Summer time is here! Kids are finishing school for the summer. As I write this, I recall we would be packing up and heading to the cottage for the summer. Some of the best times of my life where spent on the Rideau Lake System boating, water-skiing and fishing. It was an endless stream of relatives coming to spend time with us at the cottage. It all sounds so glorious to a child, but now as an adult I remember that it was not always sunshine and lollipops for my parents. There are many things to consider if owning a recreational property would be best or would just renting something be a better option.
1. How much time will you spend there?
The general rule of thumb is you need to spend at least 2-3 months out of a year in order to make it reasonable to own a second property. If you are not going to use the property this much yourself, then you may want to consider renting it out during the time you will not be using it. This can open up another whole can of worms!
2. Has Your Mortgage Been Pre-Approved?
Mortgaging on a recreational property is not the same as a conventional mortgage on a residential home. There are many things the Lender considers for instance is the property useable in the winter? Some lenders will not give mortgages on non-winterized properties or they may require 50% down and give a mortgage with a higher rate. Also keep in mind CMHC will not offer mortgage insurance on a secondary property so you will need at least 20% down. Depending on the location, this could be quite a bit of a down payment required.
3. Will You Be Able to Get Insurance?
It would be in quite the bind if you purchased a property and just before closing found out you could not get any insurance on the property. No Insurance = No Mortgage! Those 2 wood burning fireplaces that are the centre-piece of the great room in the cottage may be the reason it is uninsurable! Other factors that affect insurability is access? Is it water access only? Is it winterized? Do you have detached buildings like a bunkie or boathouse that needs insurance as well. I do recall that my parents were having difficulty with insurance after our cottage had been broken into several times. The location was not close to a police station so even having a security system was not favorable to the insurance company.
4. Can You Really Afford The Extra Expense?
You may easily have the down payment and can easily handle the mortgage payments on your recreation property but have you also factored in the property tax? The land transfer tax? The utility costs? Have you made allowances for the maintenance costs? Things you may not consider in the dead of summer, but will really need to think about during the winter is snowplowing. Is your road a private road? Do the landowners on the road have to share the expense of having it plowed all winter long. This can be quite expensive if you are the only cottage on the road. Other expenses to consider would be if you plan on having any toys? What about all the extra visitors who come to visit over the summer. As many who entertain often know, this can become very expensive with the increased food and beverages required.
5. Can You Really Afford The Extra Time?
Time is something you need to have enough of. Whether or not you like it, the grass still grows even when you are not there! Do you need to spend time putting in docks or removing and getting ready for winter? It’s lovely when you can just roll in on a Friday and enjoy for the weekend and leave, but someone still has to clean and maintain that property. Who really wants to fight traffic on a Friday night and then spend all Saturday cutting grass and then Sunday cleaning before you pack up to fight the traffic again. People complain they do not have enough time to run their homes with cleaning, shopping and maintaining now you are basically doubling the duties. These are things to really consider.
6. Are You Going To Share Ownership?
Many people love the romantic idea of a recreation property but just can’t afford it on their own. So the idea of having a “family” place seems like a great idea. However, be cautious of this arrangement. Despite being a loving family when you begin this process, it quickly can change. Have the partnership be drawn up by a lawyer with very specific guidelines laid out like who is going to pay when the roof collapses because of too much snow. To stay speaking to each other, it’s best to have everything worked out and written before things tank.
So if you have given real consideration to owning a recreational property and still think it would be a great fit for you and your lifestyle, we say go for it! It is always best to have a local real estate agent working for you on purchasing a place in their trading area. They know the ins and outs about the area and any things you need to be concerned about. We can definitely refer you to a trusted professional in your desired area. Just give us a call and we can get you started in your search where ever that may be.