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Having a vacation home isn't just about having your own little piece of heaven to go to when life gets too much. It's about making money over time and giving your family a place to make memories year after year without having to deal with booking hotels or figuring out how to use new rentals every time.
I've helped our project teams at AmeriSave buy hundreds of second homes in the past few years, and the patterns are clear. People who buy vacation homes with realistic expectations and good financial planning end up loving their choice. People who jump in without fully understanding the commitment often have to deal with unexpected costs and maintenance problems in the first year.
Think of it like this: your primary residence is your anchor, but a vacation home? That’s your opportunity to diversify your real estate portfolio while giving yourself and your loved ones a reliable retreat. The key is understanding exactly what you’re getting into before you sign on that dotted line.
The vacation home market in 2026 looks different than it did even two years ago. According to the National Association of REALTORS®, vacation home sales accounted for 5.2% of all residential transactions in 2024, with median prices reaching $475,000 nationally. Interest rates have stabilized compared to the volatility of 2022-2023, though they remain elevated compared to the historic lows of the early pandemic years.
What makes 2026 particularly interesting for vacation home buyers is the combination of evolving work-from-anywhere policies and tightening short-term rental regulations in many popular destinations. More buyers are considering properties they can genuinely use as extended-stay retreats rather than pure investment plays, which fundamentally changes the calculus on location and property type.
Before we dive into the tactical considerations, let’s talk about where vacation home markets actually stand right now. The Federal Housing Finance Agency’s House Price Index showed vacation home areas experiencing 4.8% annual appreciation in Q3 2025, slightly below primary residence markets at 5.3% but still representing solid growth.
Prices are still high in coastal areas of Florida, the Carolinas, and Southern California. Buyers looking for four-season appeal have been especially interested in mountain destinations in Colorado, Tennessee, and Vermont. In areas within 50 miles of major cities, bidding wars are going on like they do in primary residence markets. On the other hand, buyers have more negotiating power in more remote areas.
Even though more companies are requiring employees to return to the office in 2024 and 2025, the work-from-home revolution isn't over yet. The Bureau of Labor Statistics says that as of late 2025, 26% of workers still have fully remote or hybrid schedules. This is down from the highest levels during the pandemic, but it is still much higher than before 2020. This level of flexibility keeps demand for vacation homes high because more and more buyers see these homes as places to stay for a long time instead of just weekend getaways.
This is where vacation home loans are very different from loans for your main home. Mortgage lenders see second homes as riskier, which means that all lenders have stricter requirements for who can get a loan.
Most of the time, well-qualified borrowers need to put down at least 10% of the purchase price, but this can go up to 15% or 20% depending on their credit history and debt-to-income ratio. The Consumer Financial Protection Bureau's 2025 mortgage data shows that the average down payment on vacation homes was 17%, while the average down payment on primary homes was 13%.
Credit score thresholds run higher as well. While you might qualify for a primary residence conventional loan with a 620 credit score, most vacation home lenders want to see 680 minimum, with competitive rates generally requiring 700 or above. The Mortgage Bankers Association reports that 73% of vacation home loans in 2025 went to borrowers with credit scores above 720.
Debt-to-income ratios matter more for second homes because lenders need confidence you can handle dual mortgage payments even if rental income doesn’t materialize. Most lenders cap DTI at 43% including both mortgages, though some portfolio lenders may stretch to 50% for exceptionally well-qualified borrowers.
Interest rates on vacation home mortgages typically run 0.25-0.75 percentage points above primary residence rates, according to Freddie Mac’s Primary Mortgage Market Survey data from November 2025. That differential might seem small, but on a $400,000 loan, even a 0.5% rate increase adds roughly $115 to your monthly payment and $41,000 in additional interest over 30 years.
Tax treatment of vacation homes remains one of the most commonly misunderstood aspects of second-homeownership. The rules are actually pretty straightforward once you break them down by usage pattern. We’re not tax experts, so please consult a tax professional for more info, but here’s the 1,000-foot view.
