Renting vs. Buying a Vacation Home

Good Morning Relaxing Retirement Member,

It’s that time of year again! It gets dark at 5:00 p.m. It’s chilly in the morning. And, you can sense another New England winter right around the corner.

As is the case every year, I’ve begun to have discussions with a few Relaxing Retirement members about the prospects of buying a second home in a warmer climate vs. renting one.

Each of them came to me with the same questions, so I thought I’d provide you with the same “rational” checklist I shared with them to help them evaluate and arrive at a rational conclusion based on their individual desires.

This is one of those big decisions that is extremely hard to de-emotionalize yourself from, so it’s very important to take a rational step back to look at the big picture first.

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.

Questions To Ask Yourself

  1. The first big question you want to ask yourself is how many days in a year can you really see yourself being at the second home? If the answer is two weeks, you know which option you should choose. Rent!
  2. Do you have family members or friends who would take advantage of it and utilize it when you were not there? (Another justification for owning)
  3. How long can you see yourself owning it? How many more years can you see yourself traveling to this location on a regular basis? 5 years…10 years…20 years?
  4. Who will maintain the property while you’re not there? Is it part of a condominium complex where a service is available for the fee you pay?
  5. Lastly, are you going to rent it out while you’re not there? If so, do you want to be a long distance landlord? The big downside of this is that the time of the year you want to be there, i.e. winter months, is exactly when someone would want to rent it from you. There’s not much of a market for renters in Florida or Arizona in July!

Ditto for renters on the Cape in January and February!

Many times, if you take a step back and rationally answer these simple questions, you can determine the best option for yourself.

Advantages of Owning

  • You expect to be in the second home for an absolute minimum of four months per year and want it to be “your” home

  • Freedom and Control: You can come and go as you please with no limitations, and leave belongings behind such as clothing and a car
  • Family and friends can use it for their vacations while you’re not there, or you can host family and friends
  • Locking in the price of a home, especially at depressed prices.
  • Income Taxes: if you’re going to live there for more than six months, you may establish residency there and potentially reduce your state income taxes, i.e. in Florida, there are no state income taxes.
  • Real estate appreciation: Although I don’t recommend treating it as an investment, owning an appreciating asset is always a plus (of course making the ‘assumption’ that your property will increase in value over time)
  • Pride of ownership

Disadvantages of Owning

  • Costs: you’re responsible for any condo fee, real estate taxes, insurance, utilities, maintenance, and upkeep
  • Lack of control over rising real estate taxes: Over the last six years, this has become a challenge with second home buyers in Florida for whom this in not their primary residence. Unfortunately, you have no control over your town’s evaluation of your property. They have the power to increase your property taxes.
  • Lack of control over rising condo fees (assuming for a moment that you live in a condo). The association controls this. You want to speak with other members about their experience with the association.
  • Having to care and maintain the property from a long distance
  • Being caught in a buyer’s market when you want or need to sell

Take a moment to write down your thoughts on each of these, and the questions above.

Advantages of Renting

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.

  • 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 very 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 in the beginning.

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.

Committed To Your Relaxing Retirement,

Jack Phelps
The Retirement Coach

P.S.: WHO do you know who could benefit from receiving my Retirement Coach “Strategy of the Week”? Please simply provide their name and email address to us at Or they can subscribe at I appreciate the trust you place in me. Thank you! (The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)