Having your own piece of paradise can be a rewarding experience. However, the costs can pile up higher than your budget if you aren’t prepared. Many people consider the monthly mortgage and homeowners insurance but neglect to think of added utilities, specialized insurance and property management fees.

Renting your vacation home when you aren’t using it may generate some income, but you must balance that with all the associated costs. It may be a great choice if you have a nest egg set aside to build your family legacy or would like to invest in real estate. However, it’s a decision you should only make once you have all the information.

The dream of a vacation home is more expensive than the startup costs would lead you to believe. You may be able to afford the initial investment, but further recurring and unexpected expenses could transform your dream into a nightmare. However, this can be an excellent investment if you know what fees are coming.

1. Mortgage

Your mortgage is the most straightforward expense of the whole process. In most cases, your financing will progress in the same manner as your first house. However, second home mortgages often incur higher interest rates and require a larger down payment. You’ll also need to pay closing costs and other associated fees.

2. Homeowners Insurance

At the most basic level, you’ll need to purchase homeowners insurance for your second house. Unfortunately, you can’t just estimate doubling your current monthly or yearly coverage fee because insuring a second home usually comes at a higher cost than your first.

3. Specialty Insurance

You might also want to purchase specialty insurance depending on the vacation home’s location. Florida properties are beautiful and rent well but would benefit from a flood policy — most basic plans should cover hurricane damage. If you’re hoping to rent out your house, you’ll need a vacation rental policy and liability coverage in case anyone gets hurt during their stay.

4. Maintenance and Repairs

Like your primary residence, your vacation home will need regular maintenance and repairs. In fact, you’ll likely need to set aside even more money to maintain it if it’s in an area with severe weather or if you plan on renting it out.

Humidity and heavy rains sometimes complicate repairs and wear down your home faster. Similarly, renters add heavy use to your appliances, home systems, furnishings and linens. You’ll probably need to repair or replace items in a vacation home more often than in your main residence.

5. Property Taxes

As with any other home, you’ll need to pay property taxes yearly based on your state and county. In addition, you’ll need to collect income, sales and lodging taxes, if applicable in your state.

6. Utilities

Unfortunately, it’s not a good idea to leave the utilities in your vacation home completely off when you aren’t there. The Florida heat and humidity could severely damage your house and possessions if you never take measures to cool it down.

If you use your vacation house as a rental, you’ll probably pay even higher utility bills than in your primary residence. Guests don’t pay for electricity and air conditioning, so they usually have no qualms about leaving lights on and running the AC with windows or doors open.

7. Property Management

This expense is entirely up to you but can be well worth it in the long run. You should consider hiring a property manager if you live an hour or more away from your vacation home. Vacant properties are more susceptible to break-ins and unnoticed accidental damage. For example, if your basement floods or a window shatters, you’d want to make repairs as soon as possible.

Property managers can also take care of general maintenance like pool care, yard work and house cleaning, or at the very least hire out services to take care of that for you. You may be able to contract with one individual to manage your home, or you could hire a professional service.

8. Home Security

Your empty vacation home is a tempting target for burglars or squatters. You’ll want to invest in security services and equipment to keep an eye on your house, especially if you opt not to hire property management.

You get to decide the cost of your system. Lower expenses with some elbow grease and bargain hunting, or hire a company to install something for you and maintain security for a subscription fee.

How Much Income Can You Generate?

Florida is an excellent choice for a vacation home, especially if you plan to use it as a full- or part-time rental. The warm weather allows you to get the full advantage of your investment year-round.

The average estimated yearly rental income for Florida vacation homes is around $35,000. You can often get a beachfront property for less than $300,000, which could make the investment well worth it.

Is a Vacation Home the Right Investment?

Purchasing a vacation home should never be taken lightly. You’ll need a significant amount of money set aside for upfront costs and a good credit score to secure further financing. You’ll also need a steady income stream to support your primary residence and second property.

Renting your vacation home will bring in more money, but with its own additional costs. Play around with your finances and run through some worst-case scenarios to decide if owning a vacation home is right for you.