Whether you’re looking for a second home or the right investment property for short-term rental income, a vacation home search can be very exciting. When you begin, everything feels possible. But, without the right approach, it’s easy to get caught up in the romance of searching and start to feel burned out by search overload or decision fatigue.
It’s important to be thoughtful and efficient when you look for a property, structuring your vacation home search around your priorities and how you hope to use your vacation home:
Once you’re clear on your goals, you can make a prioritized list of your needs, wants, and deal breakers. Or, if you’re not yet sure about your goals, your list of needs, wants, and deal breakers can help you better understand your interest in owning a second home vs. an investment property.
Think about the number of bedrooms and bathrooms, square footage, floor plan considerations, and other features that can’t be easily changed. If you're looking for a second home for personal use, it's important to think about what you need to feel comfortable. If you're aiming for an investment property, you might prioritize having extra space to accommodate a larger group of guests.
It’s not a bad idea to start mapping out your financial needs now, too. What’s your budget? How might that budget change if you could offset your mortgage or property taxes with short-term rental income?
By the way, there’s no cause for worry if you’re not sure about these numbers. Few people are at this stage. Talking with an expert vacation home real estate agent can help you understand what’s available in markets you’re interested in, or find a market that would meet your budget and income goals. Together, you can weigh the pros and cons of a second home vs. an investment property.
When you’re looking at a second home vs. a vacation rental investment property, think of your nice-to-haves as the features you may have to compromise on.
Things like views, a chef's kitchen, ample parking, lot size, flexible accessibility, and space for vacation-friendly (and revenue boosting) upgrades, like a hot tub, should be on this list.
Your wants can also include community amenities like beach or pool access; recreational opportunities like golf, skiing, and local attractions; and proximity to restaurants and resorts.
Whether you're buying a second home or an investment property, consider the property's proximity to things you love to do on vacation—since those features will also appeal to your family, friends, and potential guests.
Many vacation homes will have most of the features you want, but this is the part of your list where a prioritized list of your wants will matter most.
What amenities make your home most desirable for you, guests, and even other buyers? (After all, someday you may want to sell or trade up in a 1031 exchange.) What are the nice-to-haves that can be traded away for other benefits?
You might find a home that’s exactly what you’re looking for except for one unavoidable problem: Is there a biker bar on the other side of the fence? Can you hear freight trains or significant road noise from the home? Is there a beautiful pond… that’s always filled with honking geese? Even if the house is otherwise perfect, identifying something that’s a personal deal breaker means it’s time to keep looking.
Also consider the vacation rental climate in the locations you’re searching. There may be some financial factors that reveal unexpected deal breakers:
It can be helpful to consider how much you’re willing to invest in improvements and upgrades, too. Some buyers like the idea of investing in a fixer-upper, and there are some clear pros and cons to doing so—especially if you’re leaning more toward buying a vacation rental investment property.
It’s a good idea to reconcile your list of priorities with those of any other people involved in this purchase, like a spouse, partner, or sibling. It helps to have everyone in agreement and aligned to the same goals. Defining your priorities up front, together, makes it easier to make an objective decision later.
Read more: Finding and optimizing your vacation rental
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*This document is for information and illustrative purposes only. It is not intended to provide “investment advice” or a “recommendation” regarding a course of action. The discussion is general in nature and has not taken into account your personal financial position or objectives. You should consult a licensed financial advisor or other professional to discuss your specific situation.