Thinking of buying a cottage ??

[cityfisher]

Hi all,

 

Im 26 years old and am considering buying a small cottage for renting purposes and of course for enjoyment also.

 

How is the pleasure housing market compared to GTA housing market ?

 

Should I just hold on to the money I have for a downpayment and purchase a home to move out in ? I dont see myself moving out for 3-5 years min.

 

I figure i can rent a cottage from 1-2k a week depending on size and location and also depends how nice of a cottage I get.

 

Am i tying up my money into something that wont reap returns in the long run ? slow rate of appreciation ?

 

Thanks for any insight.

[irishfield]

Exactly how our neigbour across the channel paid for their place over the last 5 or 6 years. They take about 3 weeks holidays and rent it out the rest of the year at around $800 a week from late May until September.

 

Personally I said I'd never own a cottage if all I had was a couple week holidays a year. The money it costs for taxes/upkeep etc, let alone the initial cost could put you in some pretty nice lodges/getaways instead.

 

If you want to approach it as a rental investment... remember you, or someone you will pay, will have to be there EVERY saturday to see the renters off in the morning and bring the new batch in... in the afternoon.. clean the place in between. If you have no issues with being tied to it that way and you figure rental will cover a good part, or all, of the mortgage (if going that route) then why not. If it's on a lake that you're not overly stuck on staying on in future years move in to the place for a year when you are about to sell, so it's now your principal residence, and avoid the captial gain at sale time!

[cityfisher]

well im thinking of this as part personal cottage and part rental to help with the loan.

 

how much does cottage insurance cost on avg ? smaller lake front style property.

[fishinggeek]

I say don't do it. As an investment, there are much better investments for the same amount of money, those that can offer better returns, less risk, or both. You will probably not accumulate significant wealth by renting out a cottage on the side. For pleasure, like Wayne mentioned, you can rent a pile of other cottages over many different bodies of water. So if the investment isn't good and the pleasure can be had for much less money, don't do it. I think owning a cottage is something one should do later in life, when you have discretionary income. If you haven't moved out yet, your best bet would be to save for that.

[irishfield]

how much does cottage insurance cost on avg ? smaller lake front style property.

 

Should be no different than a home.. IF IT HAS ROAD ACCESS....right up to when you tell them you are renting that its ! LOL

 

If you are water access only = no fire protection ...even if the local FD has a fire boat... and in that case you'll get nailed for about 3 times or more than what a house policy would be on the same property value.

[cityfisher]

Should be no different than a home.. IF IT HAS ROAD ACCESS....right up to when you tell them you are renting that its ! LOL

 

If you are water access only = no fire protection ...even if the local FD has a fire boat... and in that case you'll get nailed for about 3 times or more than what a house policy would be on the same property value.

 

Interesting ! thanks !

[Meely]

CF,

 

I was in your same situation about 10 years ago. I was 29 and had always wanted a cottage of my own. Was tired of renting and having to tow the boat everywhere.

 

I took the plunge in buying a place ( Im on Pigeon Lake) and have NEVER regretted it. I purchased it for an "all around" reason. Financial Discipline, Investment, Income opportunity and most importantly..ENJOYMENT (Fishing).

 

I can not tell you how many good and memorable times I have had up there since.

 

I was very fortunate when I made the move to purchase as the value has increased since and as it turns out am sitting on a very nice return for my money.

 

I always tell people there are three things you need to look at.....drive time, location and price. I am convinced you can not get all 3 anymore and have to sacrifice one of these when purchasing( just my opinion).

 

As for insurance, take Irishfield's advice, ensure you have road access if you do purchase......

 

Meely

[cityfisher]

CF,

 

I was in your same situation about 10 years ago. I was 29 and had always wanted a cottage of my own. Was tired of renting and having to tow the boat everywhere.

 

I took the plunge in buying a place ( Im on Pigeon Lake) and have NEVER regretted it. I purchased it for an "all around" reason. Financial Discipline, Investment, Income opportunity and most importantly..ENJOYMENT (Fishing).

 

I can not tell you how many good and memorable times I have had up there since.

 

I was very fortunate when I made the move to purchase as the value has increased since and as it turns out am sitting on a very nice return for my money.

 

I always tell people there are three things you need to look at.....drive time, location and price. I am convinced you can not get all 3 anymore and have to sacrifice one of these when purchasing( just my opinion).

 

As for insurance, take Irishfield's advice, ensure you have road access if you do purchase......

 

Meely

 

Thanks ! great info !

[Big Cliff]

We decided to INVEST in water front property and it was the best investment we could have ever made. It seems that they just aren't making any more of it and values are going up much faster than land locked properties.

 

Renting out is a good option. A friend uses an agency to rent her place out every summer and makes enough to cover her mortage and taxes for the whole year plus she builds equitey in the place and gets to use it when it isn't rented out. Not a bad deal!

