Buying a vacation home comes with obvious rewards. But there are risks too, including the possibility that if you plan to rent the home for income, you may not earn enough to offset your expenses. That’s why it’s crucial to crunch the numbers carefully and estimate the cost of owning a vacation home before investing in a property.

The 7 main costs of owning a vacation home

The price of owning a second home can be steeper than you think. There are recurring costs that must be factored in, as well as unexpected expenses, such as a sudden breakdown of an appliance or major system. What’s more, if your rental income stream is interrupted, overall ownership can be more costly than expected.

Here’s a breakdown of seven major costs of second-home ownership.

1. The mortgage — with a chance of increased interest

Your biggest expense is likely to be your monthly mortgage payment. “Usually, a second home mortgage will run about 0.5 percent to 0.75 percent above the interest rate you’d qualify for on a primary residence,” says Polina Ryshakov, lead economist at Sundae, a San Francisco–based real estate marketplace that helps homeowners sell to investors.

As an example, let’s say you do your homework, scout around and pick what looks like a nice vacation property in sunny Tallahassee, Florida. The home price is $300,000. Your lender requires you to put down 25 percent (a higher-end estimate), or $75,000, on a 30-year fixed-rate loan, and your interest rate is 5 percent. In this scenario, your monthly principal and interest payment would be $1,471.

2. Costlier homeowners insurance

In addition to your monthly mortgage payment, the cost to insure your second home may be higher than for your primary home.

“The location, type of property and amenities will all affect your insurance costs,” says Bonnie Lee, vice president of property claims at Mercury Insurance. “The factors that make your location desirable may also be the things that make it more expensive to insure. For example, a beach home is more exposed to wind damage or hurricanes, and a mountain lodge is at greater risk for wildfires.”

Keep in mind that you may need special insurance coverage — like landlord insurance — if you plan on renting out your vacation home. This can also increase your premiums and deductible, Lee adds.

3. Property taxes

As with a primary residence, you’ll pay property taxes on a vacation home as well. This can vary widely by state and county or region. Using the previous example of a $300,000 home, you may pay around $9,000 in annual property taxes in Tallahassee (where the county tax rate was 3 percent in 2021) compared to the average national property tax of $3,785 (0.9 percent), according to ATTOM Data Solutions.

There are other taxes to consider, too, including income tax and sales and lodging tax. The combined sales and lodging tax rate for a second home in Tallahassee is estimated to be 12.5 percent, according to, which provides lodging tax rates in each state.

4. Repairs and upkeep — even when you’re not there

A vacation home needs upkeep just like any property, from lawn care, furnace tune-ups and a fresh coat of paint to gutter cleanings or caulk replacement. The labor and materials required to maintain your residence can add up quickly. Generally, experts recommend setting aside 1 percent of the total purchase price of the property for home maintenance each year. On a $300,000 vacation home, that would equate to $3,000 every year.

In addition, your second home will eventually require repairs and replacement of key items like appliances, lighting and plumbing fixtures or the HVAC system. Because the things that require repair often break down unexpectedly, you may not have the time or bandwidth to shop around for the best price on a service provider or contractor. In other words, repairs can sometimes be more painful in the pocketbook than you anticipate.

Many experts suggest also budgeting 1 percent of your home’s total purchase price for repairs. To be extra safe, it’s wise to salt away up to 3 percent for a combined maintenance and repair fund.

5. Managing the property

Unless you plan to monitor your vacation home (and if you’re renting it out, managing and booking the rentals) yourself, which can be close to a full-time job depending on the location and demand, it’s often best to hire a property management service.

“Expect to pay 14 to 35 percent for these services, based on your market, plus potential fees,” says Sarah Kruse, a Portland, Oregon–based real estate agent. “Price around and know what you’re paying for. If you go with a budget company, you’re likely to get budget-level care.”

6. Security

Because you won’t be there as often as you would at your primary residence, it’s smart to beef up your second home’s security. That means buying and installing equipment like a video doorbell and outdoor cameras, and perhaps a home alarm system that’s centrally monitored (meaning it will alert local police if a breach occurs).

Equipment costs vary, but are generally more expensive if professional installation is required. And 24/7 monitoring services often require a monthly or annual subscription that can equate to several hundred dollars a year.

7. Decor and furnishings

On top of all these costs, don’t forget about expenses associated with furnishing your property. Furniture and decor such as a bedroom or dining set and patio furniture can quickly set you back a few thousand dollars. Plus, these items wear out quicker if you’re hosting lots of short-term rental guests every year.

“Always ask about buying a furnished vacation home,” recommends Ryshakov. “Fortunately, sellers in many vacation markets often list homes with all the furnishings included.”

Pros and cons of owning a vacation home

Owning a vacation home can be costly, but you might consider purchasing and managing it as a joint venture with relatives or friends, which can lower your risk. You may also be able to deduct many expenses on your tax return.

According to Kruse, buying a vacation home is a great way to own your very own piece of paradise. “It can be a place where family and friends build lasting memories together,” she says. “This could end up being your retirement home down the road. And it could be a great investment opportunity if you rent it out while you’re not there. Rental income could cover your mortgage and the costs of annual vacations. In some markets, you might even make a profit above and beyond covering these costs.”

However, Ryshakov notes that owning a vacation home doesn’t always make sense for everyone. “Depending on the market, second homes historically often don’t appreciate in value as desired due to the lack of nearby growing economies,” she says.

Also, vacation homes can be more challenging to finance than primary homes. “Lenders often expect a minimum down payment of 30 percent on second homes,” Kruse says.

How to prep to buy a vacation home

There are several steps involved in finding and purchasing a vacation home. If you’re considering buying a second home, Kruse offers the following tips:

  • Scrutinize your finances and calculate what you can afford.
  • Choose a skilled real estate agent experienced with vacation properties who can help you locate the best deals.
  • Look at markets carefully. Is the property near water or a beach, which many vacationers prefer? Will it snow in the colder months? Is it near coveted amenities? Is it served by accessible roads and a nearby airport?
  • Get the home professionally inspected.
  • Shop around for lenders — you may get the best deal with a local lender from the market you’re interested in. Compare rates, down payment requirements and terms prudently, and calculate your total closing costs so you know your complete financial investment before purchasing.