Buy a Vacation Home or Invest Elsewhere?

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u/Monopoly · Joined Oct 2024

Deciding between a vacation home with Airbnb income or investing? Compare returns on both, factoring in home value, rental profits, and investment growth!

Last update Oct 2024
  • Scenario 1: Buying it - Net Gain
  • Scenario 2: Investing the Money Elsewhere
  • Which One Is Higher (%)

This chart compares the future value of buying a vacation home (including Airbnb profits) versus investing. Look for which scenario yields higher net gains over time, factoring in expenses and returns (and unquantifiable personal enjoyment)

# Years from Now

Try your numbers:

The cost of the vacation home.

A =

Percentage of the home price paid upfront.

B =

Annual Interest Rate for the home loan.

C =

Duration of the mortgage.

D =

Yearly tax cost for the home (municipal tax, school tax). This is assumed to increase by inflation.

E =

For home maintenance and upkeep.

F̃ =

Estimated percentage increase in home value per year.

G =

When you're not vacationing there, you can make some money from short-term rentals. Estimate the market, effort level, and personal usage; or, set a target profit to simply evaluate the feasibility your vacation home project.

H̃ =
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Time Value Assumptions

Heads Up!

If you're using Cost Basis (cb) for calculating capital gains:

Please be aware that very few countries currently use inflation-indexed cost basis. Double-check your local tax rules before publishing.

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How is Cash Value calculated?

Assume 1.5% closing cost for buying and 6% for selling. Account for all owner expenses and short-term rental income.

Decisions / Expectations

(Expressions are evaluated at Year 0 only.)

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Calculations

(Expressions are evaluated at every year.)

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