Investing In Muskoka in 2016

Green - #1Investing in a vacation property is a big decision and one that, if you do not make wisely, will likely cause more heartache and stress than joy and relaxation. So here are 10 things you should consider before you start this venture:

1. Why are you buying it?

A vacation home isn’t always just about a place to retire or relax. It can and probably should be an investment. Maybe even an investment which generates income when you don’t want to be there. You need to determine how this purchase will fit into your overall investment portfolio. Will it “grow slowly” as the market value increases or will you operate it as a profit maker each year?

If it is mainly for a profit making investment, you need to consider what a renting family is looking for, as much as what you may be looking for!

2. Keep your emotions in check

Buying a vacation home is fraught with emotions and therefore risk! Do not let this be an emotional decision, as it could lead to heartache and stress. Before you start on your journey make sure that you do a thorough check on your finances. Can you carry the operating costs? Do you know what the carrying costs will even be?  If you still have a mortgage on your primary residence can you carry both properties?

3. Where do I buy?

In Ontario, Muskoka, Parry Sound and Haliburton Highlands are the traditional summer vacation locations, and for many people winter locations too. They are within reasonable driving distance of major cities like Toronto, Ottawa and London and are therefore easy to access and enjoy. The important thing to think about is the time and hassle it takes to get there and how often you will actually use it. You’re more likely to head north to cottage country for the weekend if it is only a few hours away, than if it takes 5 or 6 hours to get there.

4. Consider pooling resources

One way to ease the burden or to get a nicer property is through joint ownership. Your brothers or sisters might want to go in with you. Friends may want to do the same. The key is to make sure everyone understands the rules of the road, including a fair way to split up prime time use, what happens when one party wants to sell and who inherits the property. If you are thinking of taking this route, please make sure you have legal advice. Setting up a family trust or a company with share holders can work very well but if not properly established can lead to serious upset.

5. Beware of tax implications

Buying a second or recreational home has tax implications when you sell, as the sale of this property could be subject to capital gains, and advice from a tax accountant or lawyer should be sought.

6. Location is key

Buy a cottage that is set back from the lake or up high on a hill and your potential rental income could drop by half. Vacationers are willing to pay extra for that week or two they spend in paradise. Views and private lakefront are traditionally two of the main features people look for. Consider the trade-offs. You may go for a lesser property on a great lot rather than a larger property on a steep one or without a view.

7. Condo vs Cottage

Do you have a big family and like to be surrounded by friends? Or are your vacations a chance to get away from it all? Thinking about this will help you decide whether you need a small condo, or fully detached cottage with lots of space.

Make a list of your important features. Things that were important in your family home may not be as important in a vacation property. Do you really need tons of closet space for your two suitcases? Will a galley kitchen do since you plan to be eating out a lot?

8. Check out the neighbourhood

Once you’ve decided what to buy and where, stay in the area for a few days and look around. Rent a cottage on the lake or a condo at the resort you are interested in. You’d be surprised how many people buy from blueprints only to have a rude awakening later.

You may have vacationed in the area before but not really gotten to know anyone. Talk to neighbors and locals. What do they think of the area and what is it like in the off season? Can you walk beautiful trails and get to shops in a reasonable time? Are there cross country ski or snowmobile trails in the area for winter fun? Is this a good fit for you and your family?

9. Look for hidden costs

What will it cost to pump the septic, have propane delivered, get the roof shovelled off after heavy snow, keep the lane open in winter? If you are buying a condo, does the condo association allow rentals and if so under what conditions? Must they be long-term periods of several months or can it be weekly? Does the condo association have an adequate reserve fund to pay for future repairs? If not, you could be hit with a special levy once you move in.

10. Cheap doesn’t always mean bargain

Buying on impulse is probably the worst thing you can do. Just because you enjoy your summer in Muskoka, step back and consider all the factors. Don’t be blinded by a seemingly great price. Do your due diligence. Hire a great Realtor!

 

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