Net Carry Rate: What Vacation Homes Really Cost

A $750,000 lake house rented at a national-average occupancy rate generates somewhere around $40,000 in gross revenue — and after a property manager’s cut, maintenance, and the mortgage on a second home priced into 7%-plus territory, the owner is still writing checks for roughly $30,000 to $40,000 a year just to hold it. That gap between the rental income people imagine and the carrying cost they actually absorb is the number this analysis exists to quantify.

Most coverage of vacation property fixates on appreciation and the fantasy of a self-funding getaway. The carrying math tells a colder story. To make the comparison honest across price points and markets, every property below is scored on a single figure: the Finluxy Vacation Home Net Carry Rate — annual net carrying cost after rental income offset, divided by purchase price, expressed as an annual percentage.

The numbers that define the decision

Sources: Redfin/HMDA (2024); Curinos (April 2026); AirDNA (2025); industry management-fee surveys (2025–2026). The 0.25%–0.75% premium reflects the spread quoted across major lenders as of early 2026.

One data point reframes everything that follows. second home mortgage rate premium figures show second home loans averaging 7.60% in April 2026, per Curinos — and second homes carry a median value of $495,000 versus $385,000 for primary homes, according to Redfin’s read of 2024 mortgage data. Higher rate, higher price, on a property occupied a fraction of the year. The leverage cuts the wrong direction.

What the carrying cost is actually made of

Strip the romance and a second home’s annual cost decomposes into six lines, each of which behaves differently from the equivalent expense on a primary residence.

Mortgage PITI dominates. At 7.60% on a $495,000 property with 20% down — a $396,000 loan — principal and interest alone run about $2,800 a month, or roughly $33,600 a year, before taxes and insurance. The second home cost guide for $150k+ buyers breaks down why the rate premium and larger down payment compound: lenders price second homes as higher-risk because borrowers default on the vacation place before the primary roof.

Property management is the line owners most consistently underestimate. Full-service vacation rental management runs 20% to 30% of gross rental revenue — the framework figure this cluster uses, and one borne out by 2025–2026 industry surveys placing full-service fees broadly in that band. On a property grossing $40,000, that’s $8,000 to $12,000 evaporating before a single other rental expense. The economics of property management fees for second homes determine whether a rental property clears its costs or merely subsidizes the manager.

Maintenance on vacation properties runs higher than on primary homes — 1% to 2% of value annually, because turnover wear, weather exposure, and deferred attention from an absentee owner all compound. On a $495,000 home that’s $4,950 to $9,900 a year. Utilities run full-year or partial depending on whether the property sits dark between stays. HOA or community fees, common in resort and ski markets, add a fixed annual layer. And travel to and from the property — a cost no spreadsheet on a primary residence ever carries — is real money for a household flying to a destination several times a year.

Against all of that sits rental income, net of management fees and vacancy. At AirDNA’s 2025 national occupancy of 54.9%, a property is dark nearly half the available nights — and that figure reflects nights the listing was *available*, not 365 days. The second home rental income offset rarely covers the full carry. It dents it.

The Finluxy Vacation Home Net Carry Rate, modeled three ways

To make the abstraction concrete, here are three composite properties at price points typical of $150k+ buyers, each run through the full TCO model and scored on the Finluxy Vacation Home Net Carry Rate. Rental revenue assumes the national 54.9% occupancy benchmark applied to a market-typical nightly rate; readers targeting a specific market should substitute AirDNA Rentalizer figures for their address.

Model assumptions: 20% down at 7.60% (Curinos, April 2026); management at 25% of gross (midpoint of 20%–30% framework range); maintenance at 1.5% of value (midpoint of 1%–2%); occupancy reflecting AirDNA’s 54.9% national 2025 benchmark applied to market-typical nightly rates. Property management fee shown is calculated on gross rental revenue. Figures rounded. Composite illustrations, not appraisals.

