Should You Keep or Sell Your Vacation Rental Property?

Whether it’s a cottage in the Hamptons or a bungalow in the Caribbean, owning a vacation property is a dream for many people. While you can use the home when you need an escape from your daily routine, a vacation property can be also a valuable source of additional income.

However, a vacation property can be costly to keep and maintain. And, with millions of hosts on platforms like Airbnb and VRBO, there is more competition than there was a few years ago, so a vacation home Generally, experts say property owners can expect a return on investment of 8% to 12%. However, due to competition and oversaturation in some markets in 2025, your return on investment may be in the range of 4% to 10%.  though your property’s profitability may vary based on its location, size, and amenities.

So, how do you decide whether to hold onto your property, or sell? There are several factors to consider, including your overall financial situation and property use:

1. Why did you originally buy the rental property?

Think about why you originally purchased the property. Did you solely intend your property to be a source of income as a short-term vacation rental, or did you have other plans? Did you consider using it in part as a vacation home for yourself, family members and friends? Did you ultimately intend for it to be your primary residence when you retire?

Compare its original purpose with how it’s been used since its purchase. For example, if you bought it as a retreat for you and your family—but you rarely get a chance to visit it—you may need to reconsider your situation and sell the property.

2. How much does it cost to keep the vacation rental property?

Even if your vacation property earns income through rentals, a property comes with bills. Monthly and annual costs may include:

• Mortgage payments
• Property taxes
• Homeowners association or condo association fees
• Utilities
• Maintenance and repairs
• Supplies and toiletries for guests

Additionally, consider how much time you spend managing rental listings, answering questions from prospective guests and scheduling services. Your time is valuable, and you may find that you’re spending more time than it’s worth.

3. Do you need to pay for added services or expenses?

If your vacation property is a significant distance from you, or if you’re short on time, it’s difficult to handle all of the property’s maintenance and rentals on your own. Chances are you will need to paint, make some repairs, or replace some appliances in order to get the price you want. And unless you plan on doing it yourself, you may need to pay someone to remove the trash, mow the lawn or shovel snow. It’s also a good idea to have a cash cushion available in case you have an extended vacancy.

From 2 a.m. phone calls about stopped-up toilets to messes left behind by guests, hiring a property management team and cleaning service can be a smart investment, but those expenses can affect your returns.

Additionally, you may need vacation rental insurance. Your existing homeowners’ insurance may not be enough to fully protect you from damage and liability, so you will want to contact your insurance agent for more information. This extra insurance coverage can be expensive, and it is important to do your homework and build those costs into the rent you plan to charge.

4. Are you able to pay your bills if your property doesn’t get rented?

When evaluating your ownership of a vacation property, consider your overall financial situation. If you’re in a comfortable spot with a large emergency fund, you may have no problem affording a vacation property even if it doesn’t get rented out every week or it’s vacant for a season. As evidenced during the COVID-19 pandemic, unexpected emergencies and periods of uncertainty can occur, so having a safety net is key.

In the past, tourist destinations have been impacted by all sorts of unplanned events: disease, natural disasters, terrorism and political upheaval, etc. The ability to attract tourists after these events depends in large part on whether properties have the support of the tourism industry (tourism boards and tour operators, for example).

Here are some things to consider: Is your property in or near an area where people will still want to visit, regardless of issues? Is the chief attraction the natural beauty (a beach, desert, lake, mountains, etc.) that will always bring people to the area? If your property is in an area where you don’t live, research how the town and nearby businesses have fared. Talk to some real estate professionals and local business owners to gauge their level of optimism on the area’s potential to bounce back.

But, if your finances are tight, and a missed rental affects your ability to pay your bills on time, selling the property for a lump sum may be the wiser choice.

5. What is the vacation rental market like in your area?

Nationally, housing prices are relatively high. However, whether you should keep or sell a vacation property is dependent on what the real estate market is doing in your specific area. If home prices have climbed since you purchased the property, you may have accumulated a good deal of equity.

If the market is hot where you are, selling to lock in your equity gains may be a good choice. But, if the market is cooling, it may make more sense to hold onto the property.

6. What is your mortgage rate?

If you purchased your property when rates were relatively low—mortgage rates were under 3% in 2021—you may be in a solid financial position. Your mortgage is more likely to be affordable compared to loans at today’s higher rates.

However, if you purchased the property when rates were higher—rates were over 7.5% in 2023 —you’ll need to earn higher returns on your investment to justify the interest that accrues.

7. Can the vacation rental property serve as a long-term rental?

If there’s a market in the area for long-term rental properties, this option could potentially bring you a more stable source of income than marketing your property as a vacation rental. If you’re considering this, be sure to familiarize yourself with state and local regulations regarding renters’ and landlords’ rights and responsibilities.

Switching to long-term rentals may involve some added costs, such as the price of landlord insurance. And, because you want to know about the people renting your property, you’ll also need to budget for background and credit checks.

Consider all of your options.

Should you keep or sell your property? There’s no one-size-fits-all answer here. But, by looking at your goals and finances, you can figure out what’s right for you.

You may want to keep your vacation rental property if:

• It earns a consistent profit and covers your expenses
• You regularly use the property for personal use
• You have a relatively low mortgage rate and gained equity
• You’re attached to the home, and have a safety net to cover unexpected costs

You may want to sell your vacation rental property if:

• You rarely visit the property
• Maintenance costs and services are expensive
• Money is tight and you have cash flow issues
• It’s become stressful to manage

If you’re still torn, think about some alternative options. For example, if your payments are too expensive, refinancing your mortgage could be a smart alternative to selling. You could potentially qualify for a lower rate or different term to reduce your monthly payments.

A vacation home can be a smart investment, a beloved retreat—or a major stressor. Thinking about your needs and how the property fits into your life will help you make the best choice for your financial goals and lifestyle.