Cottagers consider options: joint ownership, renting

The cottage has long been an important part of the lives of many Canadians, a source of relaxation, relationships, memories and, in some cases, wealth. The high cost of owning and maintaining a recreational property, however, is forcing many Canadians to consider joint ownership or renting in order to finance their retreat in the country.

The cottage has long been an important part of the lives of many Canadians, a source of relaxation, relationships, memories and, in some cases, wealth. The high cost of owning and maintaining a recreational property, however, is forcing many Canadians to consider joint ownership or renting in order to finance their retreat in the country.

A recent report by Royal LePage Real Estate services shows that the majority of Canadians who either have purchased or who intend to buy recreational property in the next two years believe it is a good investment.

“Canadians’ confidence in recreational property values is mirroring what we have been seeing in Canada’s urban centres,” said Phil Soper, Royal LePage president and chief executive officer.

“The horror stories from some fundamentally flawed international housing markets that had dampened demand for cottage-type living during the recession era are being shrugged off.

Canada’s traditionally buoyant recreational property market appears to have found its groove once more.”

Cottages are not cheap — either to purchase or maintain. The national average price for a 1,000-square-foot, three-bedroom cottage on a 100-foot lot ranges from $100,000 to $1 million.

Given the cost of recreational real estate, the only way many Canadians can afford their dream of a spot in the country is either to buy it with others or rent it out.

“The only way we were able to realize our dream of owning a chalet in Whistler was by splitting the purchase price and ongoing costs,” said Rishi Bhalla of Vancouver, who purchased a ski home with his brother and another friend. “By purchasing the property together we were able to afford the type of place we wanted and can share the maintenance expenses. None of us could have done it on our own.”

Buying a property with others requires some careful thought before you take the plunge.

“Having the right mix of personalities is a key to a long-lasting relationship,” said Jim Rawson of Invis, a major Canadian mortgage brokerage company. “You and the other owners will have to decide jointly on everything, from when maintenance and major repairs are needed to shopping for common supplies.”

The first thing to consider is whether a vacation property fits your lifestyle.

Besides the fun and leisure aspects, prospective buyers need to consider the time and cost involved to keep a property 12 months a year.

And they’ve got to consider how the property will be used and how much time they’ll want to spend there.

One party might want a ready-to-live-in relaxing hideaway, while the other might want a do-it-yourself project. Will they be trading off weekends, vacationing together or separately, or will one owner use it more than another?

Many recreational property owners are buying for investment purposes, so you want to be clear before purchasing who owns how much of the property and, if you decide to rent, how you will split and claim the rental income.

If the property needs to be financed, consult a mortgage broker to decide which of the owners should get the mortgage.

“The bottom line is that emotion shouldn’t trump common sense when it comes to buying vacation property,” Rawson said. “Buyers need to do their mortgage homework, and the advice of a mortgage broker can help them get the most for their vacation home dollar.”

More than half of the respondents in the Royal LePage survey said they are, or will be, renting out their property to offset their mortgage and other associated costs.

“This cost-offset strategy may allow younger families to acquire a cottage earlier in their lives than they would otherwise, and others may be able to buy in a region that would have been out of their reach price-wise,” said Soper. “The purchase motivation for most is not financial planning, it remains lifestyle driven — satisfying the needs and wants of their family.”

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.