Zoning changes that restrict short-term rentals are showing up in more markets every year. For years, homeowners have built retirement plans around VRBO and Airbnb income, and in a growing number of counties, that income can vanish overnight with a single vote from a local board.
I recently heard from a couple in exactly this situation. They are 63, own a beach house worth around $4 million, and had been earning $10,000 a week during summer months from short-term rentals. A new county zoning rule just banned short-term rentals on their street. Now they want to know: sell, convert to a long-term rental, or hold it and absorb the cost?
How People Usually Justify a Vacation Home
The mental math on vacation home purchases typically goes like this. The property is expensive to own, but if you rent it during peak season, the income offsets a meaningful chunk of taxes, insurance, and upkeep. For the other eight or nine months, you get to enjoy it. The family can use it. It feels less like pure indulgence and more like a reasonable financial decision.
This couple actually executed that plan well. $10,000 a week is serious income on a $4 million asset. It was covering real carrying costs and likely funding some retirement spending too. Losing it is not a minor inconvenience. It is a fundamental change to the math that made this property worth owning.
The Question That Actually Matters
When I work through this kind of decision, I start with one question: would you buy this property today, at this price, knowing what you know now?
Not would you have bought it five years ago. Not do you love it. Would you choose today to write a $4 million check for this house, given the current restrictions, the current carrying costs, and your current situation?
If the answer is no, that tells you something important. It means the only reason you still own the property is inertia, not conviction. And inertia is almost never a sound financial reason to hold a $4 million asset.
If the answer is yes, or maybe, then it is worth doing the math on whether you can personally afford to carry the property for as long as you want to own it. With $9 million invested elsewhere, this couple likely has the capacity. But the question becomes whether a beach house that can only be used for personal enjoyment is the best use of $4 million in capital. That is a personal decision, not a financial one, and both answers are legitimate.
Why Long-Term Rental Usually Does Not Work
Converting to a long-term rental sounds like a reasonable middle path. It preserves the asset, generates some income, and keeps your options open. The problem is that it rarely makes sense as a pure investment strategy.
Vacation homes in desirable coastal markets attract buyers who are making a lifestyle purchase. They are competing on enjoyment, not returns. That willingness to overpay for a beautiful property is what inflates the sale price. But that same dynamic makes long-term rental returns underwhelming. You are trying to earn investment-grade income from an asset priced for lifestyle buyers, and the cap rates rarely compete.
The question worth asking is: would you buy this property specifically as a rental investment? In most cases with vacation homes, the answer is no. If it would not make sense as a rental investment at this price, then running it like one does not improve the math.
The Capital Gains Reality
If selling turns out to be the right call, be prepared for a tax conversation before you act. If you have been taking depreciation on the property during the rental years, some of that will be recaptured at sale. And depending on what you paid and what it is worth now, you are likely looking at meaningful capital gains on the appreciation.
This is not a reason to avoid selling when selling is the right decision. It is a factor that belongs in the analysis. The net proceeds after taxes and closing costs are what you are actually comparing against the cost of keeping the property. Running that number first prevents surprises and helps you make a clean decision.
What This Means for Your Retirement Plan
For this couple, the property was always a piece of the broader retirement picture. The rental income was real, but they also have $9 million invested. Losing $10,000 a week hurts, but it does not upend their financial security.
That context matters. It means they have the freedom to make this decision based on what they actually want, not just what they need. They can choose to keep the beach house as a purely personal asset if that is how they want to use the capital. They can also sell it and redeploy $4 million without it being a crisis.
The zoning board removed one option from the table. What remains is a cleaner set of choices than they had before. Either they love the house enough to own it outright, or they do not. That is a simpler question than the original one.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on real estate decisions in retirement, listen to the full podcast episode here.