You can deduct mortgage interest and property taxes on the property just like you can on your main home, as long as you only use it as a second home and don't rent it out. The Tax Cuts and Jobs Act limits the total amount of state and local tax deductions to $10,000 per return. For married couples filing jointly, mortgage interest is deductible on up to $750,000 of combined acquisition debt. For those filing separately, it is deductible on up to $375,000 of combined acquisition debt.
The calculation changes once you start renting the property out. The IRS uses what’s called the 14-day rule to determine whether your vacation home is treated as personal residence or rental property for tax purposes. If you rent the property for fewer than 15 days per year, that rental income is completely tax-free and you still get the personal residence deductions. Rent it out for 15 days or more, and suddenly you’re operating rental real estate with all the tax complexity that entails.
When a property crosses into rental territory, you have to report all rental income, but you also gain the ability to deduct a much broader range of expenses including depreciation, maintenance, utilities, property management fees, and travel costs related to property oversight. The catch is that personal use becomes limited. If you use the property for more than 14 days or 10% of total rental days, whichever is greater, you cannot deduct losses against your other income.
According to the Internal Revenue Service’s 2025 Publication 527, residential rental property can be depreciated over 27.5 years, which for a $400,000 property with $100,000 in land value translates to roughly $10,900 in annual depreciation deductions. Combined with actual expenses like property management, maintenance, and utilities, many vacation homeowners with significant rental activity show accounting losses even while generating positive cash flow.
Just take a breath. Location seems obvious, but the way vacation home real estate works is very different from the way primary residence markets work, which surprises a lot of buyers.
Vacation home values change a lot more than primary residence values because people buy them for fun, not because they need a place to live. Vacation property values usually drop more quickly and take longer to rise than primary residence markets when the economy is bad. The Federal Reserve's study of the housing crisis from 2008 to 2012 found that vacation home values fell by an average of 42%, while primary residence values fell by 33%. It took vacation homes 18 months longer to recover.
That changeable nature goes both ways. During times of strong economic growth, hot vacation markets can also go up in value more quickly. Real estate groups in Asheville, North Carolina, say that prices went up 11.7% in 2024, while prices in coastal Maine went up 14.3%.
If you’re planning to rent out your vacation home even part-time, understanding local rental market dynamics becomes crucial. Some destinations have year-round appeal, while others experience extreme seasonal variation.
Beach destinations see 65-75% of annual booking revenue concentrated in just four months, typically June through September, while ski resort properties generate 60-70% of revenue during the November through March window. Four-season destinations like Gatlinburg, Tennessee or Asheville show more balanced occupancy with 40-50% of revenue in peak season.
Seasonal revenue concentration matters because it affects your financing strategy and cash flow planning. A property generating $60,000 annually with steady $5,000 monthly revenue is fundamentally different from one earning $7,500 per month for four months and $2,000 per month for eight months, even though the annual total is similar.
The vast majority of vacation home purchases use conventional conforming mortgages through Fannie Mae or Freddie Mac. According to the Federal Housing Finance Agency’s 2025 data, conventional loans accounted for 82% of second-home financing, with portfolio loans and jumbo loans making up most of the remainder.
Conventional second-home loans offer several advantages including competitive rates, standardized underwriting, and the ability to use projected rental income with restrictions to help qualify. Fannie Mae and Freddie Mac both allow borrowers to use up to 75% of projected rental income to offset the mortgage payment when calculating debt-to-income ratios, provided the borrower has documented experience as a landlord or property manager.
For 2026, conforming loan limits in most markets reach $806,500 for single-family homes, up from $766,550 in 2024. High-cost areas have higher limits, with the maximum reaching $1,209,750 in the most expensive markets. Properties above these thresholds require jumbo financing, which typically means higher rates and more stringent qualification requirements.
Many buyers fund vacation home purchases by refinancing their primary residence and using cash-out proceeds for the down payment. This approach offers several advantages: you’re potentially getting a lower rate on a primary residence than you’d pay on a second-home loan, and you’re accessing equity that might otherwise sit idle.
The Consumer Financial Protection Bureau’s 2025 data shows that 31% of vacation home buyers used cash-out refinancing to fund all or part of their purchase, up from 23% in 2023. This increase reflects both rising home equity levels and buyers’ desire to minimize their second-home borrowing costs.
