What Is a Virtual Homelab? (And Should You Run It at Home or in the Cloud?)

Virtual homelab means different things depending on who you ask. For some, it refers to installing virtualization software on a laptop. For others, it’s a full cloud-based setup with VMs running in AWS, Hetzner, or Oracle Cloud.

In this article, I want to clear up the confusion. I’ll show you the two main approaches to virtual homelabs, their pros and cons, and why a hybrid setup might be the best of both worlds. I’ll also explore related terms like virtualization software, host OS, and virtual environments.

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What Do People Mean by “Virtual Homelab”?

A virtual homelab is a test or learning environment where you run virtual machines (VMs) instead of physical servers. This can take two forms:

1. Running a virtual environment on local hardware – e.g., your laptop, desktop, or mini PC using virtualization software like VirtualBox, VMware Workstation, or Proxmox
2. Using a virtual server hosted in the cloud – e.g., setting up VMs on Hetzner, Oracle Cloud, or AWS

Both options qualify as a virtual homelab. The right choice depends on your goals, budget, and available hardware.

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Option 1: Virtual Home lab at Home

If you have some hardware available, you can install Proxmox, VirtualBox, or VMware Workstation and build your own homelab server locally. It doesn’t need to be a rack full of enterprise servers.

Even a $500 mini PC can run several VMs smoothly. You’ll typically install a lightweight host OS such as Proxmox VE, VMware ESXi, or Ubuntu Server—each of which can serve as the base for a virtualized environment. Proxmox and ESXi are Type 1 hypervisors, meaning they run directly on bare metal.

In contrast, software like VirtualBox or VMware Workstation is a Type 2 hypervisors, which run on top of an existing operating system like Windows or macOS. This means the host OS runs directly on the hardware, offering better performance and control than software-based (Type 2) hypervisors like VirtualBox or VMware Workstation.

Pros

• One-time hardware cost (no recurring cloud bills)
• Full control over virtualization software, host OS, and networking
• Works offline and offers more flexibility for experimentation
• Perfect for learning operating systems, software development, network storage, or creating isolated environments

Cons

• You need to manage power, cooling, and uptime
• Consumes space and electricity
• Limited to your home internet connection for remote access

Related guides: Best Mini-PC for Proxmox, Best Hypervisor for Home Lab.

Option 2: Virtual Homelab in the Cloud

Instead of hosting your lab at home, you can rent virtual servers from data center providers. Platforms like Hetzner, Oracle Cloud Free Tier, and AWS allow you to spin up VMs with just a few clicks.

This setup is handy to host websites, game servers, or development environments with public access. Cloud-based labs are also ideal for running real-world scenarios without exposing your home network.

Pros

• No hardware required, accessible from anywhere
• Flexible, scaling: High uptime and stable networking
• No hardware maintenance
• Supports quick deployment and snapshots

Cons

• Monthly recurring costs (especially for persistent storage and traffic)
• Dependent on the internet
• Data privacy concerns (implied)
• Limited control over the host OS and virtualization software

Here’s a visual version of the table above:” before embedding the infographic

Related guides: Why I Use a VPS for Hosting,

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Local vs. Cloud: Which One Is Better?

Feature	Local Virtual Homelab	Cloud-Based Virtual Homelab
Cost	One-time hardware cost	Monthly recurring cost
Access	Local access or VPN needed	Accessible globally
Control	Full control over everything	Shared infrastructure
Maintenance	You handle it	Provider handles uptime & power
Scalability	Limited by hardware	Easy to scale up

In short:

• Build locally if you want control, hands-on experience, or a cost-effective test lab
• Go cloud if you need global access, higher uptime, or wish to host web-facing services

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My Setup: Hybrid Homelab server with Proxmox and VMware ESXi

I use a hybrid strategy:

• At home: A Proxmox-based homelab server running on a Minisforum MS-01 for testing, containers, and isolated environments and also VMware ESXi for my Exchange Mail server and public DNS server.
• In the cloud: Several VPS running my websites, staging areas, and off-site backup scripts

This lets me keep my infrastructure flexible while separating internal tests from public services. It’s an outstanding balance between cost, privacy, and availability.

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Conclusion

A “virtual homelab” doesn’t have a one-size-fits-all definition. Whether using cloud servers or running VMs on a repurposed desktop, you’re in the right space.

It’s not about the location—learning, controlling, and making your infrastructure work for you.

If you’re starting, consider your goals: Are you testing software development tools? Hosting a web server? Exploring different operating systems? For your first project, it’s best to start small by setting up a simple virtual environment using KVM or another virtualization platform. Your answer will guide you on whether local or cloud is better.

And if you’re ready to dive deeper, check out my other homelab guides to help you choose the right virtualization software, server, or setup.

I would love to get some feedback from you. Was this article helpful? Please share your opinion with me in the comment section below. Or, if you prefer a more personal touch, feel free to email me directly at info@edywerder.ch. Your thoughts and insights are always appreciated. Additionally, you can connect with me on Reddit at Navigatetech.