7 Key Signs It’s Time To Purchase a Vacation Property in 2025
Written by
Martin Dasko
Edited by
Jenna Klaverweiden
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According to data from Redfin, the demand for vacation home mortgages dropped by 40% in 2023 as housing prices soared. Even though Americans took out 90,772 mortgages for second properties during 2023, that was a 65% drop from the peak of the housing boom during the pandemic in 2021.
With interest rates expected to drop, there’s a chance you may be thinking about purchasing a vacation property in 2025. This is why reviewing the factors determining your readiness for this investment is important.
Here are the key signs that someone is ready to purchase a vacation property next year and that it will be a good investment opportunity for them.
The Vacation Property Fits Your Lifestyle
“They should clearly see how the property fits into their lifestyle,” said Justin Landis, founder of the Justin Landis Group. “For example, if they’ve been renting vacation homes regularly and are now seeking the flexibility of ownership, this could be a strong indicator.”
A key sign that you’re ready to purchase a vacation property in 2025 is that it makes sense for your family’s lifestyle. A common scenario could be that you want to host family events more frequently or that you would like to have a gathering point by the lake for your relatives.
You’re Financially Prepared
Landis pointed out that you’re in a good financial position if you’ve saved enough for a down payment on another property, have a solid credit score and have assessed your ability to cover ongoing expenses, like maintenance, utilities and taxes.
Since purchasing a vacation property is a significant investment, you want to ensure that you’re financially prepared because the expenses will add up. If you’ve made wise financial decisions over the years and the numbers make sense, you may want to look into vacation property listings as we head into 2025.
You’ve Reached Certain Financial Milestones
If you’ve recently paid off your mortgage or reached a specific financial milestone that you’re incredibly proud of, it may be time to purchase a vacation home in 2025. Many people will want to focus on marking off certain financial checkpoints prior to signing up for another mortgage.
“For example, some people prefer to have the mortgage on their primary residence paid off first, while some don’t consider that a necessity,” said Seamus Nally, CEO of TurboTenant.
The financial milestones you choose to reach will depend on your situation and goals.
You’ve Found an Area With Strong Future Growth Potential
For an investment opportunity, you’ll want to look for areas with strong future growth potential so that you can turn a profit on the property when you’re ready to sell it. “Signs of a good investment include properties in areas with increasing demand for short-term rentals or long-term stays,” Landis said.
“If the local market shows promising indicators, like steady appreciation rates, strong tourism and a limited inventory of rental properties, it can signify a good investment opportunity,” said Austin Hair, managing partner at Leaders Real Estate.
You’ll want to research the local property values and trends to determine whether the community is experiencing appreciation.
“Seek areas with stable or growing tourism, improved amenities or upcoming infrastructural projects. These factors may indicate that property values will appreciate,” said Chad Dunn, licensed buyer’s agent at Acquired HQ.
You Already Know About the Community
If you have a vacation home community that you already understand and could see yourself even retiring there one day, then you may be ready to purchase a vacation home. “You might be ready if you’ve consistently vacationed in one area, love its community vibe and foresee regular use,” Dunn said. “This also hints at rental potential when you’re absent.”
It’s also important to be familiar with what the community offers. “It’s also wise to choose a property type or location with unique amenities or proximity to attractions to ensure a competitive edge in the rental market. In my opinion, investing in top-rated outdoor amenities like pickleball courts is what will separate the winners from the losers moving forward,” Hair said.
If you’ve taken the time to analyze the local community and feel like you know where you would want to purchase a second property, then it makes sense to begin the process heading into 2025.
You Understand the Local Regulations
Hair pointed out the importance of evaluating tax implications and local regulations regarding short-term rentals.
You’ll want a decent understanding of the local regulations if you want this vacation property to also be a rental during parts of the year. You don’t want to end up purchasing a home from which you expected to earn an income only to find out that you’re not legally able to do so.
You’re Buying for the Right Reasons
Hair explained that many people purchase a second home under the pretense that they can vacation for free annually, but the math doesn’t always make sense. “If that’s your motivation, I suggest you just rent a place for two weeks,” he said.
Since a vacation property will require a down payment, on top of the furniture and other closing expenses, you could get a much better return on your money elsewhere if you’re looking for an investment or a “free” vacation destination.
If you’re purchasing a vacation home to create memories with your family or have a solid financial plan for handling the expenses, then it may be time to add a new property to your portfolio.
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