin and her brother had a falling out over what to do with the property. The brother thought they should cash out; the sister wanted to keep it as a vacation spot and also rent it out. Both the cabin and the condo are technically still in the family. Unfortunately, ownership has taken a toll on the families.

Buying a second home is an exciting dream. But there are a lot of things to think about before you put money down on that perfect hideaway. Knowing how you plan to use the property—and what you want it to be—will help you fit it into your financial plan and your life. Intentional planning can also make sure your family is aligned with your expectations.

Talk before you buy

Is this going to be a vacation home, or an investment property? Or are you hoping it can be both? When you’re asking these questions, make sure everyone involved gets a chance to weigh in. Yes, that might mean a few family meetings. It’s better to work these questions out now so you can avoid conflict later. Different assumptions will come with different costs, benefits, and levels of effort. Let’s take a look at four ways you can think about your second home, and what that might mean financially as well as emotionally:

  • Personal vacation retreat: If your second home will be for immediate family use only, that means you’re responsible for all costs and upkeep. If you’ve got adult children, make sure they’re clear about your expectations for the place when you’re not there. This is a conversation that’s good to have on an ongoing basis, especially if some of your children move away and have less access to the property. You’ll also want to think about how your vacation home figures into estate planning. For example, if you have three kids, will it be split among them equally? What does that look like in the next generation if one family hasn’t produced grandchildren?
  • All in it together: You may like the idea of a shared vacation home among extended family members or a group of close friends. This can make a property more affordable, and you don’t have to worry that it will sit empty for weeks on end. Sharing a vacation home means lots of ongoing communication about things like scheduling, expenses, maintenance, and proper use. In fact, it’s probably not be a bad idea to draw up a formal agreement and re-visit it frequently.
  • Making money the “easy” way: Another way to look at a second home is to earn money by listing it with VRBO or Airbnb. This is often called passive revenue, but don’t be fooled by the word passive. Renting out your property can take more effort than you think. And, in addition to costs like mortgage, taxes, and upkeep, you’ll want to factor in a management company, cleaning services, rental-related taxes, and added insurance. If you still plan to spend time at the property, keep in mind that renters will be most interested in the prime weekends.
  • Equity investment: Maybe your reason for acquiring a second home is to have an investment that will increase in value over time. Of course, you may hope that any vacation home will pay off over time, but a specific plan to turn your property for profit will have a lot of influence on your purchase. You may have to walk away from the humble cottage close to your favorite beachcombing spot in favor of a more touristy location. Predicting your future profit also means factoring in costs like maintenance, remodeling, taxes, and HOA fees.


Buying a second home can often be a spontaneous and emotional decision. Before you take the plunge, it’s wise to have a talk with your financial planner. And, yes, have that talk with your family, too. Whether your idea of enjoyment is a private retreat or cashing in with rental income, a financial plan will make sure everyone involved is on the same page.

Questions to think about before buying a second home:

  • Have you considered the budget trade-offs of owning a second home? Could it mean not going on a special trip?
  • Is your family all in on the decision to buy a vacation home? In addition to the money, it can be a big-time commitment if you expect to go there frequently.
  • If you’re planning to rent your place out, has your family discussed their feelings about strangers sleeping in their beds and putting their feet on your couch?


Action steps:

  • Before welcoming renters, you’ll want to research city and state landlord-tenant laws, so you know your rights if a tenant takes advantage of you or doesn’t respect your property.
  • Know the tax rules related to vacation homes and rentals. They may be different from your primary home.
  • Be sure to budget for all the additional expenses of a vacation home. For example, you might have to pay for snow removal at a ski resort property.

The foregoing content reflects the opinions of Liz Behlke and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.