Nothing fuels the desire to buy a vacation home quite like the end of summer. But, financial advisers say it is critical for buyers to weigh the unexpected costs and pitfalls that come with that beach house.
The beach house bonanza appears to be ending, many economists said. Sales of second homes are way down from last year’s boom, dipping below prepandemic levels for the first time in two years, due in part to high prices and rising mortgage rates, said Daryl Fairweather, chief economist at Redfin.
“Vacation homes can quickly turn into nightmares if you don’t know how to properly manage them,” said Tony Robinson, a short-term rental investor and the co-host of BiggerPockets’ “Real Estate Rookie,” a podcast about real-estate investing for beginners.Tim Bauer said he quickly learned to prepare for the unexpected after he bought a ski cabin in Red Lodge, Mont., that he planned to rent out when he wasn’t using it to offset the costs.
He lost about 20% of the annual revenue for the two-bedroom cabin that he rents for, on average, about $215 a night. Mr. Bauer, a financial planner, keeps a separate checking account for the cabin with a cushion of about three to four months ofRelying on the rental income to pay mortgage and other costs can be risky for other reasons, too. Local rules for short-term rentals can change. Darin Eppich, a real-estate agent in Los Angeles, recently had a client decide against purchasing a vacation home in Palm Desert, Calif., when he learned the city had strict rules limiting short-term rentals.
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