Why Buying a Vacation Home is Not a Good Investment

by on July 3, 2012

About five years ago my wife and I bought a vacation home.  It is a nice little house on a beautiful lake in Central Wisconsin.  When we decided to start shopping for a home on this lake, I ran some numbers to figure out if buying a property of this type would be worth it in the long run.  After all, you get to use it all the time and it should only increase in value over the years.  I mean, they’re not making any more lakes right?

Well, five years later I can tell you that I made the wrong decision.  While I love the house, here are the reasons why buying a vacation home is not always a good investment.

The price doesn’t always appreciate.  When we bought our vacation home, we assumed the price would continue to appreciate over the years.  While it’s true that the house is worth more today, that’s because we sunk in a lot of money to fix it up.  And during a weak housing market, vacation properties are the worst to sell.  When you really need to sell them there are no buyers.  Of the 700 plus homes on the lake, over 150 are for sale.  During the first half of this year, less than five have sold.  Instead of rising in value, our vacation property declined and continues to decline in value.

This is the inside of our lakehouse

We assumed DIY would add value.  Another assumption that we made was to treat the house as a fixer upper.  Almost like a flip this house type of fixxer upper.  We figured that by doing a lot of the fixing up, demolition, and remodeling work ourselves, that we would save a lot of money and that we would be rewarded for our work with more equity in the house.  While we did save money versus having our contractor do all the work, our theory didn’t hold up.  Contractor bills were still very high and the cost we put into the house, because of weak housing prices, has been mostly lost already.

The taxes keep rising.  I don’t know if this is happening everywhere in the country or just Wisconsin, but our property taxes have more than doubled since we purchased the vacation home.  When we bought it for $30,000 less than the assessed value thinking the taxes would go down.  They actually raised the assessed value even higher the year after we bought it.  Then, for each building permit we applied for, they raised the value of the home by at least twice the amount of the work we had done.  According to the assessors, which are a husband and wife team that are completely incompetent, your home value has nothing to do with “how much you paid for it” or for “what you put into it”.  Even the last year, when housing prices fell another 25%, the assessed value and the mill rate continued to climb.  In just over four years, our property taxes have doubled.  The monly property tax is now about 70% of our mortgage!  I don’t know of too many investments that can be profitable when you have costs that rise this fast.  Wisconsin property taxes are a joke!

The monthly expenses keep rising.  Not only did property taxes keep rising, but the cost of energy also shot up.  So did the cost of insurance.  And the price it costs to pump the holding tank has climbed by a whopping 60%.  And when one of the marinas went out of business, the other marina suddenly raised their prices too!  These are all expenses we accounted for in our initial decision to buy but they have all climbed by so much that we were just plain wrong.

The small costs can really add up.  It’s not just the big utility and insurance bills that cost a lot.  It’s all the little things too.  Like buying salt for the filtration system.  At $6 a bag and a bag a week it can really add up.  Other maintenace costs and things like weed killer and cleaning supplies also add up fast.  The small costs make up much more of the overall costs than you’d think.  Especially when you first buy a vacation home and you need to furnish it.

They are nearly impossible to rent out.  If you live in a development that is very popular and has its own rental company then it may be possible to rent your vacation home to pay for some of your costs.  If you buy a vacation home like ours, you’re pretty much out of luck.  Our county laws state that weekly or weekend rentals are illegal, and the neighbors in the area make sure and enforce this law.  I’ve listed our house on sites like postlets, trulia and craigslist and never had a legitmate lead to rent it.  I would gladly lease it out for a year or more but there is no easy way to do that either.  Vacation rental websites charge hundreds of dollars to list and don’t deliver, at least in my opinion, and for my vacation home.