 

Based on personal experience, I would say go for it! You couldn't make a better investment!

[cityfisher]

my only thinking is should i save the DP money to throw on a place of my own when i move out of my parents place.

 

Just say i put 50k down on a cottage....and in 3-4 years i get married and need a place closer to the city... that 50 k could be going towards my DP... instead of me having 100 k to put down id only have 50k and also 2 mortages ! (hopefully the cottage be mostly paid for by random renting )

 

why cant i get a computer job in Bancroft kill 2 birds with one stone lol

[aniceguy]

Great idea and something many do these days to finance thier vacation properties.

Some fod for thought

A reasonable cottage in the kawartha's muskoka's or cottage contry as the urban centers of Toronto call it will run in the 400 to 700 k range, property taxes can run well into the 3 to 7 k a year.

 

for the 1 to 2 k a week rentals there are some things that go along with that I suggest you look at some of the cottage for rent sites and some of the sales they have on their.

[solopaddler]

If you're willing to drive further north there are deals to be had.

I bought my place in N/W Quebec, 61/2 hours north of the GTA 5 years ago for 25k.

I've got a lot of sweat equity invested in it as I've pretty much renovated and/or rebuilt

the place entirely.

I had a local realtor apraise it for me last year at $95,000.

Good investment for me and a good idea for anyone who's handy and

able to do the reno work themselves...

[Big Cliff]

Obviously you have to do what you think is best for you but $50,000.00 sitting in a bank isn't going to make much of a return over the next year or two.

 

Water front properties will have appreciated at anywhere between 10-20%. If this is a short term investment then I wouldn't do it, by the time you paid the realestate fees and legal costs you'd be lucky to break even but over the next 5 years..... Well you'd be well ahead of the game. We bought our place 6 years ago for $175,000.00 we put a lot of money and time into it but could sell it tomorrow easily for $375,000.00 - $400,000.00+. To cap it off we have had the pleasure of enjoying living on the water and love where we are. We'd have had to live somewhere and that would have cost us at least $12,000.00 a year for anything reasonably nice. Try to get that type of return from any other type of investment! So, think about it; $12,000.00 a year for 6 years = $72,000.00. Gain in equity $200,000.00+ = $272,000.00. Net gain in 6 years = about $45,000.00 per year to live on the lake. Not a bad return!

 

But as I said earlier, you have to do what feels right for YOU!

[tonyb]

I would say get yourself a primary residence first. You qualify for first time home buyer and could use RRSP's for your down payment and then have up to 13years to repay them at no cost to you. Also think about the fact that the majority and better paying I.T. jobs are found in the GTA...Unless you are planning a career change to a trade that is location independant...

 

That's the safe thinking me though...

 

The devil on the other shoulder says screw it all and go for it!

 

You're lucky to be able to save $ while living at home...it's the best thing to do for as long as you possibly can!

 

Tony

[kennyman]

I say go for it. I wish I had a cottage in the worst way. It's a dream of mine that someday I hope is realized. It may end up being a retirement thing,it may never happen. (Hmmm,help the kids university or buy a cottage? My kids are more important to me, so I guess the tent trailer will do for now). I think there still are places you could speculate would get substantial appreciation, you'll just have to look around and find the right place/town/lake. There's only so much waterfront property in this world. I can't think of many investments that would give you such pride or be more enjoyable to own.

[setomonkey]

My inlaws bought a cottage a few years ago and I really enjoy going there every summer. But I personally would want the freedom to rent in different locations and explore new lakes and different parts of Ontario.

 

If it's a dream of yours, then I say go for it, I know lots of people who have bought cottages and have offset their mortgages/bills/taxes by renting the weeks they aren't there.

 

The only downside I can think of is if you put your money into a cottage and then can't act quickly if you decide to move out sooner than planned or you can get a house for a good price.

 

Mike

[lookinforwalleye]

When I was in my mid 20`s a couple of years ago LOL! I wanted to do that and the bank would not give a me a loan because the place was not going to be my principal residence,more than likely things have changed I think now if you have pulse you can find someone to give you a mortgage.

 

As a sidebar if one of my 3 man children that are still on the teat came to me and told me he was planning on buying a cottage I would be suggesting to him in a nice way of course to buy a house and get off the teat!

 

Good luck!

[irishfield]

Well looking at my RRSP and mutual returns for the year 2007... land and property is a MUCH better investment even short term! Mind you anything beats negative numbers ....

 

You will also find that many Americans are selling off their family cottages with the dollar at par. They've held onto them for ever in many cases being passed generation to generation. A few years back if they got $200k Cdn it only equated to $150 K US. Now they get the full $200K less capital gains, so many are using the opportunity to get out. Just don't buy a piece of property that has a trust attached as a part owner...only to find out the will was never probated! We might get my point of land closed by ice out....was supposed to close Dec 11th!

