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We’re having a little fun today. I’m putting on my Grinch hat and responding to a question from our mailbag: what are your thoughts on renting out a second or third home?

The short answer? When it comes to a second or third home, I have never been a big fan of renting it out. And there are a few reasons for that.

First, it mucks up the tax waters. It forces you to answer a question that is never as simple as it sounds: Is this a second home, or is it rental property? The classification matters more than most people expect, and I have seen too many families get tripped up by the unintended consequences.

The second issue is lifestyle. Do you really want an owner’s closet or an owner’s room where you’re constantly putting your things in, taking your things out, locking everything up, and worrying about what’s happening while strangers are in your space? That alone is enough to make many people rethink the idea.

That said—I will admit, I am coming around to it a little bit. Not all the way, but a little.

Because if you own a truly high-end second home—something that rents for $20,000 or $25,000 a week—the people who can spend that kind of money are generally not slouches. They are not coming in to trash your place. And I have seen neighbors of mine generate $20,000-plus for a month here or a month there while they take a long trip or a 40-day cruise. That makes sense to me. I get it.

Still, I am not fully warmed up to it. I understand why someone would do it, but I also know where the line should be.

Here is the part I feel strongly about:

If the rental income is an important part of you being able to buy the property in the first place or going forward, I do not think that is a good idea. That turns a second home into a dependency, and second homes should not be built on dependencies. I don’t meet many clients that even suggest it, but it is true that every once in a while, our desire for a dream that sounds great tempts us to make exceptions. Don’t.

Questions to Consider Before Renting Out a Second Home

  • Am I renting by choice or because my budget requires it?
  • How complicated will the tax classification be, and is it worth it?
  • Does the lifestyle trade-off—owner closets, turnover, management—fit what I actually want?