In summary, you are paying a lot more each month than the house is appreciating.  This is really the definition of a bad investment right?  You are spending more money than you earn.  Well, we expected our vacation propert to rise in value by a few percent a year.  If it did, it would rise faster than the cost to own it.  What we found out was that our vacation property fell in value by a lot, and that the cost of ownership was over double what we had expected.  Unfortunately, we’ll be stuck with it for a while longer, until the housing market recovers and then the vacation housing market starts to cover.  In our case, investing in a vacation property was a bad idea!

UPDATE: A Lot Has Changed Since I Originally Wrote This

Since I wrote this article, I have taken a few steps to help my family recover from the vacation property expenses.  First off, I contacted the assessor and pleaded my case to him.  Although he couldn’t change my tax assessment for the current year, he was able to re-assess the property earlier this year and reduced the assessed value by about 20%.  This should save me close to 20% on the ridiculously high Wisconsin property taxes.

Also, the housing market has come back and houses in my neighborhood near Madison have been selling quickly and starting to go back up in value.  Although this hasn’t caught on yet for second homes and vacation homes, it is a good sign that they will start rising in the future.  Although this doesn’t help my monthly cash flow problems, the thought of getting some capital appreciation back makes paying all the monthly expenses a little more worth it.

And finally, I rented out the home this summer and made enough to pay my property taxes.  I used VRBO.com to list our vacation rental.  It was very scary to let total strangers use the house, and many of them lied about the number of tenants.  I also spent dozens of hours writing the rental agreement, preparing rules and other rental information, and even more hours corresponding with potential renters.  In addition, my wife and I had to travel 3 hours round trip almost every week to spend 5-7 hours cleaning, laundering, removing garbage and mowing the yard.  The time commitment was larger than you’d think and during that whole time we didn’t get a chance to stay there until we stopped renting it out and saved three weekends for ourselves.  Overall, it was a lot of work and I’m not sure what I’ll do next year, but will probably have to rent it out at least a few times to help cover the property taxes again.

If anyone has any questions about renting out vacation homes drop me a comment and I can probably help answer them.

And if you’ve had a similar experience or have any other constructive comments about buying, renting or investing in a vacation property, please leave us a comment below.

{ 48 comments… read them below or add one }

AverageJoe July 4, 2012 at 6:41 am

Lovin’ your tax assessors. A friend of mine was doing some work on his house. He got the necessary permits and started construction (garage). The next day a guy with a clipboard was standing at the door. Guess who it was? Mark asked him, “Couldn’t you wait until I was finished?”
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george saints July 5, 2012 at 4:16 am

Agree, not a good investment. You could have find a place where people would want to buy a house in the upcoming years. For sure, you’ll get good rates by then. I run on some blogs regarding on Wisconsin housing, and they are not really getting any higher than that. Good analysis chris.
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Amy Turner July 5, 2012 at 6:46 am

It’s one hell of a time, I suppose you got the real timing wrong. You can’t even sell it without losing maybe, half of what you already spent for the house and improvements. Tough luck and one great dilemma.
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Jake July 5, 2012 at 1:57 pm

I think the key take-away that homeowners should recognize is that housing is not an investment vehicle. While yes, it is possible to make money in real estate, it extremely risky in today’s market.


Bay Shore Systems July 15, 2012 at 6:28 am

I think that it is because of today’s market that is why it resulted to this kind of situation. I think that the financial crisis that happened last 2008 still had an effect today. If that hadn’t happened I think the situation would be a lot different.


Andrei July 18, 2012 at 6:50 am

Agreed. It’s better if we just rent a room, a house or live in a hotel when taking a vacation. For me, renting in different hotels, lodging houses any rooms for rent would be a new experience compared to just taking a vacation in the same vacation house.


mari July 31, 2012 at 5:34 am

If your going to sell your property right now then I would say you will lose money so it is not wise to sell right now but it’s always good to buy a vacation home if you love the lifestyle ans I agree let the contractors do the job because they are experts!
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Mike Matney September 18, 2012 at 7:22 am

It\\\’s a shame you\\\’ve had such a difficult time. While every situation is different, I do believe that most times, it is difficult to get your money\\\’s worth from a vacation home. I hope things get better for you with the home, so you can end up benefiting more from it.


logement a louer September 29, 2012 at 3:00 pm

You can see that the author is very dissatisfied with himself, and that he is trying to warn us. From this little piece of text we get to learn a lot. Many of us want to have a vacation home and this is great. But as we can see here, this could actually go horribly wrong and we might end up on the losing end. It is great that the author has taken time in presenting us to the drawbacks in detail, because many of us would otherwise go to the losing side as well if not careful.


