Should You Buy a Vacation Home First?

Why some renters are buying second homes first, and what you need to know before you do.

Key Takeaways

1. Buying a vacation home first isn’t crazy, but it’s not a shortcut.

2. Try before you buy, and spend at least a week or more than one season renting in the town before you buy.

3. It’s a lifestyle choice, not a wealth-building strategy.

In the darkest days of the early Covid-19 pandemic, so many of my New Yorker clients were in full-on headless chicken panic mode. And with good reason. The vibes in New York City were terrible. Sirens went off constantly, fear of getting sick and dying was very real, and normal life was brought to a standstill. One and two-bedroom apartments started to feel like tiny prisons. Spouses talked over each other on Zoom calls and kids tried to remote into the classroom all while sharing too-small spaces.

Cute apartments that seemed perfectly suited for people who went to an office and were often out and about most nights were suddenly uncomfortably small. What did us New Yorkers do? We went on Zillow. We looked north! To the great plains of “upstate” New York. And apparently, we were all looking at the same listings because the demand for that $800,000 home with 2-3 bedrooms and some land skyrocketed.

What I said to my clients then, to talk them out of a panicked decision, I believe still holds true: don’t make a large purchase unless it’s been in your financial plan for more than a year. And by financial plan, I mean loosely a goal you are working towards. There were some clients who had been looking at a second home long before the pandemic started, and for many of them, the discomfort of the pandemic was the kick in the butt they needed to make the purchase. So we went ahead and helped them make the purchase. But for everyone else who was desperately seeking a short-term solution to their discomfort, we had some long, hard conversations because most purchases made on a whim end with regret.

Now, with the panic of the pandemic in our rearview mirror, we’re back to a normal level of housing panic with people asking themselves: WHY CAN’T I AFFORD TO BUY A HOUSE IN THE PLACE I LIVE?! Renting in a high-cost city can feel like financial purgatory. You’re doing all the “right” things: saving diligently, maxing out your 401(k), living below your means. But the idea of putting down roots, owning something, still feels laughably out of reach. I wrote extensively about this recently:

The Rent vs Buy Debate

When a decent house that can accommodate their family seems squarely out of reach, some people start entertaining a wild idea: What if we bought a more affordable vacation home before buying a primary home?

This may sound backward or even reckless. And if I’m being honest, it is. But for a certain group of financially stable renters—those with high incomes, good credit, and a serious need for space and quiet—it’s actually not that wild.

The plan to execute buying a vacation home ahead of a primary one goes something like this: keep renting in the city where you work and buy a cabin or small home in a more affordable area a couple of hours away. Use it to unplug on weekends. Let it be your foothold in the real estate market. Scratch the ownership itch on something that you CAN afford, when buying in your city is damn near impossible. Paint the walls, get your DIY on, do your home ownership thing with a small “starter home” that you may only spend 10% or less of your time in.

But can the math make sense?

Rent Where You Work, Own Where You Play

There’s real logic to this. Housing prices in major cities are absurd. Maybe you could afford to buy where you live, but it would leave you stretched, locked into a commute you hate, or making peace with a house that doesn’t feel like home.

Buying a vacation home—someplace slower, quieter, cheaper—lets you dip a toe into homeownership without sacrificing your quality of life during the week. It gives you space to breathe, hike, decompress. It turns weekends into mini-retreats. And emotionally, it gives you that deeply satisfying sense of “I own something.”

But just because it feels good doesn’t mean it’s the best financial decision.

You Can Afford It... But Should You?

Let’s say your take-home pay is $13,000 a month. You’re putting away $4,000 of that each month for a down payment, and you’ve got no debt. On paper, you can absolutely afford a $400,000 cabin in the woods.

But owning two “homes” (even if one’s a weekend spot) comes with serious ongoing costs: not just the mortgage, but property taxes, homeowners insurance, utilities, maintenance, and seasonal extras like snow plowing or repairs.

If your current housing costs are 25–30% of your income, this second property could push that figure closer to 50%. That’s a dramatic shift. And it doesn’t include the very real risk that you simply won’t use it as much as you think.

That peaceful cabin could quickly become an expensive guilt trip you only visit out of obligation.

Try Before You Buy

Before you fall in love with the idea of a place, make sure you actually like being there and that you can actually get there.

I have two RULES for my clients before they buy a vacation home:

1. They must pull out their calendars and identify AT LEAST six weekends in the next six months when they could potentially spend time at this vacation home. What we often find is that people are just too busy and wrapped up in the minutiae (or excitement) of city life to get away and they actually might be better off renting someone else’s place. Try it, actually look at your calendar. Even if you can afford it, do you have time and space in your life to retreat¹?

2. They must spend at least one full week in the area during high season, and again in the off-season. The charming summer hiking town might turn into a ghost village in February. Or the cozy winter ski base might be gridlocked every weekend once tourist season hits. Try renting for a while: a long weekend is not enough. Stay in the town. Go to the grocery store. Sit in traffic. See what the place feels like when the novelty wears off. If you still love it then, you're a lot closer to making a smart decision.

