Rent or own vacation property

Every year, I meet more and more people that have bought vacation property or are thinking about buying vacation property. The question I get is whether this is a good idea or not.

It’s in the numbers

I’ve always said there are two influences to every decision we make – the logical influence and the emotional influence. From a logical perspective, the answer often lies in the number so let’s look at an example that is near and dear to my brain.

Previously, we took a family vacation to the Okanagan where we spent a week in Kelowna and a week in Vernon. We loved both places but we really fell in love with the resort we stayed at in Vernon called the Outback Resort. In fact we loved it so much we fell in love with the idea of spending longer summer vacations there and if that was the case, we should explore the option to buy a place there. We called up a realtor and looked at a 2-bedroom option and a 3-bedroom option. Let’s look at the math.

The math of the BUY

The 2-bedroom unit was selling for $300,000. If I put $50,000 down, the $250,000 mortgage would cost me $1315 per month (roughly $9300 of that payment would be interest and the rest would go towards principle).

Along with the mortgage payments is the strata fee of $350 per month and the property taxes at $2500 per year.

Total annual cost to purchase the condo is $16,000 per year. I can take some pretty nice holidays for $16,000 per year not including the $50,000 down payment.

Rent or buy?

Next, let’s look at renting. If I was to rent this unit for a vacation, it would rent for $339 per night. That means I could rent that place for 47 nights a year or 7 weeks to reach a total cost of $16,000.

With four young boys, there is no way I am going to be able to spend 7 weeks of every year in Vernon.

In my opinion, the math is pretty clear . . . rent the place for a week or two and I will be out of pocket a lot less than buying.

But what about an investment?

So my wife says to me “Jim, you are the investment guy. Isn’t investing in property a good idea?”

My response was “Yes but only if the numbers justify a return”.

If I look at the annual cost of $16,000 on a $300,000 property, I need that property to increase by 5.3% per year just to recover my costs. I don’t know if Vernon vacation real estate will increase by 5.3% per year but I know there are a lot of properties for sale and the prices have come down (not up) in the past few years. I also know that prices in Vernon are very much dependent on buyers from Alberta and Vancouver.

I know lots of people who bought property in the US and have not experience positive growth. I’m sure there are others who have made money as well.

Flip a coin on the investment argument. I say 50% chance it will beat 5.3% growth and 50% it won’t. What do you think?

What about renting it out on the days we are not there?

Here’s another argument from my lovely wife who really wants this place in Vernon. Here’s the problem. Let’s say we want the place for 2 or 3 weeks of every year. We are going to pick the summer months when the kids are on summer holidays, which is peak rental season. To recoup our $16,000 annual cost, we will need to rent the place for 60 to 80 nights in the year. Now this sounds like a part time job to me for a lot less money than my real job makes me.

My five cents

I’m not trying to discourage anyone from buying vacation property but I do think it requires careful thought and analysis of the numbers. The math on the $400,000 3-bedroom option was not appealingbut every property has it’s own set of numbers. Run the math, think logically and put emotions aside when making this big decision.

This is a simplistic analysis but a real one. Any thoughts on what I have missed? Do you have an experience (positive or negative) you want to share with others about buying vacation property?


  1. Rufus scrimger

    Nice article Jim! Although I would never buy a vacation property (I don’t want to be tied to the same holiday every year), I was thinking that for us to fly the extended family down to Florida and do a one-week cruise it probably cost close to $16K. In that context, having access to a 2-bedroom unit for a whole year doesn’t sound so bad!

    • Jim Yih

      Thanks Rufus. I have enjoyed traveling to different places and hope to get back to that one day but with 4 kids it gets really expensive to do (as you know with your cruise) that which is why a vacation home seems appealing.

  2. Steve @ Grocery Alerts

    We have heard horror stories of trying to sell property in Florida (if it was passed down). The hassle for the taxes and extra paperwork doesn’t seem worth it to me (too much risk).

    • Jim Yih

      You bring up a great point that buying property in other provinces/states/countries can create more complexity which weighs into the decision. Thanks Steve.

  3. Dave Hilton, Financial Conflict Coach

    I agree with your assessment- the only way I would invest in a vacation property is if I could rent it out and cover all of my expenses for the year on that income. And my time investment would have to be minimal.

    Otherwise, it would likely be more beneficial to invest in standard rental properties close to home. Either that, or start investing in Motels/Hotels in places my family likes to vacation.