Michael Stew October 3, 2012 at 12:39 pm

Since the housing bubble has burst already, it seems irrational to buy any property that you wouldn’t really be using full-time. Besides, people need to cut on unnecessary expenses anyway. Maybe it’s time that “stay-cations” came back in vogue.
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Dan October 23, 2012 at 9:53 am

I agree, it’s not a good investment. Even if you don’t intend to sell it in the future, it’s not worth buying one. A vacation house is not really necessary, you can rent by the way. It could sometimes cost you a lot on maintenance.
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Surminga October 24, 2012 at 2:58 pm

Many people dont buy a holiday home with a view to quickly selling. My parents had a lovely vacation cottage which needed some work done, at weekends and holidays we’d spend time as a family doing it up and fixing things so we are now all older and can still use it with our own families.
Vacation homes are for the enjoyment rather than a business opportunity
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townhomes for rent November 8, 2012 at 4:47 am

I don’t know of an excessive amount of financings that could be beneficial when you have prices that ascent this quick. Wisconsin property expenses are a joke!


Quick House Sale December 6, 2012 at 5:44 am

Vacation property can really ascend quickly but can then descend just as quickly, its a tough decision to decide what home to buy.


Repossession Information December 6, 2012 at 5:50 am

It’s important to remember with this author that there is a good chance they have personally had a bad experience with vacation property. This article highlights only the negatives there are positives of buying a vacation holiday.


Property buyers December 11, 2012 at 9:26 am

Its a shame that you had bad luck with your property, it can be a real hit and miss with over seas property, can either go really well and you make a profit or the other way and you can make a district loss


Edmonton Real Estate December 20, 2012 at 12:40 am

I found this post very informative and helpful as I am planning to buy a vacation home from past few years and I have even make a visit to many such houses but yet I haven’t finalize any. After reading this post, I am really thinking that it is better to invest on something else rather than on vacation home.


andrew calwert January 7, 2013 at 5:46 am

I think this is happened because of lowering in property value.I don’t get it that why should you want to sell your property if i have it i’ll never sell it.It’s just like dream place for me the home on lake.


Basement for rent January 10, 2013 at 11:50 pm

I believe the property manager decide that will home-owners should acknowledge is that will property homes for rent Whilst sure, you possibly can generate profits within real estate property.
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Letting Agents Liverpool January 11, 2013 at 5:28 am

I agree with the advice in this article, although its a nice feeling to own a holiday/vaction home, the upkeep costs are really high and is something everyone needs to take into account if they are looking to purchase a holiday/vacation home.


short sales January 17, 2013 at 12:58 pm

Look for a place where time will come people will surely live. You have to study the location and make a strategy first before acquiring properties.


Timothy January 22, 2013 at 10:02 pm

I agree! Oftentimes it is better to rent for properties rather than buying one and then loosing the value of it. Remember that over spending is never a good thing.


