Hidden Costs of Owning a Vacation Property and How to Prepare

30 May 2025

So, you've been dreaming of owning that perfect vacation home—maybe a cozy cabin in the mountains or a beachfront paradise. The idea of having a getaway spot that’s all yours is exciting, no doubt. But before you jump in headfirst, it's important to understand that the purchase price is just the tip of the iceberg.

Owning a vacation property comes with a lot of hidden costs that can quickly add up and catch you off guard. Let’s break them down and, more importantly, talk about how to prepare so you don’t end up in over your head.

1. Property Taxes and Insurance

Property Taxes: More Than You Expect

Just because it’s a vacation home doesn’t mean Uncle Sam is giving you a break. In fact, depending on where your property is located, property taxes could be higher than what you’re used to paying on your primary home. Some states and counties charge higher rates for second homes, especially in popular tourist destinations.

How to Prepare:
- Research local property tax rates before buying.
- Ask whether second homes are taxed at a higher rate in the area.
- Factor annual property taxes into your budget so you’re not caught off guard.

Insurance Costs That Might Shock You

Insurance for vacation properties can be significantly more expensive than what you pay for your primary residence. Why? Because these homes are often left vacant for long periods or are in high-risk areas (think hurricanes, wildfires, or flooding). Standard homeowners insurance may not be enough—you might need additional coverage, such as:
- Flood insurance (essential in coastal or flood-prone areas).
- Windstorm insurance (for properties in hurricane zones).
- Short-term rental insurance (if you plan on renting it out).

How to Prepare:
- Get multiple insurance quotes before buying.
- Consider whether additional policies (like flood or wind coverage) are necessary.
- Budget for rising insurance costs, especially in disaster-prone areas.

2. Maintenance and Repairs

Regular Maintenance Adds Up

Owning a vacation home isn’t just about relaxing by the pool or enjoying the fresh mountain air. Like any home, it requires upkeep. But because you’re not there year-round, small issues can turn into big (and expensive) problems before you even realize it. Regular maintenance costs can include:
- Lawn care and landscaping
- Cleaning services
- Pest control
- Pool and hot tub maintenance
- HVAC servicing

And let’s not forget seasonal tasks like winterizing a cabin or hurricane-proofing a beach house.

How to Prepare:
- Budget at least 1-2% of the home’s value annually for maintenance.
- Hire a reliable local property manager if you can’t be there to handle routine tasks.
- Set up regular service contracts for essential upkeep like HVAC and pest control.

Unexpected Repairs Can Hit Hard

If you thought maintenance was expensive, wait until something breaks. Roof leaks, burst pipes, or electrical issues can be costly, especially if they go unnoticed for weeks or months.

How to Prepare:
- Keep a separate emergency fund for major repairs.
- Schedule annual home inspections to catch problems early.
- Invest in a security system with cameras so you can monitor the home remotely.

3. Utilities and HOA Fees

Utilities: A Year-Round Expense

Even when you’re not there, the bills keep coming. You still have to pay for electricity, water, gas, sewer, internet, and trash pickup. And if your property is in a colder climate, keeping the heat on during winter (to prevent pipes from freezing) can add up fast.

How to Prepare:
- Estimate your monthly utility costs before purchasing.
- Look into energy-efficient appliances and smart thermostats to control costs remotely.
- Consider shutting off non-essential utilities during off-seasons.

HOA Fees: The Price of Convenience

Many vacation homes are in communities with homeowners' associations (HOAs), which means monthly or annual dues. These fees can be pricey, especially if the community offers amenities like pools, golf courses, or gated security.

How to Prepare:
- Read the HOA agreement carefully to understand all fees and regulations.
- Factor in annual increases—HOA fees often go up over time.
- Ask about special assessments (one-time charges for major community upgrades).

4. Property Management and Rental Costs

Hiring a Property Manager Isn't Cheap

Unless you live close enough to manage the property yourself, you’ll likely need a local property manager. A good manager can handle bookings, maintenance, and guest issues if you’re renting it out. But their services aren’t free—expect to pay anywhere from 10-30% of your rental income in management fees.

How to Prepare:
- Get quotes from multiple property management companies before committing.
- Read online reviews and verify their experience in short-term rentals.
- Factor management fees into your rental price to maintain profitability.

Marketing and Rental Platform Fees

If you plan on renting your vacation home when you’re not using it, you’ll need to list it on platforms like Airbnb or Vrbo. These platforms charge service fees, cleaning fees, and sometimes even occupancy taxes, which can eat into your rental income.

How to Prepare:
- Research the commission rates on different platforms.
- Include all expenses when setting your nightly rental price.
- Consider setting up a direct booking website to avoid some platform fees.

5. Travel Costs

Unless your vacation home is just a short drive away, you’ll have to factor in the cost of getting there. Flights, rental cars, gas, and even parking can add up every time you visit. If your goal is to use the home frequently, these travel expenses can make your dream getaway more costly than expected.

How to Prepare:
- Choose a location that’s easily accessible to you.
- Look for travel deals, airline miles, or rewards programs to cut down on costs.
- Visit during off-peak times to save on flights and transportation.

6. Legal and Tax Implications

Income Taxes on Rental Earnings

If you’re renting out your vacation home, even part-time, you may owe income taxes on the earnings. Many homeowners are surprised by how much they have to report—and pay—once tax season rolls around.

How to Prepare:
- Keep track of all rental income and expenses for tax deductions.
- Consult a tax professional to understand your obligations.
- Look into tax benefits or deductions for vacation rental owners.

Local Laws and Regulations

Short-term rental laws are constantly changing, and some tourist destinations have strict regulations (or outright bans) on vacation rentals. Make sure you know the local rules before buying, or you could end up with a home you can’t legally rent out.

How to Prepare:
- Check local ordinances regarding short-term rentals.
- Ensure you have the necessary permits and licenses.
- Stay informed about any changing laws in your area.

Final Thoughts: Is a Vacation Home Worth It?

Owning a vacation home can be an amazing investment, both financially and personally. But it’s not all sunshine and sandy beaches—there are a lot of unseen costs that can sneak up on you. The key is to plan ahead, budget wisely, and be fully aware of what you’re getting into before signing on the dotted line.

If you go into it with a solid financial plan, owning a vacation property can be a rewarding experience. Just make sure you’re not only looking at the purchase price—because the real costs come long after you’ve got the keys in hand.