 

But as others have said as well....and coming from a guy with a 25 year old living up stairs... get the _ _ _ _ out of your parents home if you've got a downpayment like that and take my son with you! LOL

Edited January 17, 2008 by irishfield

[fishinggeek]

While there seems to be a lot of positive experiences, I think the returns some have had might not be a reason to invest. You should be looking at the risk-adjusted returns. When you have all your eggs in one basket (in the cottage), as well as an uncertain (and illiquid) market for recreational property, combined with the fact you have mortgaged it, the risk can become very high. As well, these returns are over many years, and mortgage interest builds up fast over these years if you borrow to make the purchase, which makes these rates far less attractive on an annual basis. And when you factor in the opportunity costs of sweat equity, you could earn those returns with far less risk through other channels (e.g. taking a part-time job).

 

We all love fishing and there's nothing more grand than to spend time in our great outdoors. But exposing $50K of your own equity, not to mention borrowing from the bank and increasing your risk, is just not rational to me, especially when someone is not in an affluent financial position. To me, a cottage is a luxury purchase, similar to going on vacation or buying a Harley. They're fun, but only get one when you are in the proper financial position. And even if one is comfortable with the risk, should one's future family live with such a decision when the equity could have been invested elsewhere? Personally, if I made a financial decision that I regretted in hindsight, and my future children had to go on OSAP or work 30 hours to go to the school they wanted, I would have much guilt.

 

Why not take your ideas to a reputable financial advisor, one who is independent and preferably doesn't love fishing as much as we do . See what he/she thinks about such a purchase.

[Blue_Axela]

I think you should buy your first home with the $50,000 you have sitting in the bank right now. You should also do it quickly if you are residing in the GTA. Real estate prices keeping going up in Canada, esp in the GTA so you are much better off putting that 50K as a DP on a pre-construction condo or house. This way when you move out of your parents' house in 3-4 years, the place will be ready.

 

A cottage is really nice. My parents bought one on Rice Lake two years ago and my brother and I maintain it. I love being out there and even right now I am thinking of the summer already. Having said that, its all about the fundamentals so you should use your money for a car and house first. When you get a bit older, you can then consider getting a cottage and a bigger boat.

Edited January 17, 2008 by Blue_Axela

[holdfast]

Yup I agree with the last two Posts. Put the money in a house and get into the Real estate Market ASAP. Concentrate on the house only as a cottage is a luxury Item anyways. Sooner or later you'll be married and will want to live in a house near where you work. You'll be in the market and by then hopefully you've paid most of the interest. In the mean time dont be tied down on one lake or cottage. Explore

[Deano]

Have you considered just purchasing a trailer camp at a trailer park. It won't make you any money, but you shouldn't lose any either. I had a trailer camp for about 6 years. Loved it while it lasted but have no regrets about selling it either. Now I have the freedom to go where ever I want. You can buy a trailer all set up with all the fixins for some really great deals. Sad but true is the fact many older folks buy trailers to enjoy when they retire, but then fall ill or pass away, leaving the survivor to just wanting to get rid of it. You can find some great deals for under $10000. Keep it for 5 years or more and still get the same price you payed for it. The only real expense you'll have is the rental fee for the trailer park which you won't get back but you don't get back your taxes or utilities on a purchased cottage. Might not be for everyone, but I found it worked for me.

[nofish4me]

Having an income tax plan is always a good thing. Haven't been into this for a few years, but it could make good tax benefits.

Of course, if you do this, a profit will eventually expected, but there is always next year (LOL).

There are lots of buisinesses, that never make a profit, you just have to be prepared for R.C..

[danc]

I have a few friends with cottages. They spend all of their time at the cottage fixing it up, mowing the lawn, landscaping etc. No thanks. Give me a tent and I'll explore a hundred other places instead.

[crappieperchhunter]

I'll add my 2cents to the discussion. We have a small cottage in Bobcaygeon. It is not on the water, so the price is much cheaper then waterfront. My taxes are under a grand a year...and we are actually on town water and sewer. We use the cottage from May 1st until September 30...and then have winter tennants. We have been fortunate to get a retired couple who have a trailer for the summer and need a place for the winter, so they return every fall. So we have a cottage for the whole summer and then get 7 months worth of rent cheques to help pay the mortgage. When we retire we will sell our house here in the city and move to our cottage...which will be paid off by then...so all the $$$from selling our house in the city can be used to buy every darn fishing toy/gizmo/necessity under the sun (don't tell Debbe).

 

As long as you do your homework...you will do well on any kinda cottage and whatever rental income you can get on top is just gravy.

 

If you have any questions fire me a PM. I'll help answer whatever I can.

 

Good luck with whatever course you take...the earlier you get into the real estate market the better...whether it's a cottage or your home.