    Also, like Rufus, I don’t want to be limited to one vacation option, either.

    • Jim Yih

      I’ve had some people talk about justification through lifestyle arguments but I think the math has to make sense.
      Thanks for your comment Dave

  4. H.H.H

    Just sold a Florida Property took less than a week.
    We still own another Florida property, we spend six months there, cost wise it is a wash versus renting, but when you own the place, you know what you are getting.
    We sold our Canadian Home, down sized, put mega bucks in bank, when the kids are gone and you are only here for six months, you don’t need as much bricks and sticks.

    • Jim Yih

      Thanks HHH
      Aside from the math, I prefer to own too. I’ll keep my eyes open and find other options.

  5. Shannon-ReadyForZero

    This is a really great breakdown! Personally, I only think it would be worth the money and time if the property were in a place I’d like to retire to. The years I’d live there in retirement would hopefully make the cost worth it (and even more if I owned a home now and sold it at retirement).

  6. Duff Jolly

    Motorhome_ It gives you a chance to spend time in different places and if you find you don’t like the place or the weather turns bad you just move on. Fuel is not as bad as you might think, when you consider you are packing your whole house with you. If you find you can’t or don’t want to travel one year, it just sits in the yard and becomes a spare room with kitchen facilities. When we find the ideal place to spend the winters we might sell it and drive or fly to the destination, but for now we get to plan all summer for the winter trip, choosing routes we haven’t traveled before. This may not be for everyone but there are tens of thousands traveling to Arizona to spend the winter so it can’t be all that bad.

  7. Squeezer @Personal Finance Success

    I would love to own a vacation property in the U.S. Virgin Islands but the cost of housing there is expensive, and I’d have to find a property management company to take care of the property while I’m not there to keep the maintenance up.

  8. Silas

    My personal belief is that owning a vacation property is too risky for the average home buyers. It’s much better if you can share the risk with another person/couple or even more than one other family. The fluctuations are just too wild in that type of market. Always a great idea to have a good property management company as well if you are thinking about renting it out while you are not there.

  9. Jennifer

    There are both advantage and disadvantage of owning. on one hand where there is freedom and control because of which you can come and go as you please with no limitations and leave belongings behind such as clothing and a car at the same time pride of your ownership, on the contrary problems like Having to care and maintain the property from a long distance and being caught in a buyer’s market when you want or need to sell are involved..So you see, both pros and cons are there.

  10. Andy Glavac CFP, EPC

    Hi Jim, Thanks for a great article once again. I travel to Arizona, 2 to 3 weeks per year. We have crunched the own vs. rent many times. You are so right on with the numbers. Most people buy on pure emotion.

  11. Stephen

    You need to use your head, not heart. I looked at a place in Phoenix. The homeowner fees run about three thousand a year, then we’d need to pay property tax electric, phone, cable etc. which are included in the rent. Just those costs cover two months one a short term rental. The last point is we will not always wish to go to the same place year in and out. Sites like VRBO and others offer a great way to explore different spots. The cost of out of country health insurance also limits how much time you can afford in foreign spots. It climbs quickly as you age, and if you get any sort of chronic condition the costs jump up again.



  13. S Hawrelak

    I took one of your retirement seminars last fall and it was awesome. I decided not to wait until I am retired to travel – just returned from my 4th vacation this year. We do a lot of rentals – lovely vacation rental properties around the world and a great alternative to owning. The homes are fully equipped with furnishings, dishes, linens, etc. but you need to supply the food, drinks, toiletries, etc. but some locations even stock it for you for a fee before you arrive. It’s truly like living at home away from home.

    My retirement plan is to move back to the Okanagan. I lived in Vernon for 2 years and Kelowna for 18. I will retire there in 5 – 6 years and am watching property values there. I have connections to buy in early on developments and rental management but I haven’t decided if I want a small home or condo yet. BC property tax is higher for non-residents and pre-retirees so I’m willing to wait. In the meantime, I’m paying off my mortgage here in AB and travelling whenever I want to.

  14. Lorne

    Bought a nice 3 bedroom vacation home with pool and spa in Naples Florida in 2012 when the Canadian dollar was above par and prices had bottomed.

