Are vacation rentals a good investment?

Yes, they can be. Investing in a vacation rental can pay off in more ways than one, in both the short and long term. While you may be initially drawn to visions of family vacations on the lake or escaping to your slopeside cabin during ski season, a good investment decision comes down to this: Will an investment home result in healthy financial returns? Buying a vacation home as an investment has the potential to deliver ample perks that can boost your bottom line, both immediately and in the future.

Read on to find out more, or contact us and we'll talk you through it.

Why are vacation rentals a good investment?

You can get more R&R (reservations and rental income, that is)

The biggest advantage of investing in vacation rental properties? The opportunity for extra income and revenue stream. Vacation rental websites such as Vrbo, Airbnb, and Booking.com attract legions of travelers seeking authentic local experiences and roomier accommodations. Investing in the right vacation property has potential to bring healthy profits, especially when you purchase in a popular vacation destination and upgrade the property with income-boosting amenities (think hot tubs, custom interior design, etc.). The income you make from reservations can help offset mortgage payments and other expenses, including insurance and property tax. We suggest working with a real estate agent who’s an expert in both vacation rentals and the local market to help you find a vacation rental property that can produce a great cap rate.

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You may have a future retirement home or a sizable nest egg

Investing in a vacation home is a way of putting stakes down for your future. It can be a smart strategy that ensures a healthy financial foundation for you and your family down the road, no matter how close (or far) your retirement is. Real estate values tend to increase over time, especially in in-demand travel destinations. You may be fortunate enough to find that by the time you reach retirement age, your vacation home’s value is up and your mortgage payments are down (or completely paid off). At that time, you can kick back and enjoy the retirement you’ve hustled hard for. Or, there’s the option to sell, then use the earnings to fund your living costs, healthcare, travel and more.


You could see steadily soaring home values in top vacation destinations

When you invest in the right vacation rental in the right place, it’s possible you’ll see a significant increase in value and equity over time. Compared to residential real estate, vacation rental properties can increase fairly rapidly.* Before making the investment, work with a savvy real estate agent to review past and current trends in the destination you’re hoping to buy in. What’s happening to home values in that location? What about the home values in nearby areas? Then, invest in upgrades and improvements to push up its market value even further. These modifications can attract more guests and result in more compelling reviews.

stylish living room of Saugatuck, MI vacation home

You get tax write-offs

A vacation rental investment is much like your primary residence. You may write off expenses related to mortgage payments, property taxes, rental income, insurance premiums, and so on. But, how you use your investment property, and how often you use it, can impact what expenses you deduct.

For instance, if you rent out your second home for more than 14 days a year, you may be eligible to write off some, or all, of your rental expenses. We recommend reaching out to a CPA to help you understand the vacation rental investment tax codes and tax laws for your state and your situation.

Get the scoop on vacation rental taxes >


You have your very own place to get away

Want a multitasking investment that makes you money and memories? A vacation home can do both. Invite the family over for a long weekend. Host the next group ski trip. Escape for a romantic getaway. If you want to maximize your revenue potential, you can rent out your vacation rental investment property for the entire busy season and make personal visits only when demand is slow. Whether you want to unwind or entertain, it’s up to you. If you partner with a vacation rental management company, make sure they give you the flexibility to stay whenever you’d like, and for however long you’d like, without restriction.


Want to maximize your profit potential when investing in vacation rentals or need help navigating your options? We’re here to help.

Read our tips for investing in vacation rental properties >

Vacation rental investment FAQ

Most often, mountain towns, lakeside communities, and coastal destinations deliver more vacation rental ROI since they draw visitors year-round. When scouring for the right property, consider how much the location and its weather and amenities will appeal to guests. The more appealing a destination, the higher your earning potential can be.

Explore the top 25 places to buy a vacation home >

According to the National Association of Realtors’ 2017 Investment & Vacation Home Buyer’s Survey, 64% of vacation rental investment buyers and 72% of vacation home buyers funded their second home purchases with some sort of funding. Lending options can include a home equity line of credit (HELOC), an investment property loan, a conventional loan, or refinancing your primary home and cashing out on the equity.

How to finance your future vacation home >

Successfully managing a vacation rental comes with a tangle of responsibilities: marketing, home repairs and maintenance, housekeeping, and even setting the best rates based on future demand, season, events, etc. The best vacation rental company will take care of every detail imaginable and actively work to protect your investment and make you a healthy profit, while saving you precious time.

Hire the right vacation rental property manager >

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Vacasa offers property management and other real estate services directly through Vacasa LLC and through Vacasa LLC's licensed subsidiaries. Click here for more information about Vacasa's licensed real estate brokerage/property manager in your state. Vacasa’s licensed real estate brokerages/property managers include: Vacasa Alabama LLC; Vacasa Arizona LLC; Vacasa Delaware LLC, 302-541-8999; Vacasa Florida LLC; Vacasa Louisiana L.L.C. (licensed in Louisiana); Vacasa Michigan LLC, 947-800-5979; Vacasa Nevada LLC; Vacasa New Hampshire LLC, P.O. Box 283, Conway NH 03818, Dave Grant, Broker of Record; Vacasa New Mexico LLC, 503-345-9399; Vacasa New York LLC, 888-433-0068, Susan E. Scanlon, Real Estate Broker; Vacasa North Carolina LLC; Vacasa Pennsylvania LLC; Vacasa Real Estate Corporation, California DRE #02105811, Joseph Czapkowicz, California DRE #01380722; Vacasa Real Estate LLC (licensed in Colorado, Daned Kirkham); Vacasa Real Estate LLC (licensed in Idaho, Oregon, and Utah); Vacasa Real Estate LLC (licensed in Tennessee, 615-671-9916); Vacasa Real Estate LLC (licensed in Washington, Robert Brush, Designated Broker); Vacasa South Carolina LLC; Vacasa Tennessee LLC; Vacasa Vacation Rentals of Hawaii LLC, 3350 Lower Honoapiilani Road, Suite 600, Lahaina, HI 96761; Vacasa Vacation Rentals of Montana LLC, Patrice Tompkins, Licensed Property Manager; Vacasa Virginia LLC; Vacasa Wisconsin LLC; Vacasa Wyoming LLC. In Canada, this advertisement is provided by Vacasa Canada ULC, CPBC lic. number 75826, 172 Asher Rd. V1X 3H6 Kelowna, BC.

* Source: Investopedia

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.

The ability to rent out a vacation rental property is subject to local market regulations and restrictions.