Why You Should Sell Your Vacation Home
Written by
Martin Dasko
Edited by
Chris Cluff
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Owning a vacation home may seem ideal because you have a place to escape to that’s all yours. And when you’re not using this property, you can rent it out to create a new income stream.
While this seems like a win-win scenario, owning a vacation home isn’t all that it’s cracked up to be in all cases. This is why GOBankingRates reached out for insights from a real estate agent who has seen the negatives of owning a vacation home and why it sometimes makes sense to sell it.
Here are the difficulties associated with managing a vacation property that could make you want to sell.
Also see mistakes people make when looking for a vacation home.
Trouble Creating a Consistent Rental Income
“If the property consistently generates a negative cash flow, where expenses exceed income, it can be financially draining,” said Deba Douglas, a real estate investor and founder of Douglas Dwellings. “This could be due to high maintenance costs, property taxes, or mortgage payments.”
If you purchase this vacation home with the expectation of renting it out part of the time to provide you with an income, you could have issues when this scenario doesn’t play out as you had hoped.
It’s essential that you run the numbers to ensure that you can afford the payments associated with this new property if you can’t create a consistent rental income from it. With higher interest rates on mortgages, you’re going to want to think twice before investing in another property.
Unforeseen Repairs and Maintenance
“Unexpected repairs and ongoing maintenance can significantly impact the financial viability of a property,” Douglas said. “Older properties, in particular, may require constant attention.”
A vacation home can become a financial burden because you now have another property to look out for. On top of the standard home maintenance, you may have to make expensive upgrades like changing the roof or renovating the basement.
Another thing to consider is the location of the vacation property. If the area has a history of flooding or extreme weather, you could have unforeseen repairs you must deal with when Mother Nature strikes. That dream home could become a nightmare when you get the bill for necessary repairs.
Regulatory Issues
According to Douglas, “Changes in local regulations, zoning laws or tax policies can impact the profitability of a property. Staying informed about and adapting to these changes is crucial.”
The rules often change around short-term rental policies, so you could end up with a vacation home that you can’t rent out any longer due to a regulatory change. If you relied on this income to cover the mortgage payments, you could be in a stressful situation.
The worst part is that you have little control over regulatory issues as an investor.
Tenant Problems
“Managing difficult tenants, handling eviction processes or dealing with tenant turnover can be time-consuming and stressful,” Douglas said. “Vacancies can also lead to income loss.”
In the perfect world, you would have respectful tenants who stay in your unit when you’re not using it to help cover the mortgage payments. In reality, numerous tenant issues could pop up with your vacation property. You could have a tenant that damages the place, or you could face eviction issues.
There Are Better Investments
“As your investment goals evolve, certain properties may no longer align with your objectives,” Douglas said. “Selling a property that no longer fits your portfolio strategy might be a prudent decision.”
There are two major considerations as to why you should consider a better real estate investment:
Property Could Depreciate
“Over time, properties may depreciate, affecting their overall value,” Douglas said. “This depreciation can be influenced by factors such as wear and tear, changing neighborhood conditions, or outdated amenities.”
If your property decreases in value, you’ll end up losing money when you try to sell this place. Even if you don’t lose money, you have to factor in the opportunity cost of not investing in another property or doing something else with your money.
External Market Forces
“Economic factors can impact property values,” Douglas said. “If the market experiences a downturn, the property’s value may decrease, affecting your potential for profit upon sale.”
If your vacation property drops in value, you may be stuck with a property that isn’t worth the initial investment.
Time Commitment
Douglas said, “Managing a property can be time-consuming, especially if you have a full-time career. Your time might be better spent on other investment opportunities or business endeavors.”
Even if you keep the vacation home strictly for personal reasons, a surprising amount of maintenance could be required.
For example, if you have a cottage in a destination that experiences harsh winters, you’ll have to spend money on preparing the home for the cold. You also have to spend time on maintaining this property, from cleaning the inside to basic lawn care.
This adds up to a significant time commitment that you may not have at this point in your life.
Stress and Burnout
“Dealing with property management challenges can lead to stress and burnout,” Douglas said. “If the property becomes a constant source of frustration, it might impact your overall well-being.”
It may be time to sell that vacation home when you find yourself constantly stressed about everything you have to deal with. Maintaining multiple properties is difficult, especially as unexpected issues arise.
Market Saturation
“If the local real estate market becomes saturated with similar properties,” Douglas said, “it can be challenging to find quality tenants or sell the property at a desirable price.”
If you intend to flip this vacation home one day, you must consider that the market could become saturated. You also can’t predict how a community will change and evolve over time, which will also affect your home’s value.
Closing Thoughts
Douglas concluded with this advice: “Regularly evaluating your portfolio, staying informed about market conditions and reassessing your investment goals are crucial aspects of successful real estate management.”
While that vacation home may have seemed like an excellent idea years ago, things change, and you may have to consider selling it. The good news is that you can always sell the property and move on.
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