Cottage: Rent or buy?

Cottage: Rent or buy?
National Bank Home, Personal Home, Personal

Dreaming of a cottage vacation? Now’s the time to think about it. Fall is the ideal season to act on that idea and make a purchase, or just to rent a summer home before all the good ones get snatched up.

So, should you rent or buy? Make an informed choice!

Buy: What you need to know

If you regularly rent a cottage in the same area and your savings allow for it, it makes sense that you’d want to buy. Good news – it’s an opportune time! “Despite recent increases in the prime rate, interest rates are actually very low,” asserts real estate broker Christian Longpré. “If your goal is to keep the residence for several years, buying is an excellent idea.”

In addition, fall is the ideal season to unearth a three-season cottage at a good price, once summer is over and demand goes down. “You can even find a four-season at a good price if it’s not that desirable as a winter cottage – far from ski hills, for example,” says economist Joannie Fontaine. If you want to invest somewhere that’s close to winter activities, on the other hand, you’re best to wait until spring.

However, before signing you do have to take into account the financial and non-financial commitment this type of acquisition represents: cottage maintenance, roads to get there, managing unforeseen events plus about $15,000 of annual expenses for a medium-sized cottage, suggests an article in the Financial Post. This sum includes:

  • Water and electricity
  • Insurance
  • Municipal tax
  • Replacement of old or broken equipment
  • Internet, telephone and television

A profitable choice

Buying a property could be a smart choice if you regularly rent a cottage and spend in the neighborhood of $10,000 per year. The money you are currently putting towards rent would cover the expenses associated with your purchase and you would own the property, with the associated freedom to come and go as you please. “Buying also allows you to leave all your personal and recreational items at the house,” adds Christian Longpré. “If your schedule opens up at the last minute, you can always pop up to the cottage without too much hassle.”

Those who are only spending a few thousand dollars on a rental, though, have no financial incentive to invest, unless they’ve decided to change their habits. “A four-season cottage costs almost as much as a house to maintain,” says Ghislain Larochelle, President of Immofacile.ca. “You have to occupy it or rent it out around 50% of the time in order to amortize the cost and ensure the profitability of your purchase.”

Owning a cottage is expensive, unless you spend 50% of the year there, which is hard to imagine for most people in the workforce, or rent it out often enough for it to be profitable. It could still be a good investment though, if the cost is less than your current rental budget. Do the math!

Rent: Hassle-free

According to a Royal Le Page study published in June 2017, nearly two-thirds of Canadians who put their cottages on the market claim they do so because they don’t get enough use out of the property, and aren’t able to maintain it. Under these conditions, occasional rental is a more cost-effective and less high-maintenance solution.

Almost anywhere in Canada you can find a weekly cottage rental for any taste starting at $400. “Fall, in particular, is a good time to book a cottage for the holidays and plan for your summer destination before everyone else does it,” advises Martin Rouleau, President of CottagesinCanada.com.

Renting is also a good way to try out the experience of having a cottage before you buy. What if, in the end, you discover that you prefer to go somewhere new every time you go away?

Beyond the financial advantages this choice represents, buying or renting a cottage depends on the lifestyle you’re looking for. Some people prefer a hassle-free rental and changing destinations at will, while others choose to become owners in spite of the constraints that come with it. “Sometimes profitability isn’t measured in dollars, but in terms of quality of life,” concludes Christian Longpré. “Seeing your children grow up and spending time at the cottage as a family is also a worthwhile investment.”

Edited on 6 October 2017

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