Should You Buy or Rent a Vacation Home? – Part II
In our previous blog entry, we discussed the pros and cons of buying a vacation home.
This came about because of all the inquiries I receive right around this time of year about purchasing down South or out West.
The big question always centers around buying vs. renting. And, because there are so many factors involved, there is no correct ‘rule of thumb’ answer.
Let’s now weigh the advantages and disadvantage of renting a vacation home. When we’re done, we’ll pull it all together so you can make an educated decision that you can be comfortable with.
Advantages of Renting
- No large sum of out-of-pocket cost to purchase
- No costs other than rent
- You’re not locked into one destination each year
- You have no other responsibilities other than paying the rent and preventing damage to the property while you’re there
- As needs, desires, priorities, and life circumstances change, you have the flexibility to change plans without having to sell
Disadvantages of Renting
- No control over future rent increases (could get priced out of the location you desire)
- No equity buildup if prices of real estate increase
- Must live by the owner’s rules (i.e. no pets, etc.)
- Unless you drive to the destination, you may have to rent a car which is extremely expensive
As you can see, there are strong advantages and disadvantages to each. Much of it comes down to your answers to the initial questions I posed last week.
For instance, if you plan to be in your vacation spot four months per year, you’ve been to this location before and you know you like it, you have family who will also utilize it, and you have friends who live in the same community, ownership is clearly the way to go given the choice.
However, we find that renting works for many of our Relaxing Retirement members, too.
Several of them rent for two weeks to as many as four months and get great benefit and value from doing it. It suits their unique situation.
The all important initial step is to de-emotionalize yourself from the situation so that you can calmly and accurately make a decision that is based fact, not emotion and opinion. (i.e. try not to make a decision “if” you want to own property when you’re sitting in the middle of a real estate sales presentation at the newest condominium complex in a town you’ve been to once in your life!)
Your emotions are too high at that point. You want to treat this just like all of your other financial decisions, as part of a carefully thought out plan, not an isolated decision in a vacuum.
Visualize the next 20 years of your life. Can you vividly see yourself living a good portion of your life in this location? That’s the real test.
If you’re seriously thinking about buying, my recommendation is to rent initially for an extended period of time (minimum of four weeks), so that you can get the feeling for what it is like to actually “live” in this location as opposed to “vacation” in this location.
Then you can make a rational decision that you can be happy with for many years to come.