Vacation Homes – the Reality

Are vacation homes good real estate investments?

On May 3, 2012 I explored the topic of whether you should buy vacation homes as a real estate investment. I promised some juicy details on our vacation home experience, financial and otherwise.

In this post, I will reveal the secrets of our actual results for the past several years. You will be able to see for yourself the reality of owning a vacation rental.

Property description

I bought a 3 bedroom, 2 bath condo on Tablerock Lake, right on the shore line, in a quiet residential neighborhood. It was part of a new development and condo association, built on the property of a long time resort and developed by that resort owner. There are two buildings, 3 stories each with 9 condo units in each building. The resort owner has a boat dock, which she made available to the condo renters and owners and rental boats. There is a small pool and a playground as well as a new outdoor picnic and gathering area.

The condo rental management offered was from the resort owner, with no rules about getting other management. The resort owner came with long time clientele wanting to rent the units.

The property was just half a days drive from my home, and in a resort town that was actively marketing the area and developing it further. Year round, the weather is fairly decent, but the big seasons are spring fishing, summer lake and year end holiday time.

The shoreline is quite level, unlike most of the lake’s shores and access to the areas entertainment venues is quick and easy.

Financial results


Since I bought at the very height of the real estate boom, I have not yet realized any significant appreciation on the property. According to Zillow estimates, it may have appreciated about $10,000, but if I sold it today, I would lose money due to the sales commission, taxes and etc.

Opportunity costs

I paid cash in full for our condo, so I have no mortgage or interest payments. As you will see below, my income sometimes almost covers my expenses, so I am not making any year over year money on my capital. If I had invested the money spent on the condo, even in a bond fund, I would have realized gains. Unless the condo appreciates enough, the end-game financial result will be a net loss for me.


Initial start up costs


I rent a fully equipped condo – furniture, linens, cookware, dvds, games – everything.  When I bought, we bought a package of used furniture from the developer and they moved it in for me.  It added $7000 to the initial cost, but was cheaper than I could have done on my own.

Over time I spent an additonal $1200 or so on more furniture and furnishings (like lamps, pictures and etc).

Year over year income – expense – gain/loss

  • Year 1 – Gross Rents $11,800 Expense total $12, 000 -$200
  • Year 2 – Gross Rents $16,000 Expense total $12,000 +$4000
  • Year 3 – Gross Rents $12,500 Expense total $14,500 – $2000
  • Year 4 – Gross Rents $15,200 Expense total $15,900 – $700
  • Year 5 – Gross Rents $19,000 Expense total $17,800 +$1200

Keep in mind that we do not use the condo during the busy season. If we did, I would have a larger operating loss each year. Most income is realized in the month of July – the month we would most like to use the condo!

Note: Expenses do not include depreciation so for tax purposes I had a paper loss each year. If I ever have a gain, I will owe taxes on that.

Expense type breakdown

Management expenses include the following:

  • 38% of the rent – to cover booking, marketing, management of unit to meet health and safety regulations and attention to renter needs.
  • Supplies fee – each nightly renter starts out with a small supply of stuff – like coffee, sugar, creamer, popcorn, shampoos, soaps, toilet paper and etc. Plus the manager buys things as needed and charges them to my account (things like batteries and light bulbs) – $10 per stay (we pay this)
  • Cleaning – although each renter pays a $95 cleaning fee once per visit, I have to pay for an annual deep clean, carpet cleaning, bedspread and blanket cleaning, furnace filter cleaning and etc.  This is usually between $125 and $200 a year.


I just pay for sewer ($39 a month) and electricity (varies from $50 – $200 a month depending on use). My condo dues cover the cable and wireless internet.


I am required to hold a liability policy to cover at least a million dollars, plus I have the normal insurance for fire and etc. – about $300 a year

Professional fees

Lawyers, accountant – depending on what is going on this has varied between $1000 and $3500.


Our expenses driving down and back to work on the place include gasoline. I do get to charge these against income and reimburse myself out of the company.


$3,000 a year for real estate taxes to the county

Condo dues

$225 a month.


In an effort to increase rental days, I advertised on VRBO. You have to list for a year and it was around $550 when I did it. It did not seem to increase rentals for me as the management already had an ad on that site for units under management.

Changes to financial items

  • Taxes doubled – the area government decided we were a business – to about $3000.
  • Management fee percent increased – from 35% to 38% of rental income.
  • Cleaning fees (charged to owners when they use their own apartment) increased $10 to $95 per visit.
  • Special assessments – 2 for $500 each, one to restain the exterior of the buildings after only 3 years and one to build the new outdoor picnic and gathering area.
  • Condo association dues increased from $175 to $225 per month (covers pool maintenance, grounds-keeping, exterior maintenance, parking lot upkeep, and misc).
  • I started having our taxes done due to the complexity of nightly rental tax calculations – both for our company and our personal returns. – $1500 a year.

Family Bonding

Since buying the unit, we have been able to enjoy at least two long weekends each year with our children and their children – sometimes one family unit or the other uses it individually as well. It gets a bit crowded, having 6 adults, 2 teens and 2 toddlers in a 3 bed condo, but we enjoy it. We haven’t used it as much as I had hoped, but then my daughter-in-laws have been studying hard in RN nursing schools fro 3 of the last 4 years.

The grandchildren love going down as do I.

Owner community

There are about 15 – 16 families owning units in the condo association. Several do not participate in the nightly rental program and have raised concerns over some of the stuff we nightly rentals want to do. Several own a couple of units each and thus have a bigger vote in association doings. Rental management and relatives own several units, which sometimes makes for interesting conversations about fairness. Most owners are from out of town. I have not yet met most of them because I haven’t yet personally attended the annual meeting due to other commitments.

Agonizing Issues

Boat slip

I bought a boat slip in a non-existent new boat dock and had to sue to get my money back. I did successfully recover it – with interest at 9% and lawyer fees covered, but the experience was not pleasant. Now more than 50% of the condo association members are entering into a new agreement together to build a new boat dock in place of the one that is there. Since I opted not to participate (the owners are assigning 51% of their condo units to a ‘resort’ company to comply with Corp of Engineer rules on having a boat dock and I won’t do that) – I, nor my guests, will have the use of the new boat dock. I’m nervous about what they might decide to try to change in the condo association rules due to this venture!

Special assessments

I did not agree with either of the special assessment needs, but had to chip in regardless. I feel that some of my fellow owners either have a lot more money to throw away than I do, or they just don’t manage it all that well.

Condo management

Although our rental manger is a dear lady and has a faithful following of renters, she does own units in the condo and does rent them out – therefore I feel she is not totally fair in distributing rental nights to the rest of us.

Would I do it again.


Although we don’t use it as an extended family as much as I would like, I do feel that it has built a set of shared experiences and memories that are invaluable.

It is similar to my experience with the airline industry. I worked for TWA for several years and we as a family got to fly free. We took multiple air trips during that time. When I decided to leave, due to the company experiencing troubles, we said that with my salary increase at the new job we could just travel as much as we wanted. We didn’t. I believe the same would happen with vacations. If we didn’t have the condo, we wouldn’t stay together and bond the way we do no.

If you own a vacation property and are making money with it, please comment or contact me and give me your best tips!

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