Jan January 26, 2013 at 7:08 pm

Now that is something that I will be keeping in mind. Before I came across your post, I’ve been dreaming of owning a vacation home 10 years from now. I changed my mind though. I would have been investing in something which is not just worth it. For vacations, just go someplace else. 🙂
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conveyancers sydney April 15, 2013 at 12:31 am

Yest I agree Its a shame that you had bad luck with your property, it can be a real hit and miss with over seas property, can either go really well and you make a profit or the other way and you can make a district loss
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franky April 29, 2013 at 9:19 am

Omg! I was planning to buy a vacation house but stumble to read upon this blog. But, maybe this only happen in Wisconsin right? Well anyways, investing has its own risk and in how I see it this is one tragic investment, but maybe in another 5 more years to come you will double up, might not know the answer whether your losing or your earning.
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Mike June 19, 2013 at 3:07 am

Buying a vacation home is not a need but a want. If you want a recurring income then you can purchase one but make sure that the location is good, accessible, and with good amenities. But for me personally there is a big risk buying one.


Max Dorji July 7, 2013 at 1:58 pm

I read your post carefully and other comments as well, I also think that whatever happened with you was very bad. But, I still feel that not necessary it might happen with every person. I really appreciate that you shared your experience with us and linked a detailed info to save our investments. Keep up the good work!!!


Max Dorji July 11, 2013 at 11:54 pm

Investment means to think first and then step ahead! I think if a person needs a regular income, then idea of purchasing a vacation home is certainly a fantastic idea. But if you just want buy home for spending vacations with your friends and family, then rental apartments or hotels are much better option. Your post is quite informative for those who have big families and who organize big gatherings on regular intervals.


Max Dorji July 18, 2013 at 5:12 am

Vocational apartments can be good to some extent, but this idea cannot be viable for everyone. As you want to purchase an apartment, just to spend holidays, well, certainly this idea is quite costly. But, if you use it for other purposes like giving on rent, then it has worth enough. Of course then it is a feasible choice to invest because your two purpose will be solved. One of your spending vocation and secondly, after spending holidays you can give it on rent so that your apartment stays clean and your investment can be utilized well.


Atlanta Realtor July 24, 2013 at 3:02 pm

purchasing a vacation home is certainly a fantastic idea. but it is not possible for every one. but who have ability they can purchase a vocational apartment, by this they can spent their vocatio and give them on rent after vocation.


Ian Harvey July 26, 2013 at 4:45 pm

Buying a vacation home is not a good idea at all. But I guess we can`t stop people for doing this. Some people really love to waste money and showoff. lol


Charls Wastten August 1, 2013 at 6:29 am

Investment can be possible in many ways and real estate investment is one of the most profitable and safe way.


Ben Lang August 9, 2013 at 2:15 am

I agree to what you say… and sorry about what happened to you… they indeed aren’t a good investment… unless you are buying them for yourself and not as an investment property.
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Verna August 21, 2013 at 8:04 am

Maybe not all people would think of like you. I feel sorry for you, but i believe everything happens for a reason. 😀


Donald Quixote August 28, 2013 at 5:19 pm

I would agree with the article, a vacation home is an expenditure and not an asset….if you feel like having it is worth it to you then go ahead and purchase it, but I generally would not consider it an investment but rather a luxury.


Primo Mortgage September 2, 2013 at 4:27 pm

Good stuff Chris! Yeah, the expenses are surging on almost everything. Wisconsin may be high in taxes, but Westchester county NY (Lincolndale, Somers) is even worse – taxes are 20k per year on a homes worth 500-800k+, crazy.

Investing in real estate is getting more and more challenging, but love it anyway.
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Richard Thompson from Hotels In Stamford September 18, 2013 at 4:28 pm

It’s good that you added an update section, because things have really changed in the past couple years. I think that vacation homes can actually be an investment though, it just looks like that time wasn’t a good one for real estate investments. I think some areas like the Outer Banks in North Carolina would probably be a safer bet for vacation homes as an investment, simply because almost everyone on the east coast goes there (or so it seems, with all the OBX bumper stickers everywhere). Great article though, and hope all has worked out financially for you and your family!


