The moment when you start scouring real estate listings for a vacation home of your own is an important rite of passage for many Canadians. Buying a cottage is no small decision. It may be the place where you (and your children, and your children’s children) spend summers for decades to come, and it’s also likely to be one of the largest financial investments you’ll ever make.
It’s important to take both the emotional and the financial into consideration when making your decision of what (and where) to buy. Don’t know where to start? We spoke to Tony Maiorino, Head of RBC Wealth Management Services, and he gave us a few pointers for buying a vacation home without any regrets.
Here are five things you should do before you write any cheques.
Take a hard look at your budget (and work within it)
It may seem obvious, but if you want to buy property, the first step is to figure out how much money you have. That may seem simple, but there are plenty of pitfalls you can fall into when assessing your budget. For example, you might blow all your funds on the property itself, leaving nothing for repairs and upgrades. Or you may become enchanted by a beautiful property that’s just outside your price range, but buying it may cause financial stress and prevent you from actually being able to relax at the cottage.
“[Keep] in mind when you buy that cottage that there are those nice-to-haves that come very quickly after you buy the property,” Maiorino says. Boats, ATVs, snowmobiles—if you want to have any of these things, you need to factor them into your budget. So before you start scoping out potential cottages, make sure you know exactly how much you have to spend and what’s important to you.
Think of the end at the beginning
Buying a vacation home is a new beginning, but it will benefit your finances to consider what’s going to happen with it in the future. “Don’t just think about enjoyment during your lifetime,” Maiorino says. Instead, consider who the cottage may end up belonging to when you’ve passed away or are no longer able to visit. Will your children inherit it? Will you sell it? If so, says Maiorino, you need to ask yourself, “Does this property also meet the needs of where the demographics might be going?” For example, if you buy a multi-story property with lots of stairs, you may be limiting your ability to sell it to older people, or if the cottage is located at the top of a hill with a lot of steps down to the water, you may not be able to sell it to younger families with children who can’t navigate the steps down to the lake. So when you buy, keep the ability to resell in the back of your mind.
As Maiorino puts it, “Things change.” It’s best to be ready.
Consider location (location, location)
Let’s face it—vacationing is all about location. And so in buying vacation property, you need to consider its location carefully before you buy. According to Maiorino, if you want to invest in a cottage, you should be “researching where you want to be, understanding the benefits of the area that you’re looking in, and then looking at multiple areas within that area.” He also recommends renting in the area you’re looking at to get a feel for the considerations and benefits it offers. Is it a lake full of personal watercrafts that will make it difficult to fish? Or will fishing boats mean you can’t indulge in your waterskiing hobby? These are important things to know. He also proposes you try out the drive during peak hours. “Do it on a Friday night after work to see, actually, what the commutes to these places might be.”
Check the nearest services and amenities
Your cottage doesn’t exist in a vacuum. The surrounding area, and the proximity of services, can have a huge effect on not just your vacation experience, but also your insurance. “How far you are from things like the fire department and emergency services can impact your premium,” Maiorino says, adding that “not all insurance companies will insure vacation property, and if they do, there are sometimes very specific clauses around how long the property can be vacant.” So before you buy an incredibly remote property, you may want to ask yourself: How close is the nearest fire department or hospital? How long would it take for an ambulance to get there? Is it possible for someone to reach the property and check on it if you’re not there? All of these questions may be relevant not just for your insurance, but for your safety.
Don’t let your emotions make all your decisions
“As someone who fell subject to this himself, keep your emotions in check,” says Maiorino. “It can be incredibly intoxicating to show up at a beautiful cottage on a beautiful lake and immediately begin to visualize yourself there with your family, and you can very quickly become tunnel-visioned on a particular property.” Buying a cottage is an emotional decision, and often, when we see a particularly lovely property, we become like a child with a new toy: we want it. But it’s important to make these decisions with your mind as well as your heart, and to remember that your cottage is not just a place to spend weekends—it’s a financial decision that will impact you for years. Of course you should buy a cottage that you love, but don’t become so attached to one property that you stop considering all others. “Focus on this as an investment,” Maiorino says.
Fortunately, if you think about all the steps we’ve just laid out before buying, you’re likely to make a good decision, from a financial perspective. And when it comes to making lifelong memories in your new cottage? We’re pretty sure you’ve got it in the bag.