How to buy a vacation home


For those who are able, buying a second home is suddenly more appealing, as remote working has become the norm in the pandemic. Why not work from the place where you like to vacation – the place where you really want to live?



a large brick building: A lake house cabin


© gmnicholas/Getty Images
A lake house cabin

“Stay at home orders and social distancing have put a new value on the extra space,” explains realtor.com Chief Economist Danielle Hale. “We’re seeing this in the luxury market as well, which could mean there is renewed interest from high-end buyers to find a second home that is within driving distance from their primary residence.”

Whether you’re considering buying a vacation home now or in the future, here are the steps to take.

  • Steps to buy a vacation home
  • Costs of owning a vacation home
  • Tax implications of buying a vacation home
  • Vacation home loan requirements

How to buy a vacation home

As with any home purchase, buying in a new area requires serious thought and preparation.

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Step 1: Determine what you can afford

Before you can purchase a second home, it’s important to understand the costs you might face.

If there’s a mortgage, then there are expenses for principal, interest, taxes and insurance (PITI). However, the very nature of a second home can mean other costs, as well. If you’re 150 miles from the property, for example, who will look after it? Who will check the property in the event of a storm? Will somebody stop by regularly to check for theft or vandalism?

If you’re thinking of buying property by the beach or in a forested area, look into the availability and cost of insurance before you buy. You can’t get or keep a mortgage without required insurance coverage, so make sure it’s both available and at an affordable price.

Costs of owning a vacation home

In addition to your monthly mortgage payment, there are other expenses associated with vacation property ownership, whether you fund them yourself or offset costs with rental income. These expenses generally include:

  • Maintenance and repairs
  • Management and vacancies (if you rent)
  • Furniture and housewares

Tax implications of buying a vacation home

The 2017 tax reform radically changed real estate taxes. In theory, mortgage interest and property taxes remain generally deductible for both primary residences and second homes – but in practice, many people take the standard deduction instead of itemizing mortgage interest and property taxes. Without such deductions, the economics of ownership have changed.

To offset costs, vacation property owners may want to consider short-term overnight rentals through platforms such as Airbnb, FlipKey or HomeToGo, as well as in-season rentals through a local real estate broker.

According to the IRS: “If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You’re considered to use a…



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