Jordan September 30, 2013 at 4:34 am

It is good to buy a vacation house but not really for investment. I definitely agree with this. Definitely the price of this doesn’t appreciate and there would be a big maintenance for this vacation house. Thanks for sharing your thoughts about this. It is indeed very helpful and useful. I really appreciate this..
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alex sheen September 30, 2013 at 7:47 am

Professional apartments may be good to some extent, but this concept can’t be viable for everybody. Well, certainly this notion is quite costly, while you wish to obtain an apartment, just to spend vacations. But, if you use it for other purposes like giving on lease, then it has worth enough. No wonders, it will be a viable choice because your two motives will going to be solved at a time. One of your spending vocation and secondly, after spending vacations you can give it on rent which means that your apartment stays clean and your investment can be used well.


alex sheen October 3, 2013 at 7:26 am

After reading your post, i can say one thing that what eve happende with yoou was really bad. But, I still I still think that i is not at all necessary that anyone else face the same situation, the way you did. it might happen with every person. Well, I muist say that it is commendable that you shared your experience with us and linked a detailed info to save our investments. Do keep up the good work !!!


Paul October 5, 2013 at 1:32 pm

One problem with vacation property is that it IS just that…vacation property. That means you are not there all the time. If something goes wrong, like a plumbing or roof leak, you could be tens of thousands of dollars of damage behind. So you really need to ensure your insurance will cover it. A problem with renting your property out, or even letting another family member use it is that they may not be familiar with the environment and conditions. If your property is in a rural area, and has septic and well, damage could occur.

Not to say second property investments are always a poor choice, but you need to walk into them with your eyes open. Like they say, you make your money in real estate by purchasing wisely.


Jason Harrison October 17, 2013 at 1:50 pm

vacation properties are very hard to keep and maintain, but are desired by most people. This article helped me decide if a vacation home is right for me, and it definitely is not. One thing that I think is overlooked by this article is that vacation homes are for luxurious purposes, and not exactly an investment. But most people don’t have the money to buy big luxuries like this, so they try to use it as an investment.
Best Regards,
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Donald Quixote from Tradewind Investments November 22, 2013 at 5:08 pm

Keeping up a vacation home can be super pricey. With the economy in the state that it is, it’s impossible to sell a vacation home right now because people just don’t have the money to buy another house. They can barely afford the house they live in. Once the nation is able to get back on its feet with the economy, I think vacation homes will be a lot more valuable and easier to sell.


Bill Marshall January 3, 2014 at 9:53 pm


Buying a home that could give you regular, additional income is not bad at all. Additionally, if the property you buy is located in a premier real estate spot is always a wise move.
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Alex Vercheski February 13, 2014 at 2:12 pm

What I really like is your update. At the downtime of the market, a ton of people with vacation homes were in the same boat as you were, and the fear was everywhere. However, the market has come back and is continuing to rise. Buying a home, even a flip house, can sometimes turn into a long term investment, but if your smart, and hold it for long enough, the payoff can be generous.


Cabins March 27, 2014 at 8:39 pm

Looking at another aspect of it, vacation home might be a good investment depending on its location. But, before you decide to buy you have to think first of its long term use. We all know that home maintenance is a must to keep the house in good conditions, but there are things that can be done which you do not need to spend more. Well, thanks for sharing your insights about home vacations. This is indeed a great read.


Rob Ohs June 26, 2015 at 2:16 am

The prices are rising on a daily basis and the value of currency is decreasing with time.

If we had bought a home ten years ago at let’s say $50,000 and the current value of that place is $80,000. It might seem like a profit to you, but you need to understand that the prices of daily commodities is also rising.

Thank you so much for this article!
Keep ’em coming!
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Carol Martin June 26, 2015 at 2:26 am

Great article!

It is a descriptive article and explains nicely about the small factors that affect a vacation home in the long run. I believed that buying a vacation home is always a good investment as you do not need to work too much on it and the prices keep increasing with time.

But, didn’t take into account the small bills that pile up for improving it and keeping it maintained.

Again, good post.
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