Read the bottom row carefully. Even with rental income running at a healthy national-occupancy assumption, none of these properties carries itself. The lake house at the median-adjacent price point still costs its owner roughly $24,700 a year net — a 5.0% Net Carry Rate. The larger properties land near 5.9%, meaning the owner pays close to 6% of the purchase price every year for the privilege of holding, after every rental dollar is counted. Note the distinction the model preserves: gross rental revenue is what guests pay; net rental income is what survives the management fee and vacancy. Those are not interchangeable, and conflating them is exactly how the self-funding fantasy gets sold.

The IRS line most buyers cross without noticing

Personal use is where the tax treatment quietly turns against the owner. IRS Publication 527 (2025) draws the bright line: if personal use exceeds the greater of 14 days or 10% of the days the property is rented at fair price, the property is treated as a residence — and deductible rental expenses get limited to rental income, killing the ability to claim a loss against other income.

Run the arithmetic on the mountain home. If it rents 120 days a year, 10% of rental days is 12 — so the 14-day floor governs, and the owner can use the property personally for 14 days before tripping the residence classification. Spend a third week there, and the property flips. The IRS 14-day rule tax math is unforgiving precisely because the threshold is so low: two weeks is barely a vacation. The same publication notes the inverse safe harbor — rent the home 14 days or fewer and the rental income is entirely tax-free, no reporting required, regardless of amount. That carve-out rewards owners who barely rent and penalizes those who rent enough to dent the carry but still want to use the place themselves.

This is the structural trap of the $150k+ second home: the income level that makes the purchase feasible is the same income level that makes the personal-use limitation expensive, because the disallowed losses would have offset a high marginal rate.

What the data shows that most coverage misses

The overlooked figure isn’t the rate or the occupancy — it’s the interaction between them. National STR occupancy sits at 54.9% (AirDNA, 2025), and second home mortgage rates average 7.60% (Curinos, April 2026). Coverage treats these as separate headlines. The Net Carry Rate model shows they’re the same problem: the rate sets a high fixed carry, and the occupancy ceiling caps how much rental income can offset it. At 54.9% occupancy, the rental side simply cannot generate enough net income to flip any of these properties to a negative carry — they never become the income-producing assets they’re marketed as.

Put differently: for these composites to reach a 0% Net Carry Rate — true break-even — rental revenue would need to roughly double from national-occupancy levels. That happens only in a handful of supply-constrained, high-ADR markets, and even there it requires near-full-time renting, which collides directly with the 14-day personal-use limit. The markets where the math works are the markets where you can’t actually use the house. That trade-off is invisible in any single statistic and obvious the moment you model the carry. Comparing destinations like Aspen vs Vail second home costs or Maine vs Cape Cod coastal costs only sharpens the point: the premium markets carry the highest absolute cost, and the cheaper markets carry the lowest rental offset.

Methodology

For the $150k+ household: the threshold that actually matters

A household earning $150,000-plus can almost certainly qualify for and service a second home mortgage. Qualifying is not the question. The question is whether a 5% to 6% annual Net Carry Rate — $25,000 to $77,000 a year in the models above, after rental income — is the best use of that capital and cash flow, given that the rental offset structurally cannot eliminate it at national occupancy levels.

The honest framing treats the second home as a consumption decision with a partial rebate, not an investment that pays for itself. If the household genuinely wants the place and uses it heavily, the personal-use limit caps the rental offset anyway, so the carry is simply the price of enjoyment — and that’s a defensible choice for a buyer who values it. The failure mode is the buyer who underwrites the purchase on rental projections, crosses the 14-day line every summer, loses the deductions, and discovers the Net Carry Rate is a real recurring liability rather than a number on a brochure. Before committing, model your specific market’s occupancy and nightly rate through AirDNA, run your own personal-use days against the Publication 527 threshold, and decide whether the carry is a cost you’re choosing or one you’re rationalizing. A conversation with a tax professional about how the residence classification would hit your marginal rate is worth more than any appreciation forecast, because the appreciation is speculative and the carry is certain.