Buying a vacation home as your first home (instead of renting) may seem counterintuitive, but hear us out. If you live in a big city or in an area with a very competitive (and pricey) real estate market, you might not be able to afford to buy a primary residence — but you can very likely afford a little getaway home for sale in Fort Lauderdale, FL, or someplace else where you’d like to have a retreat. Trulia’s rent vs. buy calculator is a great way to weigh the pros and cons of buying in your city. And if the numbers don’t work out in favor of buying, consider this: Instead of doling out dough every year to rent a home near the beach, you could own a condo in the same area.
“The idea of buying a vacation home as a first real estate purchase and renting a primary home may not seem intuitive to most people, but upon closer inspection, it can definitely make financial sense,” says Michael Comandini of the Comandini-Chowdhury Team in New York, NY. For many in large metros, it may be difficult to buy a home that’s convenient to where you work and want to live because of skyrocketing home prices and high property taxes — so renting makes more sense. Yet it can be nice to own a vacation home in an affordable area you know, love, and visit regularly.
Although definitely an untraditional route, buying a vacation home as your first home can be a smart real estate move for some people. Read on to decide if you’re one of them.
Should I rent or buy?
The real estate market is thriving, and in many markets, low inventory has made the competition to buy a home even fiercer. But once you trade asphalt for grass, things start to calm down. Prices are shockingly affordable in smaller U.S. towns, and whether you’re looking for a home that’s a two-hour drive or a two-hour flight away, you’ll likely find that you can get more for your money. This isn’t to say that all rural areas are alike — on the contrary, there are plenty of country towns in states like Connecticut and Vermont where the market is a challenge, but by and large, prices become more reasonable the farther you travel from big-name cities. And the property taxes do too.
Do I need a 20% down payment to buy a vacation home?
Not necessarily. Another barrier to entry in a strong housing market is the down payment. Expensive homes require more money upfront, and to compete, you sometimes need to cough up more than the standard 20% down payment — especially when all-cash deals are becoming more and more commonplace. Once you’re looking at properties in the very low six figures, however, that huge initial output suddenly goes away, with loan options that might knock that figure down even further.
What about home-buying stress?
Low inventory, standing-room-only open houses, blink-and-you’ll-miss-them properties that go under contract in just hours, overseas all-cash buyers who make buying a first home even more of a challenge — it can be enough to make you throw up your hands and choose to rent forever. But all that goes away once you start looking in less-competitive areas. With fewer buyers vying for the same homes, properties stay on the market longer, bidding wars are virtually nonexistent, and it’s the rare seller who isn’t willing to negotiate.
Vacation planning: Done
There’s nothing worse than spending another weekend in your cramped apartment while all your acquaintances post yet another round of envy-inducing vacation snapshots on social media. Buy a vacation home, though, and you suddenly have an endless number of getaways stretching out in front of you. Getting out of town is cathartic no matter where you end up, and being able to relax in a space that’s all yours, without the hassles that come with hotels (tipping, parking, other guests), is almost meditative. Plus, you’re already paying for it, so there’s no additional cost, especially if you end up cooking at home.
Can I rent my vacation home?
If you’re concerned about juggling the costs of your primary residence and the upkeep and furnishings for a vacation home you own, consider this: Some of those costs could be alleviated by renting out your second home as a vacation property to others. “The potential of earning income on the days that you aren’t using the property, which would realistically be most of the year, while also taking advantage of property appreciation, can turn an expensive lifestyle into a solid asset,” says Comandini.
Be savvy about where you purchase by checking out some nearby vacation rental listings and by researching nearby activities. Does your place have four-season appeal? Is it near a celebrated museum or landmark? If you’re still unsure, think about buying in a college town. That way, you can rent out your property for the length of the school year to a grad student or visiting professor and still enjoy the spoils for the summer months, when you’re most likely to be there anyway.
Bonus: A vacation home can be your new social hub
Not everyone wants to buy a vacation home, but no one turns down the chance to visit someone else’s. Investing in a second home guarantees a regular rotation of houseguests grateful for the opportunity to get away and spend quality time with friends in a relaxed environment. People you haven’t seen in months will suddenly be vying for an invite, especially those with young kids who find it hard to travel. And when the big holidays roll around, you actually have the opportunity to invite your family to travel to you. (The hostess gifts aren’t bad either.)