If you’re counting on rental income to help cover your vacation home costs, developing realistic projections is essential. Many buyers overestimate rental revenue while underestimating expenses and vacancy periods.
Start with actual market data rather than best-case scenarios. The median vacation rental in the United States earned $42,000 in gross revenue with 58% occupancy across an average of 212 available nights in 2025. After accounting for platform fees, cleaning costs, maintenance, and property management, net operating income averaged $24,500, or 58% of gross revenue.
But those are medians. Performance varies enormously. Top-quartile properties earned $76,000-plus in gross revenue at 71% occupancy, while bottom-quartile properties generated under $22,000 at 39% occupancy. Location, property condition, management quality, and marketing sophistication all drive these variations.
Airbnb and VRBO charge hosts 3% of booking value while collecting 13-16% from guests, according to their 2025 fee structures. Some hosts try to offset these costs by offering direct booking discounts, but the platforms’ market dominance makes it challenging to drive meaningful direct booking volume for most properties.
The vacation rental market has professionalized significantly. Professional property management companies now operate 34% of all vacation rental listings, up from 24% in 2022. These professional operators typically achieve 12-18% higher occupancy rates and 8-12% higher average daily rates than individual owners, but they also charge 25-35% of gross revenue for their services.
This is crucial: short-term rental regulations have become dramatically more restrictive in many popular vacation markets over the past three years. What was permissible when you started shopping for properties might be illegal by the time you’re ready to close.
According to the National League of Cities’ 2025 survey, 47% of cities with populations above 50,000 now have some form of short-term rental regulations, up from 31% in 2022. These regulations range from simple licensing requirements to caps on rental nights per year to outright bans in certain zones.
Examples of restrictive markets as of 2026: Savannah, Georgia caps short-term rentals at 90 nights annually in historic districts and requires $500 annual licenses. Charleston, South Carolina banned new short-term rental licenses in the downtown peninsula in 2023 with existing licenses grandfathered. Sedona, Arizona implemented a lottery system for new licenses with only 30 issued quarterly.
Homeowner associations and condo associations frequently restrict or prohibit short-term rentals through covenants, conditions, and restrictions. According to the Community Associations Institute’s 2025 survey, 38% of HOAs in vacation-heavy areas now restrict rentals to minimum 30-day stays or longer, while 12% prohibit rentals altogether.
These restrictions can change through amendments to governing documents, though the process typically requires substantial owner approval, often 67-75% of voting members. The challenge is that existing restrictions might not be well-publicized, and what you discover during due diligence might differ from what you were told initially.
If you manage your vacation rental yourself or hire a professional property management company, you will have to spend a lot of time and money.
Self-management saves the 25–35% property management fee, but it means dealing with all guest communications before, during, and after their stay, coordinating cleaning between bookings, handling maintenance issues and emergency repairs, responding to guest concerns at any time, keeping calendars up to date across multiple booking platforms, collecting payments and enforcing rental agreements, and keeping track of income and expenses for tax purposes.
Self-managing owners report spending an average of 12.7 hours monthly on rental operations during shoulder season and 19.4 hours monthly during peak season. Successful self-managers typically live within 30-60 minutes of the property or have extremely reliable local contractors they can dispatch for issues.
Vacation properties require more maintenance than primary residences because they experience higher usage intensity when occupied and sit vacant between guests. Both create maintenance challenges.
Owners should budget 1.5-2% of property value annually for routine maintenance, or roughly $6,000-$8,000 annually on a $400,000 property. This covers things like HVAC servicing, appliance repairs, painting, carpet replacement, landscaping, and the inevitable guest-damage issues.
It's simple math, but it's important to remember that having two properties means really doubling your costs in most areas. A lot of buyers know this in their heads, but they don't realize how much it will affect them until the bills start coming in.
The Bureau of Labor Statistics' 2025 Consumer Expenditure Survey says that the average American household spends $21,726 a year on housing for their main home. Adding a second home with its own mortgage, taxes, insurance, utilities, and maintenance can easily cost an extra $25,000 to $40,000 or more a year, depending on the property's value and location.
