When you get ready to relax and unwind, what comes to mind? Perhaps it’s the spot on the beach you’ve been traveling to over the last 10 years, or maybe it’s an adventure in the Galapagos.
Since the pandemic, many physicians have considered either purchasing a vacation home or increasing their travel fund. Let’s take a closer look at the advantages and disadvantages of both and the factors you should consider before making a decision.
Buying a Vacation Home: Pros and Cons
If you’ve ever been to a destination that has taken your breath away, you’ve probably considered buying a vacation home there. While it may seem like pure bliss, there are several advantages and disadvantages of buying a vacation home that you should consider.
4 Advantages of buying a vacation home:
- Opportunity for a permanent getaway. Buying a vacation home means never having to worry about a hotel or other lodging accommodations. If you have an unexpected free weekend, it’s much easier to travel when you have a home to go to! You can also vacation like a local and become a member of the community.
- Potential for rental income. Since you won’t likely be using the home most of the time, you can rent it out to other vacationers so it doesn’t have to sit vacant. This extra income can go towards the mortgage or other upkeep expenses.
- Investment of property ownership. With a vacation home, you have a real estate investment that can diversify your investment portfolio—unlike when you stay in hotels or Airbnbs. Your money is working for you.
- Retirement preparedness. Having a vacation home lets you immediately retire to a destination you love. You don’t have to wait for the perfect home to come along, because it’s already in your portfolio!
4 Disadvantages of buying a vacation home:
- High upfront costs and ongoing expenses. Owning a vacation home isn’t cheap, no matter what kind of vacation home you buy—home, condo, or shack! The location of your vacation home will significantly impact total expenses. For example, if your home is on the Floridian coast, you may have to prepare for possible hurricane damage, which can be quite costly.
- Maintenance and management responsibilities. Like your permanent home, vacation home expenses go beyond the mortgage. You must prepare for utilities, insurance, taxes, miscellaneous maintenance, and an HOA fee (if applicable).
- Limited flexibility and location constraints. Once you own a vacation home, you will likely want to spend as much time as possible there, which can impact your other travel goals. You may have fewer travel opportunities to other destinations.
- Property management. Whether renting the property or not, you will still have to provide regular maintenance, like mowing the lawn or ensuring the pipes don’t freeze. If you opt for renting, you will be responsible for cleaning up after your residents.
Increasing Your Travel Fund: Pros and Cons
Traveling the world and experiencing new cultures can be an incredibly rewarding experience! But just like buying a vacation home, increasing a travel fund has its own share of pros and cons.
3 Advantages to increasing the travel fund
- Flexibility to explore various destinations. With more funds dedicated to traveling, you can explore areas you never thought possible. Whether it’s a European excursion or a safari adventure in Africa, you have the freedom to see the world how you please.
- No additional financial burden or responsibilities. No vacation home means you don’t have to worry about renters destroying your couch or paying an additional mortgage. There are no extra expenses to a travel fund besides what you’re contributing.
- Ability to adapt to changing travel trends. Trends and fads are always changing, and having a healthy travel fund means you can jump on the trends that catch your eye. If you work remotely on certain vacation days to stay even longer, nothing can stop you from traveling around the world!
3 Disadvantages of increasing the travel fund
- Possibility of fluctuating travel costs. Depending on your vacation destination, traveling can be very expensive. You will need to consider transportation, meals, the activities you’d like to participate in, and the time of the year you will be traveling.
- Lack of permanent vacation space. No funds for a vacation home means you don’t have a weekend getaway on standby.
- Dependence on availability and accommodation options. Without a vacation home, you will be at the mercy of local accommodations. During peak season, local hotels and Airbnbs will likely sell out months in advance, so you must prepare and plan early.
Additional Factors to Consider
Whether you purchase a vacation home or increase your travel funds, there are financial impacts to consider.
If you have your heart set on a vacation home, take the time to map out every potential expense (mortgage, down payment, property taxes, repairs, utilities, etc). What are the potential returns on investment? Will renting out the home cover additional costs? Will you need additional help to manage the property? Compare those expenses to increased traveling.
You should also consider your lifestyle preferences and future plans as you make your decision. Do you still want to travel across the globe as often as possible? Or do you find yourself returning to the same area year after year? Weigh the importance of stability versus having a variety of vacation experiences.
Think about your long-term goals. Do you want to live in a different area in retirement? Would buying a vacation home impact your other financial goals? Or is buying a vacation home a goal you’ve been working toward? There’s no right or wrong answer; it’s about what you want and what makes you feel fulfilled.
Make the Decision With a Trusted Partner
Buying a vacation home or increasing your travel funds is a deeply personal decision and depends on your current financial status and future goals. If you’re still unsure, you can explore alternatives and hybrid options like short-term rentals, home-sharing platforms, or vacation home timeshares.
When it comes to any major financial decision, it’s crucial to seek a trusted professional for advice. Our team at Vestia can help you evaluate your options so that you can make a choice that aligns with your goals and values. Get in touch with our team today!