Reviewed by Mike Kelly
Updated August 30, 2022
Who doesn’t enjoy imagining looking out the window at the sunset over the water or skiing right up to the door of your cottage? Many Canadians dream of owning a recreational property where they can play to their heart’s content.
Buying such a property is generally an emotional decision, but it’s important to back up your dreams with hard, cold numbers. You should give careful consideration to the financial implications of your dream purchase before signing on the dotted line. Is renting seasonally a better option?
Before you make the leap, give some thought to these questions:
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Are you planning to use the recreational property for your own relaxation or are you hoping to rent it out for some extra revenue or to cover costs? Either way, examine the worst-case scenario.
Recreational properties are often the first casualties during an economic downturn. If you can’t rent out the property, can you cover the costs?
Average your potential income from the property over the year; some properties are appealing during one season, but not the others. Be sure to factor in wear and tear, maintenance and insurance costs, too.
Are you buying the property for your own family or do you plan to share ownership with relatives or friends? If so, be sure to treat it as a business transaction and have a contract drawn up by a lawyer. All partners need to be prepared to share unexpected expenses – a leaky roof, for example – and to adjust if one partner wants to sell his or her share.
If your dream property is near a ski hill, but only two of you are skiers, how will the other family members spend their time? Is there a village nearby with restaurants, shops or movie theatres? Does the property or resort community have its own amenities, such as a gym or a spa?
In choosing a location, consider whether it’s important to socialize with the “right” people or whether you don’t really care who your neighbours are (as long as they’re civilized). Knowing which of these is important to you will help you narrow down the search for the right property. Lesser-known lakes or areas can provide good value, but they won’t have the same cachet as prominent resort areas.
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Freestanding cottages are delightful, but they generally require maintenance and winterizing, along with plans for plowing the access road or driveway. Condos include maintenance, but there are often restrictions on decorating or noise. Decide which best suits your lifestyle.
Once you’ve given some thought to issues, you’re ready to look at properties with an eye toward purchasing one. First, find a realtor who specializes in recreational offerings, since they may have answers to some of your questions. As you travel the countryside and narrow down the possibilities, make sure you do your homework about country living and financing.
These additional questions provide additional food for thought:
Are you aware of all the costs involved? Can you afford the taxes, the land transfer fees and the year-round maintenance, including plowing and lawn care?
Is your property insurable? Check around and get some quotes. Seasonal properties or those with water-only access may be harder to insure. You may also need additional insurance for outbuildings, such as boathouses and sheds. Realtors suggest that your purchase offer include a condition that satisfactory insurance is available. Don’t buy first and try to insure afterward!
Is your mortgage pre-approved? Find out what a lender is willing to provide before you sign an offer. Some may require larger down payments, depending on the property; if it isn’t winterized, for example, you may need to put down more money in advance.
Examine the condition of the water and septic systems. If you have a well, is there enough water to meet your needs? Is it potable? How healthy is your septic system? Regular home inspections won’t necessarily cover these items, so have them inspected separately.
Have you factored in the carrying costs of the property? Make sure you know what to expect in terms of mortgage, insurance and taxes, as well as utilities.
Think about transportation. How long will it take to reach your property and how much will fuel cost? Consider traffic, too. Are there alternate routes if one is clogged with cars?
All of these considerations may make you want to simply fall asleep on the couch and never leave home again! However, being prepared will ensure that the property you purchase is the right one for you and your family.
For a quick overview of how Canadians feel about Buying a House in Canada, check out the infographic below.
Want to learn more? Visit our Home Buying, Selling and Moving resource centre for everything you need to know about real estate, buying a home, or moving. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Mike Kelly
Mike Kelly is no stranger to working under pressure, Mike works hard for his clients in the Toronto real estate market while always maintaining a relaxed, low-stress environment. He builds trust with his clients through open and honest lines of communication.
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