The Mortgage Could Haunt You Later

If you plan to buy a primary home down the line, this vacation home could complicate things, specifically your debt-to-income ratio (DTI), which lenders use to decide how much you can borrow.

When you already have one mortgage on your record, even if it’s a second home, not a rental, that monthly payment gets factored into your DTI. And it could limit your ability to qualify for a loan on a future primary residence, especially in a more expensive market.

Also worth knowing: while there isn’t great evidence that mortgage rates for second homes are actually higher, from personal experience and advising hundreds of clients, it’s more difficult to get a mortgage for a second home. Banks don’t like second mortgages because they’re seen as a riskier investment, and perhaps one you won’t care about as much because it’s your second home. So while you can get a loan, the terms won’t be as favorable as what you might get for a primary residence.

Is the Cabin Really Your Forever Happy Place?

In the beginning, you may go to your vacation home all the time. You’ll fall in love with the little general store in town. You’ll buy a cute Jeep to keep up there. You’ll take up fly fishing. But habits shift. Life gets busy. The world is big and you may want to explore it.

If you start going every other weekend, or once a month, you’re effectively spending thousands of dollars a year for a few nights in the woods. That might still be worth it to you. But you should run the numbers the same way you would for a timeshare or luxury gym membership: What does each use actually cost?

In many cases, you could rent high-end cabins and Airbnbs for less than the sunk cost of ownership and with none of the risk. It’s worth reiterating: buying a vacation home is personal preference! Some people LOVE their vacation homes and it’s worth it. I’m not trying to talk you out of this, I just want to make sure it’s the RIGHT decision for you and that you’ve spent a lot of time thinking about it and testing it out.

Don’t Forget the Bigger Picture

Before you make any major purchase, it’s worth zooming out. How’s your retirement picture looking? Are you on track for your long-term goals? Is this a distraction to scratch an imaginary itch because your friends did it? By the way, you should remember that, as the saying goes: it’s better to have a friend with a boat than to own one yourself. Let’s apply that same logic here: cozy up to someone with a vacation home who you can visit instead of shelling out the financial-plan-altering down payment yourself.

You also won’t get certain tax breaks or homestead exemptions if the property isn’t your primary residence. And if your life situation changes—new job, new baby, new city—you may find yourself saddled with a property that’s hard to offload quickly. Sometimes it works out, sometimes it doesn’t.

Quick little real-life anecdote for you: a close friend bought a very pretty home in a town in upstate New York in 2018. They spent many summer weekends there at first, and then long stretches of time there during the pandemic. But last year, the house started showing signs of age, and they needed to make some serious upgrades to make it retain heat better in the winter. They were preparing to welcome a second kid and while technically they could STILL afford to keep the upstate place, they decided to sell it. I don’t know the exact purchase and sale price, but my friend said, “We got a good price. I don’t think we made money but I’m happy with the time we had there and I’m just letting it go.” Damn, if that isn’t a good relationship with money, I don’t know what it is. I share this story because I constantly want to reiterate in this newsletter that you almost ALWAYS have a choice in how you spend your money. It’s okay to look back on big purchases and see them as missteps. You won’t always make the right decision and that’s okay. As long as you have some semblance of financial security.²

When It Might Actually Make Sense

So who should consider buying a vacation home before buying a primary residence? If you’re already maxing out retirement accounts, have a healthy emergency fund, no debt, and enough cash flow to cover two homes without strain, you’re in a solid position to explore it.

Some people can make money on renting out their vacation homes but please don’t count on it! I urge you to think of this as an expense, not a revenue-generating business!

And if this property truly brings joy, provides rest, and doesn’t derail your other financial goals? Then sure. Buy the cabin. Light a fire. Sit on the porch with your overpriced thermos of pour-over and whisper “I own this” into the trees.

But if you’re doing it just to feel like you’re “finally getting ahead,” or because your friends just closed on something? Be careful. You’re not skipping a step, you’re adding one. And it’s a step with splinters, wildlife, and a plumbing system from 1987. Next week we’ll explore the joyous pitfalls of home ownership :)

Parting shot: Buying a vacation home is a lifestyle choice dressed up as a financial one. And that’s okay—as long as you’re honest about which part you’re prioritizing.

The best $20 I spent this week: I’m reading a new novel I love called King of Ashes³ by S.A. Cosby.

PS…I’m looking for volunteers for my AM I SAVING ENOUGH column.

Message me with a sentence about your money worries.

1. This is also a good exercise to remind yourself to go on vacation or at least block off time for yourself.

2. I’m sending you back to the savings order of operations. You’ll be able to carry on when you have to change your mind.

3. Disclaimer: This post contains affiliate links to books that I like. If you click through and make a purchase, I earn a small commission at no additional cost to you (it’s 10%). I only recommend books I genuinely find useful. I use Bookshop.org for all my links because I believe independent bookstores are the greatest sources of discovery and knowledge sharing we have. Support your local independent bookshop or order online at Bookshop.org.