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What they don’t teach you in school about going on vacation vacations for free
The ROI, return on investment, of the trips cost is to be recuperated before dollar number one gets spent
return on investment (ROI) for “free vacations,” but the concept needs some clarification since vacations are typically an expense rather than an investment with a direct financial return.
### ROI for Vacation-Relating Towards a Work Conference
If you’re considering something like investing in a vacation rental property to generate income that could offset vacation costs (or provide “free” trips), here’s how to think about it:
#### Vacation Rental Property Example
– **Investment**: Let’s say you buy a vacation rental for $200,000 in a popular spot, putting down 20% ($40,000) and financing the rest.
– **Annual Income**: With good management, you might earn $25,000 per year in rental income after expenses (e.g., maintenance, property management fees).
– **Cash-on-Cash ROI**: This is calculated as annual income divided by your cash investment:
\[$25,000 / $40,000\] × 100 = 62.5% ROI annually.
This is high but realistic in top vacation markets with strong occupancy rates (e.g., 60%+ per AirDNA data from 2023).
– **”Free Vacation” Angle**: If you use the property yourself for, say, 2 weeks (valued at $3,000 market rate), that’s a perk you don’t pay out of pocket. The remaining income ($22,000) still gives you a 55% ROI on your $40,000, plus the “free” vacation.
#### Credit Card Rewards or Points
– **Investment**: Spending $10,000 on a rewards card with a 2% travel points return (e.g., 20,000 points, where 1 point = $0.01 in travel value).
– **Return**: Redeeming points for a $200 flight or hotel stay—a “free” vacation component.
– **ROI**: If you’d have spent that $200 anyway, your ROI is effectively infinite on the points portion (since your out-of-pocket cost is $0), but it’s not true passive income—it’s just cost avoidance.
#### Time Share or Travel Club
– **Investment**: A $15,000 time share with $1,000 annual fees.
– **Return**: A week-long “free” vacation annually, valued at $2,000 market rate.
– **ROI**: After fees, you’re netting $1,000 in value for a $15,000 investment—about 6.67% ROI, ignoring resale value (which is often low). Not great compared to rentals.
### Key Takeaway
“Free vacations” don’t have a traditional ROI unless tied to an income-generating asset like a rental property. For rentals, a good ROI benchmark is 8-12% annually (per industry standards), but top markets can hit 20%+. If you mean something else—like a job perk or giveaway—there’s no financial ROI, just a lifestyle benefit.
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