Let's go through a real-life example. A vacation home that costs $450,000 and has a 15% down payment: A mortgage of $382,500 at 7.125% costs $2,585 a month or $31,020 a year. In a state with moderate taxes, property taxes are 1.1%, which is $4,950 a year. The cost of home insurance with a vacation rental rider is $2,200 a year. $200 a month in HOA fees adds up to $2,400 a year. Utilities like electricity, water, gas, trash, and the internet cost $4,800 a year. At 1.5% of the property's value, maintenance costs $6,750 a year. $2,000 a year for furniture and replacements. The total cost for the year is $54,120.
You're paying $19,120 a year for the property yourself, which is $1,600 a month, even though it makes $35,000 in net rental income after platform fees, cleaning, and other costs. After paying for their main home, a lot of buyers don't have that much wiggle room in their budget.
One of our AmeriSave project teams’ consistent recommendations: maintain separate contingency reserves for the vacation property beyond your primary residence emergency fund. We typically suggest 6-12 months of carrying costs in liquid savings.
Why so much? Vacation rentals can experience sudden occupancy drops due to weather events, economic slowdowns, or regulatory changes. A major hurricane doesn’t just cause property damage. It decimates bookings for months afterward as tourists avoid the area. Having adequate reserves prevents financial stress if rental income disappears or unexpected expenses arise.
Early in your vacation home journey, you’ll need to decide whether the property is primarily for personal use with occasional rentals, primarily an investment with occasional personal use, or an attempt to balance both equally. This decision drives everything from financing to property selection to tax treatment.
Vacation home buyers’ intended usage breaks down as primarily personal use with less than 4 weeks of annual rental at 38%, balanced usage with comparable personal and rental at 29%, primarily investment with personal use under 6 weeks annually at 24%, and pure investment with zero personal use at 9%.
For personal use Focused buyers can put properties that fit their family's needs at the top of their list, even if they don't have a lot of rental potential. You can choose unusual properties in strange places, properties that need work that you can do over time, or places that have sentimental value, no matter what the rental market is like.
Here’s what I’ve learned working with second-home buyers over the years: the financial appeal of rental income almost always sounds better before you’ve actually dealt with the reality of having strangers occupying your personal retreat.
Many buyers start with plans to rent aggressively, then gradually shift toward more personal use as they realize how much they dislike the intrusion on their flexibility. Forty-one percent of vacation rental owners reduce their rental intensity within three years of purchase, citing preference for personal access over financial optimization.
While traditional vacation hotspots remain popular, several emerging markets offer compelling value for buyers willing to look beyond obvious choices.
Traverse City, Michigan offers Great Lakes waterfront access with year-round tourism economy and median vacation home price of $385,000 with 8.2% appreciation in 2024. Door County, Wisconsin provides four-season appeal with limited inventory driving demand and median home price of $420,000. Chattanooga, Tennessee delivers outdoor recreation access as a growing remote worker destination with median price $348,000 and strong rental demand. Hot Springs, Arkansas presents a historic spa town experiencing renaissance with median price $295,000 and rental occupancy up 18% year-over-year.
One fundamental fork in vacation home selection is choosing between mountain and beach destinations. The seasonality, appreciation patterns, rental dynamics, and maintenance requirements differ meaningfully between these property types.
Beach properties generate 68% of annual revenue in summer months, average 59% annual occupancy, command 23% higher average daily rates, experience more weather-related maintenance, face increasing insurance costs due to hurricane risk, and show more volatile year-to-year appreciation.
Mountain properties generate 58% of annual revenue in winter months, average 54% annual occupancy, show more moderate pricing, require winterization and snow removal, face wildfire risk in Western markets, and demonstrate steadier year-to-year appreciation.
Here’s an uncomfortable reality: many vacation home buyers dramatically overestimate how often they’ll actually use the property. Actual usage averaged just 28 nights annually compared to planned usage of 52 nights at time of purchase.
There are a number of things that cause this gap. Work obligations are more rigid than expected, children's activities complicate weekend trips, the novelty diminishes after the initial year, maintenance and rental coordination deplete vacation time, and repeated travel to the same destination becomes tedious.