    Have brought in a lot of rental income ($50k plus taxes, pool heat, cleaning fee, etc this year so far for a total of $64k) on the short term vacation rental market using VRBO and a local property manager to run things (for a very low fee). Plus we use the house 30+ nights a year and love it there. Zero problem renters and all fees are paid far in advance. So far we’ve had 20 new 5* reviews from our guests so they all love it too and I work hard to provide superior customer service and keep the house in great shape.

    The money we have tied up in the house represents less than 10% of our net worth and even with zero rental income it wouldn’t be a burden to carry. We love it there so right now we feel like it was a great purchase. Helps that we paid far less for it than the last owner did back in 2005.

    I also own commercial real estate but the vacation home is a lot more satisfying and has a better return so far.

  15. Lyne

    Well, well, well!! I am so surprise to see the negative being thrown to what I have done so well, and am thinking of doing it again;-) renting is not the way to go! In any case it is not if you have dreams..and you do your research. I am contemplating of selling my service to pass down everything I know, and set someone with tools to become a vacation rental owner! We have successfully bought a home at a fantastic price, and I worked on the ideal dummy free perfect vacation home. It is one of the top rental, as well made money the first year! My employees knows what my expectations are, and the way I set things up is ideal all around for every needs encountered with renting/vacationing/maintenance/costs.

    I have to say that the best advise I can give is rent one that is the type and location you will most likely buy! Don’t be afraid to ask the owner questions! Start your binder with Do, Don’t, wishes. You will only succeed if you strategically spend wisely! And run your vacation home as if the Kig was coming! We have people that comes back year, after year. You will need to be resourceful! A Management company is defiantly an expense that I would not ever make since it will eat your bottom line! If they can do it, you better believe you can too. My tips will be all in my little project I would love to do online soon;-)

    Happy owner of a successful vacation home in Phoenix.


  16. Jay

    Use a property management company to rent the place for you.
    I have been watching the market in vernon since 2014 dec-2015 aug and will say it’s a weird market here but if you buy the “right place” you will make money on it in 5 years time.
    Rentals are minimal in this town 99.9% are low end looking high rate rentals.
    It wouldn’t be hard to rent out a place in the off months and use a property management company to deal with it making the part time job not yours to deal with.
    I am in the process of buying something right now with a rental unit and live in the other part of the house.
    It’s seems prices aren’t adjusting back lower when I started looking back in dec 2014 and I’m freaking out if I don’t buy now soon this place will be untouchable…
    Remember summers are sick here and winters as well with the mountains.

    I say buy!

  17. Mark

    The bottom line here is if you enjoy vacationing somewhere and you can afford it either individually or as a group ownership( family/ friends) why not provide a family experience for yourself that begins as soon as you arrive at your destination. This emotional buy is a priceless experience that can bring family and friends together sharing mutual happiness. There is a level of comfort and satisfaction with ownership. It is the idea of sharing common thoughts with family and friends about going to that special cafe or bakery at your destination. I have yet to meet anyone that is happy with their vacation home in solitude with no one to share it with. Granted you do not have to own to have a great experience. I really liken it to coming home from a vacation and feeling ecstatic when I fall asleep in my own bed. I get a similar feeling at my vacation home. The only decision to be made is: lake , city, ocean or wilderness. What makes you feel good? True happiness must be shared!!!!!

  18. Lauren

    Just came across this article and have no idea how old it is. But we own two vacation properties outright in Canmore AB, bought in 2012 and 2013 for half of what they had sold for originally. One was foreclosure and one was a fire sale from a non-resident overseas owner.
    We originally rented them traditionally, but last year experimented with the Airbnb concept since my husband was retired and could look after that. It was phenomenal ROI! We converted the 2nd property this year, and in 5 busy months, we are going to gross over 50k. It is work, and we work hard at it, but it frees us to travel in the winters and maintain a flexible life. Our ROI is about 18% but this is low only because we paid cash in full for both properties. For us, this investment has trumped our regular ones….

  19. Charles

    Just a thought
    I’ve read all the comments and most of them are talking about vacation home use for a limited time of year. We have decided to purchase our vacation home and live there and rent it out during the peak season and travel when the place is busy with the summer holiday crowds, rental is at top dollar during peak season and you need to live somewhere

  20. Mike

    You should show dates on the original post and comments so people can see when posts were made.

    We have a little dream of buying a small condo in the okanogan. It would have to bring enough income to cover the mortgage and expenses. Well probably retire to that area but for now, we’re not adventurous people and most likely won’t buy a vacation property!

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