Profit in Paradise: Owning and Managing a Vacation Property

If you’ve worked hard all your life and been diligent about saving and investing, you might be in a good position to enjoy some of your retirement in a vacation home. It’s a fantastic way to reward yourself for all the determination, patience, common sense and self-denial you practiced over the years so you could reap the benefits when your working days came to an end. A vacation home can pay for itself if you market it effectively and manage it efficiently. And it’s a great legacy to leave your kids after you’re gone. But it’s a major financial decision not to be entered into lightly. Consider carefully a few key questions before making that level of commitment.

How often will you use it?

Think through how you’ll use a vacation property, and how often. If you’re planning to purchase a vacation home in Florida, how often do you anticipate being able to spend time there if you live in New England or the Upper Midwest? It’s easier than it used to be to get affordable air fares to Florida these days, but travel costs should definitely factor into your decision. If distance, cost, health issues or obligations at home will limit the time you can spend there, you might be better off rethinking investing in a vacation property; perhaps renting would make more sense.

How will you finance and use it?

The majority of vacation home buyers finance through a mortgage. If that’s your plan, consider how you’ll manage the cash outlay to make monthly installments. Many buyers rent their property during those times of the year when they can’t be there and use this revenue to pay down their mortgage and make capital improvements to the property. Don’t forget to factor in additional fees and costs, such as homeowner fees, property taxes, and insurance costs, especially if you’re buying in a potential disaster area (i.e. a hurricane/flooding zone), which are typically 20 percent higher for rental properties.


Using a vacation property to generate income can support the financial commitment you make with such an investment. Consider what rental fees you’ll charge and whether or not you will allow pets on the property. Remember that maintenance is a major factor to consider; most out-of-state buyers partner with a property manager or management company to take care of the day-to-day details along with booking and customer service. This is also an added expense as property managers generally charge a fee amounting to between 15 and 30 percent of rental income; our charge has been held steady at 15 percent over the last decade and we intend to keep it that way in the future. When searching for a property manager, determine how many other properties they manage, and how often they’ll be able to conduct inspections of your property, which is key to proper maintenance. It’s also important to consider the amount of time your home will be available; typically long-term rentals don’t generate as much income as those that cater to vacationers instead of “snowbirds.”

Don’t forget the tax man

Talk to an accountant or financial adviser about how your use of a vacation property will impact your tax situation. If your gross income is below $100,000, you can deduct up to $25,000. Remember that you can rent a property tax-free for up to 14 days; the secret to making the most of your deductions is to limit your yearly personal use to fewer than 15 days or less than 10 percent of total rental days, whichever is greater. 

Take careful note of property values and home sales in your desired area to determine the viability of the market there and median home prices. For example, the average listing price for a home in
Cape Coral, Florida is $250,000 and Fort Myers, Florida, is $260,000.

A vacation property can be a lucrative investment and a source of pleasant memories for the entire family. But it takes work and careful management to make it pay dividends. Consult someone with experience owning a vacation property about the financial commitment and the lesser-known challenges of owning a vacation home.

When you’re ready to begin your vacation home search, don’t trust just anyone. Contact Stephan and Sabrina Sanford of European Style Realty. This dynamic duo offers personal service and has nurtured relationships with many local service providers, including mortgage lenders and home inspectors.