Be ruthlessly honest with yourself about realistic usage before purchasing. If you genuinely believe you’ll use the property 8-plus weeks annually, will that remain true in 3-5 years when initial excitement fades? Can you truly get away from work and other commitments that often? Do your children’s school and activity schedules allow that much time away?
Even with professional property management, vacation homeownership requires ongoing time investment. Even hands-off owners spend an average of 4.2 hours monthly on property-related tasks including financial review, vendor communications, maintenance approvals, and strategic decisions.
For self-managers, that time investment jumps to 10-15 hours monthly during shoulder seasons and 15-20 hours during peak seasons as discussed earlier. That’s essentially a part-time job on top of your regular career and life responsibilities.
Even if you’re purchasing with plans to own forever, life circumstances change. Having a realistic exit strategy provides flexibility and helps you avoid forced sales during market downturns.
According to the National Association of REALTORS®’ 2025 data, vacation homeowners sell their properties after an average of 11.7 years of ownership, with common triggers including retirement at 23% of sales, changing family circumstances at 19%, financial pressure at 17%, and property maintenance burden at 14%.
Vacation home markets are not as liquid as primary residence markets. The NAR says that vacation homes stay on the market for an average of 67 days, while primary residences stay on the market for an average of 38 days. In premium markets, that gap gets smaller when the economy is doing well, but it can get much bigger when the economy is doing poorly.
One often-overlooked aspect: vacation homes can potentially become primary residences during retirement or career transitions. Eighteen percent of retirees relocate full-time to former vacation home destinations within five years of retirement.
This strategy offers several advantages. You’ve already established yourself in the community and know you enjoy living there. You’ve paid down substantial equity through years of mortgage payments and appreciation. You can time the transition to capture lower capital gains rates on your current primary residence sale.
The challenge is ensuring your vacation home location works for full-time living. Seasonal resort communities can feel isolating during off-months. Healthcare access matters more in retirement than it does for weekend getaways. Amenities perfect for vacations might prove inadequate for daily life.
In 2026, people who buy vacation homes will have real chances if they think about the decision carefully and realistically. After the crazy years of 2020 to 2023, the market has settled down. Interest rates have come down from their recent highs, and many popular places have nice homes for sale for buyers who have good financing and clear plans.
The keys to success include understanding market-specific dynamics, maintaining realistic expectations about rental income potential, preparing for double ownership costs, staying informed about regulatory changes, choosing between personal use and rental optimization, and planning for eventual transitions whether through sale or generational transfer.
For buyers with stable income, adequate reserves, and genuine interest in repeatedly visiting the same destination, vacation homes can build wealth while providing lifestyle benefits that hotels and short-term rentals cannot match. For others, the commitment might exceed realistic capacity, making continued traditional vacation approaches more practical.
Our AmeriSave teams have helped thousands of families successfully finance vacation home purchases, navigating the unique requirements and opportunities these properties present. Whether vacation homeownership makes sense for you depends on factors only you can assess, but having the right information and support system dramatically increases the likelihood of making a decision you’ll remain happy with years down the road.
Most lenders want vacation home buyers to have credit scores of at least 680, but technically, you can get a conventional loan with a score of 620. Most of the time, you need a score of 700 or higher to get competitive interest rates. The best rates are for people with scores of 740 or higher. The Mortgage Bankers Association says that in 2025, 73% of vacation home loans went to people with credit scores over 720. If your score is below 680, you might want to wait to buy until you can improve your credit. Even small score increases can have a big effect on your interest rate and monthly payment.
Depending on your overall financial situation and the lender's requirements, the down payment for a vacation home is usually between 10 and 20 percent of the purchase price. People with good credit and low debt-to-income ratios may be able to get a loan with just 10% down, while people with average credit and debt-to-income ratios should expect to need 15-20% down. Data from the Consumer Financial Protection Bureau shows that the median down payment on vacation homes in 2025 was 17%. If you make a larger down payment, your mortgage balance and monthly payment will go down, and you may also be able to get better interest rates.
