Want To Reach FI Sooner? Join more than 18,000 others and get new tips and strategies from Can I Retire Yet? every week. Subscription is free. Unsubscribe anytime:

It was a crisp, cloudless autumn day in 2004. My son and I set off on mountain bikes from a trailhead in rugged north Georgia. We climbed gradually on an abandoned logging road. It led up through beautiful old hardwood forest to near the summit of a stately mountain. We leveled out, then began the descent toward Lake Blue Ridge. We glided downhill on perfect trail, hugging the contours, coasting through the fall leaves.

After a few minutes, we veered across the back of the mountain. Ahead, we spied an odd notch in the slope, cut by heavy equipment. Arriving there shortly, we found ourselves at a cul-de-sac in a new vacation home community: A half-dozen half-million dollar homes were spread across the mountainside, rustic timbers, green lawns, and white driveways beckoning. The houses were furnished, but this was a ghost town: The driveways were empty, the homes were uninhabited….

In my decades of mountain rambling I’ve become more and more accustomed to hiking, biking, or climbing to reach remote locations and discovering neighborhoods of sumptuous properties, carved out of the wilderness. The vast majority of the time, the homes are unoccupied — empty monuments to the wealth being created in far-off cities.

At first, I’ll admit, I was a little jealous. There were certainly some lovely homes in some spectacular locations. At one point, stressed and bored by my regular job, I began to consider buying a vacation property of our own. I was earning enough. We could get a mortgage easily, maybe even pay cash. Perhaps a vacation home would cheer me up? A cute little place in the mountains where we could “get away” for weekends or longer.

I spent a few days checking out properties near some of my favorite North Carolina mountain towns. Then the economic and psychological reality hit me: I was just trying to anaesthetise myself to my job by throwing money and time into another project. I was looking at dropping a 6-digit sum, and substantial time and effort, into buying and maintaining a remote property. And I would be doing that mostly so I could daydream about it while I was at work. If I was lucky, I’d spend a few weeks and a few weekends there each year. The novelty would probably wear off after a few visits. Then, the other 40-50 weeks of the year, I’d be paying for it. That didn’t sound like the short path to true freedom and happiness….

Recent statistics on vacation home ownership confirm my realization. If you buy a vacation property, there is some possibility that you can defray your expenses by renting it out occasionally. But there is little realistic hope that it will pay for itself entirely while not burdening your finances or free time in some form.

HomeAway reports that only about one-half of vacation homeowners are able to cover even three-quarters of their mortgage payments by renting their home. And that doesn’t include management or maintenance costs. The reason that vacation homeowners struggle to cover their costs is simple: occupancy rates are very low. Don’t be fooled by statistics about occupancy rates “during season.” You’ll own your vacation home, and pay its costs, year-round. According to the footnote at HomeAway, the average owner is able to rent their home to other vacationers just 18 weeks out of the calendar year!

Adding insult to injury, “Vacation rental owners spend an average of nine hours per week marketing and managing their vacation rental properties.” That’s a full workday. And more than one-third of those owners aren’t even able to spend as much as two weeks at their own vacation home over the course of the year.

A real estate expert writing at Zillow reports that the operating costs of a vacation property are like the hotel business, with expenses in the range of 60-75% of revenue. By contrast, a modest single home or apartment rental has expenses in the range of 35-45%. The detailed analysis of a vacation rental in San Diego shows a cash on cash return of negative 10%.

High expenses. High workload. Low fun. That’s the vacation home ownership experience, on average. You might do better. There are success stories. But you need to investigate very carefully, because the odds are against you. For starters, to run the real numbers on a property of interest, you’ll need full disclosure from the existing owner on occupancy rates and expenses. And that may be hard to get.

Yet, I’ll admit to the allure of owning a personal vacation property. As described, I was tempted at one low point in my career. Ultimately we identified a more reasonable “getaway” solution, for us. That came in the form of a small, Class B RV. It has many of the positive attributes of a vacation home, without some of the liabilities. The upfront and maintenance costs are decidedly lower. And, importantly, an RV is mobile — we aren’t stuck with taking all our vacations in one place. (In the winter, or for short getaways, we still have our pick of beautiful vacation rental homes on the web.)

Yet an RV does have some vacation home liabilities. It depreciates quickly (we bought ours used), and you can’t typically rent it out. There are real, ongoing maintenance headaches. When I went to get ours out of winter storage this year, the tires had deteriorated, an air spring was leaking, and the windshield was cracked. Total cost: about $1500. We own one of the smallest, cheapest RVs to operate. Even at that, due to maintenance costs, and relatively low gas mileage, we have to use it carefully to ensure we actually break even on vacations.

As for most real estate decisions, there is no simple rule of thumb for buying vacation properties. The odds are stacked against you financially. But ultimately you’ve got to run your own numbers on renting versus owning, and consult your heart. Many of the arguments for home ownership, vacation or otherwise, are more emotional than financial. There are reasons why you could choose to own a vacation home despite the costs: pride of ownership, repeat vacations, the joy of sharing with family and friends, as a fixer-upper hobby, or to “lock-in” an ideal retirement location for the future.

Just be advised that liquidity and investment capital are more important than home ownership to a successful retirement. Many boomers are finding themselves with most of their wealth stuck in property — house, furnishings, cars, and other “stuff.” Trying to prepare for retirement by buying still more property years in advance could be an exercise in futility. We didn’t truly understand where we wanted to retire until we had been on the road exploring our options for six months after our retirement. Even now, though we love our ideal retirement location, we are happy to rent here, because we don’t know for sure what the future will bring….