To buy or rent a cottage? It’s the eternal question Canadian families face, especially as summer draws near.
Ask your friends and relatives, and you’re likely to find an even split between those who can’t imagine life without a lakeside property and those who see a second home as a ball and chain.
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Coming up with a list of pros and cons isn’t much help, either. In theory, there as many good reasons to purchase a cottage and as there are not to.
In the buy camp: Building priceless memories by the same lakes as the kids grow up. Having an affordable gateway for every break and long weekend. Eliminating the risk of a ruined vacation because your rental cottage looks nothing like the pictures. Similarly, avoiding massive family disappointment — especially for the little ones — when it turns out the rental you have been booking every summer and have grown to love isn’t available this year. And so on.
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In the rent camp: The kids’ memories may be priceless, but owning a cottage certainly has a price tag — and a hefty one. Renting means your hard-earned vacation time won’t be sucked into a black hole called “cottage upkeep.” It also means being able to explore a different lakeside spot every summer — or deciding, guilt-free, that you’d rather go to Paris instead.
A more productive approach may be examining your specific circumstances and financial situation, according to Maureen Reid, Meridian Credit Union branch manager in Penetanguishene, a popular cottage country destination on the southeasterly tip of Georgian Bay, Ont.
For the undecided cottage vacationer, she has a list of five key questions:
1. How much will it really cost you?
Step one is assessing whether you can really afford to own a cottage. The question goes beyond whether you can carry two mortgages, Reid points out. As with any residential property, buying involves a slew of legal fees and taxes, as well as monthly expenses like utilities. Heat in particular can be a financial back-breaker in a cottage, said Reid, especially if you have to rely on electricity to keep it cozy inside.
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Other potential costs include owning, maintaining and docking your own boat if that’s the only way to reach your property, said Reid.
And then, of course, there’s upkeep. Although Reid told Global News it’s hard to come up with an average estimate for this kind of expense, it’s safe to say it will likely be higher than whatever your average yearly spend is on your first home. From rodent infestations to pipes that burst in winter, the fact that cottages are usually immersed in nature and used only for part of the year tends to drive up the maintenance bill.
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2. How much will you (realistically) use it?
Once you’ve come up with a comprehensive cost estimate, ask yourself how much R&R bang you’re going to get for your buck, according to Reid. Is the cottage close to home? Do you get lots of time off in the summer? Will you be able to use the property in the winter as well? If so, then great.
On the other hand, if you only have two weeks to spend lakeside every year, will the stress of the drive and the upkeep work eliminate your ability to relax?
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3. Are you going to rent it?
This one goes back to question No. 1. Being able to rent your cottage for periods of time when you’re not there will make it easier to afford it, noted Reid.
Doing so has become easier than ever with online home-sharing services like Airbnb. And if you’re worried that the tenants who presented themselves as a “a quiet middle-aged couple’ will turn out to be a horde of partying teenagers, Facebook groups, which tend to be more community-focused, are another great resource. A short post advertising your property among friends and neighbours can quickly locate a trustworthy tenant.
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Still, not all cottages rent easily, cautioned Reid. Remote properties in less well-known areas might have fewer takers.
4. Is it a good investment?
This is really a two-part question. The first thing to consider is whether using your savings to buy a cottage makes sense. Owning two homes could mean tying up a lot of your investments in real estate, which can be risky.
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Speaking to your financial advisor is always a good idea, said Reid.
The second part of the equation is figuring out what the rate of return on your cottage will likely be. A winterized property in a coveted, easily accessible location will be easy to sell and likely to appreciate over time, said Reid.
The opposite is generally true, if your version of a cottage is only a few steps removed from a wooden shack, or if it becomes inaccessible in winter.
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5. What financing is available to you?
Location and features like insulation, heating and running water will also dramatically affect what kind of financing you’ll be able to access in order to purchase your cottage, said Reid.
What Reid calls a “type A” cottage — one with all the amenities — usually guarantees you’ll be able to get a regular mortgage.
For a more rustic “type B” property, on the other hand, your only option might be a personal loan, for which the going interest rate is generally 7 per cent, much higher than currently available mortgages.