Yes, but only under certain conditions. Fannie Mae and Freddie Mac let borrowers use up to 75% of their expected rental income to help pay for their vacation home mortgage when figuring out their debt-to-income ratios. This is only true if the borrower can show that they have experience as a landlord or property manager. Lenders usually won't count any rental income toward qualification if you don't have that experience. Lenders still want proof of your full mortgage payment from your documented income alone before they will apply rental income credits, even if you have an allowance. This means you have to qualify as if you don't have any rental income, but rental projections could give you a little more room.
The difference is very important when it comes to financing terms. Second homes must be used for personal reasons and lived in for at least part of the year. People buy investment properties only to rent them out, not to use them themselves. The interest rates on second-home mortgages are about 0.25 to 0.50 percentage points lower than those on investment property mortgages. But to be classified as a second home, the property must be a reasonable distance from your main home and you can't rent it out too much. If you rent the property all year round and don't use it yourself, lenders may change its classification to investment property, which comes with higher rates and stricter requirements for getting a loan.
Limited liability company structures protect owners from liability and make it clear who owns what, which is especially important for properties with more than one owner or aggressive rental operations. When several family members own something, when the property is a full-time rental business, or when there is a lot of liability, LLCs make the most sense. If you own a property by yourself and mostly use it for personal reasons, an LLC may not be worth the trouble and money. Most lenders would rather lend money to people than businesses, though, so LLC structures can make getting a mortgage harder. Talk to both your lawyer and your mortgage lender before setting up LLC structures so you know how they will affect your taxes, your ability to get a loan, and your liability protection.
One of the biggest problems vacation rental owners will have to deal with in 2026 is regulatory risk. Some ways to protect yourself are to do thorough research on local laws and pending legislation before you buy, buy in markets with well-established favorable regulatory frameworks, keep your finances strong enough to cover costs even if you don't rent out your property, build relationships with local officials and community groups, and, if you have the resources, buy multiple vacation properties in different markets. Markets with well-established tourism economies and clear economic benefits from vacation rentals tend to have more stable regulatory environments than markets where vacation rentals are newer and causing problems in the community.
Short-term rental activity is not covered by standard homeowner insurance. You need vacation rental or landlord insurance that covers the building, the contents (furnishings and appliances), guest injuries (with a minimum of $500,000 recommended and $1 million preferred), and loss of rental income if the property becomes uninhabitable. Vacation rental insurance costs 15% to 25% more than similar homeowner policies, but it protects you from risks that are specific to renting. Also, ask renters to get their own travel insurance and think about asking for security deposits in case of damage.
To have a strong rental performance, many things need to work together. Professional photography that shows off the property's best features, dynamic pricing that changes rates based on demand patterns, detailed descriptions that highlight unique amenities and local attractions, quick responses to booking inquiries (under an hour is best), consistent maintenance that ensures five-star guest experiences, thoughtful amenities like premium bedding and fully equipped kitchens, strategic marketing across multiple platforms, and collecting and responding to guest reviews are all important factors in success. Professional property management companies usually use these strategies in a systematic way, which is why their properties are 12–18% more likely to be occupied than self-managed properties.
The most common mistakes are not doing enough research on local rental laws before buying, not having enough money set aside for unexpected costs, not planning well for property management and maintenance, not being realistic about how often you will use the property, and not thinking enough about market liquidity and exit strategies. Before making offers, successful buyers do thorough financial modeling, keep a lot of money in reserve, make it clear whether the property is for personal or investment use, and get to know local property managers and real estate professionals.
Yes, and this plan works well for a lot of people who buy homes in places where they want to retire or move full-time. There are benefits to turning vacation homes into primary residences, such as established community ties, a known property condition and history, accumulated home equity, and possible capital gains exclusions on the sale of your current primary residence. Eighteen percent of retirees move full-time to places they used to go on vacation within five years of retiring. But think about whether the locations of vacation homes are good for full-time living in terms of healthcare access, year-round infrastructure, job opportunities if you're not retired, and cultural amenities that aren't just for tourists. Some properties that are great for weekend getaways don't always work for everyday life.
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