Rent or buy?

You're retired. You enjoy living where you are now, but you want to get away for a couple of months every winter to play golf and sit in the sun. Should you rent or buy your Florida, Arizona, California, etc. vacation home? Does it make good financial sense to purchase a vacation home even for as little as $75,000 - $100,000?

Base cost of ownership. No matter what you buy, condo, single family house or mobile home, there are costs you will incur every month even if the place is not being used: taxes, insurance, maintenence and, in some cases, lot rental. Two hundred dollars ($200) per month (twenty-four hundred dollars per year) is not an unreasonable amount to budget for these expenses. For $2,400 you could rent a very nice condo or house for at least one month. Indeed, some mobile homes could be rented for two or three months for $2,400!

Other costs. If you pay cash for a $100,000 property, one of the hidden costs you will incur is the interest lost on the funds that you used to purchase the property. Simple 2.5% interest lost on a $100,000 certificate equals $2,500/year. Keep your $100,000 in the bank and use the $2,500 income it generates to pay the second month's rent.

Ownership as an investment. While it's true that there is the potential for rental income from your property, the peak season for rentals will be the months when you'll want to be there. Also, as an absentee landlord, you'll need to hire a management firm to take care of things for you.

ConclusionIf you'll be happy getting away for only two or three winter months each year, have your accountant run the numbers for you, rent vs. own.