Barron's: What Retirees Should Know Before Buying a Vacation Home

Published January, 2020

By Dan Weil

While many retirees have considered purchasing a vacation home to escape cold winters, to rent out for income, or simply have a gathering place for far-flung family members, there are a number of financial matters to consider that could make ownership onerous.

Taxes, maintenance costs, insurance, and potentially rental-management expenses are among the factors that can make the difference between a peaceful passive investment and a problematic money pit. Depending on the location of the home, the cost of ownership may need to account for property taxes, utilities, and homeowners’ fees, among other things.

But there can be monetary benefits as well. A vacation home can appreciate in price over time, making it a potentially valuable asset. Or it could be an income-generating vehicle if you rent the home to guests either solely or during times when you’re not using it.

Still, one thing to keep in mind from the outset is that you shouldn’t view a vacation home primarily as an investment, says Tom Fredrickson, a New York financial advisor.

“It’s certainly a valuable asset, but it shouldn’t be thought of as a replacement for stocks and bonds,” Fredrickson says. “That’s because it’s not as liquid: You can’t count on selling a vacation home for a good price when you need the money.”

One of the first questions to ask before making a purchase is whether you can afford a vacation home in retirement.

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