How to buy a vacation home

Key takeaways

• Financing, insurance and local regulations — especially around short‑term rentals — for vacation homes can differ significantly, so buyers should research rules, homeowner association policies and lending requirements before making an offer.
• Homes in desirable, well-connected areas tend to rent more easily, while distance from attractions or weak internet can hurt demand. Hiring a property manager can save time for long‑distance owners but typically costs 10% to 30% of rental income.
• Beyond the mortgage, buyers should plan for insurance, taxes, maintenance, utilities, HOA fees and unexpected repairs. Sticking to a realistic budget and maintaining a reserve fund can help prevent financial strain.

Buying a vacation home — especially one you plan to rent out — differs significantly from purchasing a primary residence. Financing requirements may be stricter, and lenders often view second homes and investment properties differently.

Before you start shopping, do thorough research and work with a local real estate agent who understands the market and the rules governing vacation properties.

Here are key factors to consider:

Be upfront with your agent about how you plan to use the property — whether as a short-term rental, a personal retreat or a home that will sit vacant for long stretches. That context helps your agent steer you away from properties that won’t meet your goals.

Red flags to look for include:

• Some homeowners associations prohibit short-term rentals.
• Cities and towns may impose restrictions or bans on vacation rentals.
• Buying without understanding these rules could leave you with a property you can’t legally rent.

If your vacation home is far from your primary residence, hiring a property manager may make sense.

Owning a short-term rental involves more than collecting rent. Responsibilities can include:

• Marketing the property
• Screening guests
• Cleaning and restocking between stays
• Handling repairs and maintenance

Property managers save time — but not money. Fees typically range from 10% to 30% of rental income, depending on services and location.

If rental income is part of your plan, location matters. Renters will pay a premium for the right property. Here's what they consider:

• Homes close to major attractions — beaches, ski slopes or downtown areas — tend to rent more easily.
• Distance from amenities or unreliable Wi‑Fi can hurt demand.

Long-term value matters, too. Buying in an area with rising home prices can improve resale prospects.
Review comparable sales and rentals with your agent and look for features that appeal to vacationers. If the home isn’t walkable to attractions, amenities like a private pool or outdoor space can help offset that drawback.

Spend time in the area before making an offer.

Take a trip, explore the neighborhood and learn about local attractions, dining and entertainment. This firsthand experience can help you decide where to buy — and later help you market the property if you rent it out.

Set a firm budget before you begin your search, and don’t let emotions push you past it.

When calculating costs, factor in more than the mortgage payment:

• Insurance, including flood or hurricane coverage if applicable
• Property taxes
• Utilities and maintenance
• Repairs and replacement of worn or missing items

It’s also wise to maintain a reserve fund for unexpected expenses.

Don’t buy a vacation home that stretches your finances.

Homes intended for rental use often come with different financing and tax considerations. Investment properties may require:

• Larger down payments
• Higher interest rates

Talk with your real estate agent and financial adviser about how you plan to use the home and the best way to finance it. Beyond the mortgage, budget for:

• Utilities
• Landscaping
• Cleaning and upkeep
• Property taxes
• HOA fees, if the home is in a managed community

For buyers looking beyond traditional hotspots, lesser-known vacation destinations can offer charm and affordability. Keep in mind that if rental income is a priority, more popular locations may be easier to market.

Still, for a one-of-a-kind retreat, these destinations stand out:

• Kingfield, Maine: Wooded and peaceful, near Sugarloaf Resort.
• Corpus Christi, Texas: A laid-back beach town on the Gulf of Mexico.
• Chattanooga, Tennessee: Known for mountain hiking, caves and outdoor recreation.
• Stroudsburg, Pennsylvania: A small-town destination in the Poconos.
• Greybull, Wyoming: A town of fewer than 2,000, surrounded by wide-open landscapes.
• Petersburg, Alaska: Fishing villages, mountain views and abundant wildlife.
• Ocean Springs, Mississippi: An artsy beach town with roots dating to 1669.
• Klamath Falls, Oregon: Close to Crater Lake, Mount Shasta and Lava Beds National Monument.
• Fort Dodge, Iowa: Popular for tubing and access to nearby state parks.
• Alamogordo, New Mexico: Near White Sands National Monument and its expansive gypsum dunes.

 This story was updated April 29.