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It's the time of year when thoughts turn longingly to summer, and people start plotting their vacations. For many, cottaging is not only a verb but a fundamental part of the Canadian summer experience. For those who don't want the hassle or expense of owning a cottage, renting is an increasingly popular option. That's good news for the growing number of owners renting their properties on a part-time basis in order to cover taxes and other expenses. When buying a vacation property, it's important to establish your goals. Is this a property you'll enjoy a couple of weeks a year and rent part-time or do you plan to rent it full time? Are you looking for profit or to simply cover the mortgage, expenses and/or taxes? Will you maintain the property and run the business, or take on the added expense of having others do it for you? Knowing the answers to these questions will help determine what you can afford and where you should buy. If you're buying your dream property and simply want to cover costs until you retire and move in full time, then your approach will be quite different from someone who wants to buy and rent a property for a few years, then flip it. The price of cottages has skyrocketed in the past decade, but rents have remained fairly steady. A property that cost $125,000 10 years ago would rent for $1,200 to $1,500 a week. Today, that same property would likely cost $500,000, but the rent would still be in the $1,200 to $1,500 range. Cottages tend to rent from about $750 a week for a more rustic place (this still means running water and some form of power) to $4,000 plus a week for luxury properties. In general, it's a renter's market. More and more cottages are going on the market. The number one reason is the jump in property taxes, which have climbed 20 percent to 25 percent in most areas, but up to 120 percent in others. "People are putting their cottage up for rent because they have to, adding another third do it because they want to and the final third for investment purposes. It's important to do the math before you sign on the dotted line. Renting Your Recreational Property for Profit, includes a rental calculator to help would-be entrepreneurs tally their upfront costs and monthly expenses to figure out how many weeks they'll need to rent their property and at what cost in order to arrive at a net profit. It's a great tool for anyone considering buying a rental property.However, with interest rates at record lows and the real estate marketing being among the only investment avenues turning a profit these days, buying a vacation property is by many accounts a smart place to park your money. The average price for a Canadian waterfront cottage or cabin, with land access, jumped 12 percent. By all accounts, prices will continue to rise, as will demand, with 12 percent of Canadians planning to buy or considering buying a recreational property in the next three years. Prices vary from region to region with British Columbia boasting the highest prices, averaging just above $1 million and Alberta averaging $737,500, followed by $525,000 in Quebec and $469,500 in Ontario. The cheapest place to buy is Newfoundland at $86,500. Keep in mind these are averages -- with the right information and a knowledgeable agent, you can still find a waterfront property in Ontario, for example, for $300,000. Like any business pursuit, investing in a rental property requires start-up funds. Obtaining a mortgage for a second property that's not your primary residence is quite different from getting a mortgage for a house, which involves putting down as little as five percent. "A lot of people don't realize the initial expense. "You have to have the equity going in." As a rule of thumb, you'll need a 20 percent down payment, although you may be able to obtain a higher-interest, high-risk mortgage with less. It would be a very smart move to get preapproved so as not to waste their time or that of an agent. One thing people want to be assured of is they own what they think they're buying, the importance of understanding shore road allowances. Basically, this means that you own your cottage and the land up to, but not including, the actual strip of shore or waterfront, which is considered Crown property. Usually this doesn't inhibit your enjoyment of the water; however, it may impede your ability to build a dock or boathouse. People who are serious about buying a cottage to rent should have been doing their homework for several months, if not years. There's often a rush in May as potential buyers have visions of pulling it all together to rent by summer, The best time to buy would be June or July when you can see what you're buying. The initial purchase price is only one element of the costs involved. Most cottages, especially if you got a deal, require upgrades, whether it's a new roof, deck or interior overhaul -- renters don't see dated plaid couches as charming, just old. "People want high-end, good furnishings and all the toys, adding would-be renovators need to familiarize themselves with local building codes. Before buying, conduct due diligence and look into local by-laws or pending ordinances restricting short-term rentals. If this is a bone of contention in an area, you might want to look elsewhere or you may find yourself with a rental property that you aren't allowed to rent out. When calculating the bottom line, be realistic about the number of weeks you'll be able to rent out your property. The last week in June, all of July and August and the first week in September are safe bets. Some cottages rent successfully year-round, but they have to have all-season allure. The recreational property market, especially when it comes to great waterfront cottages, is hot. Potential buyers need to have information and approvals in order so they can move quickly when they find that perfect place.
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