Why Buying a Vacation Home May Be Easier Than You Think
Written by
Jordan Rosenfeld
Edited by
Jenna Klaverweiden
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If your notion of a vacation home is a fancy villa in Italy, purchasing one might be a bit out of reach. However, if you reconsider your idea of a vacation home to be a reasonably priced home in a place you simply enjoy visiting, you might just be in luck.
If you own a primary home with equity in it, you’re already ahead of the game in purchasing a vacation home.
Real estate experts explain why buying a vacation home may be easier than you realize.
Equity Access
“Investing in a vacation home is about creating lasting memories in places we love, not necessarily about luxury. It’s entirely possible to own a piece of paradise that’s both affordable and cherished,” said Lynn Brown, a Realtor with Coldwell Banker. She explained that leveraging home equity from a primary residence is a smart avenue many of her clients have successfully pursued.
“By tapping into this resource, potential buyers can finance a second property in a location they love, without the need for it to be overtly luxurious or expensive.”
One of the most common ways to access this cash is through a home equity loan or lines of credit, she said.
“Homeowners can borrow against the equity of their current home at favorable rates, using these funds as a down payment on a vacation property.”
This method often provides a lower interest rate than traditional loans and offers tax advantages in many cases.
Renting as a Strategy
To offset the costs, consider renting out the vacation home when it’s not in use, Brown said.
“Purchasing a vacation home with good rental potential can offset ownership costs. Many homeowners choose to rent out their vacation homes when not in use, applying rental income towards the mortgage,” she explained.
Explore Financing Options
Don’t just assume you could never buy a vacation home, according to Brett Johnson, a licensed Colorado real estate agent and owner of New Era Home Buyers.
“Investigate different financing options tailored for vacation homes, such as second home mortgages. These often come with competitive interest rates and terms, making them more accessible for buyers.”
Consider Upcoming Commercial Areas
An often-overlooked avenue for acquiring a vacation home affordably is looking in “burgeoning commercial areas,” according to Matt Morgan, a licensed California real estate salesperson with IPA Commercial Real Estate.
“These locales, ripe for development or recently enhanced with commercial investments, frequently present more reasonable prices and high potential for appreciation, making them ideal for a second property purchase,” Morgan explained.
He shared how one client was able to take advantage of lower prices before heightened demand surged property values. “This strategy is particularly effective for vacation homes, where the aim isn’t immediate occupancy but investment in future value and enjoyment.”
Considering areas adjacent to new commercial developments can yield impressive returns, both in property appreciation and in potential rental income, should you choose to rent it out when not in personal use, Morgan advised.
Be Flexible About Size
If you can put your focus on the locale over the type of property you intend to buy, you can find a nice smaller dwelling in a coveted area. Case in point, Sammy Lyon, an associate broker with Dow Capital, helped a couple buy a vacation home in Palm Springs, California, for under $200,000.
“They did not have a ton of cash to work with, but they realized they wanted to invest in real estate in a place they visited often,” Lyon said. “I was really happy that they chose to buy a sensible condo, especially when you see people who spent way too much on a fancy vacation house getting burned with the rise of short-term rental restrictions.”
At the end of the day, they spent only about $30,000 out of pocket, Lyon said, and the couple is able to rent it out for increments of 30 days or more to bring in rental income as well.
Consider Co-Buying
Niles Lichtenstein — co-founder and CEO of Nestment, a platform that aims to democratize homebuying — recommended the idea of “co-buying.”
“Co-buying is becoming increasingly popular as the traditional route to homeownership becomes less of an option for many Americans,” he said.
As consumers grapple with soaring interest rates and economic uncertainty, homeownership is often dangled as a primary means of financial security but can feel limited to wealthier people, he said.
“As a result, younger generations and those from historically underrepresented groups continue to suffer from the structural barriers to entry, with the dream of homeownership slipping away. Co-buying gives the keys back to those who would otherwise be excluded from the traditional homebuying process, unlocking the door to a more equitable and inclusive future.”
With a realistic attitude and a little equity, buying a vacation home can add leisure to your life and provide a long-term investment, too.
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