vacation home as investment property

[sbaTexas]

we are looking into buying a vacation home in either Colorado or somewhere along 30A in florida.  We own a few rental properties here in texas, so I have about 7 years experience in the rental game.  We realistically would only make it out there a few times a year, and would hope to rent it the rest of the time through a property manager.  Does anyone here do this?  Any advice on a situation like this?  Do people actually make money doing this or would it be more of a break even situation?  any thoughts would be appreciated, thanks!

[FINate]

My in-laws had a vacation home for a number of years. They lost money on it. In mountain towns summer and winter are the high season. Fall and spring are meh. Unless it's a spectacular rental (lakefront, etc.) then most rentals will be weekend, the week between Christmas and New Year, and the week  of Fourth of July. Fall and spring are pretty low demand (including weekends) and even mid week in the high season can be hit or miss. There simply were not enough days rented to make expenses. Now, they owned in a HCOL area (South Lake Tahoe), so they had a big nut to crack to reach profitability. Maybe a LCOL area (lower rents, but also lower costs) might pencil out? I don't know. My take away from being close to the details was that vacation rentals are not a good investment, are essentially an expensive pre-paid vacation...better to rent than own, and then not locked into a single area.

Keep in mind that unless you're retired or have unusual flexibility then you're going to want to use it at the times that renting it is most profitable (weekends, holidays).

Finally, a lot of towns (CO in particular) are cracking down on AirBnB and VRBO rentals...residents don't like their town being hollowed out for tourism. So know that there's a certain amount of regulatory risk. 

[undercover]

Buying rental property that makes sense whether it be for STR or LTR use is a better idea than trying to monetize your "ideal" location. It doesn't make sense to buy a property you love with no demand and then feel like you have to "use" it more when it doesn't rent well. You'll be more profitable in a location that's suited for year-round renting and then simply rent wherever it is you want to go come vacation time. So not only will you come out better financially, you aren't locked into one location. Not saying that the property you buy can't serve a dual purpose of being highly profitable and highly useful to yourself as well (that's of course the ideal), just that it's probably unlikely. You'll come out better with a high performing rental that isn't your ideal house and vacationing wherever you want than owning a mediocre performing rental that is your ideal house that you vacation to. Just some thoughts.

Do people actually make money doing this

Of course they do. But, like any other real estate investment, you make your money when you buy. I'm sure plenty of people either stumbled into or calculated buying for the right price. Harder to do that these days in popular markets. You have to get more creative.

[soccerluvof4]

^ I agree with this.   There are a lot of factors as stated above. I had a vacation home we loved and just didn't want to sell on a lake that we owned outright. The area is 7 miles from a major tourist town but after extensive research in my area it just didn't work. Granted there were a lot of maintenance expenses being on a lake in the woods etc... but most of the people that were making the money and I met several were bar owners that had shady at best places to stay for a weekend. Long and short of it we just sold it and sped up being fire'd

[LiveLean]

We live in Florida but have a vacation home/investment property in VA Beach. It works for us but there are extenuating circumstances. When I was growing up, my family owned a house down the street, so I know the area very well. I also understand the drill -- good and bad -- with the property management group that manages 300-plus houses in the area. We look at it as a place we'll spend more time in after FIRE and the kids are in college (5-6 years). We bought it in 2014 and went there 3x a year in 2014-2016 but only once this year. It rents on a weekly basis mostly from mid-June through September. I also have family within an hour of the place that not only enjoy it (when tenants aren't there) but also love to fix and upgrade things.

Bottom line: Unless it's a place you really love, it wouldn't be worth it as strictly as investment property, and I say that as someone whose home has appreciated 50 percent since I bought it.