How to make the most of your money when buying a cottage property

Hazard land. It’s the kind of designation that scares off many buyers—and some mortgagers and insurers. But when Sarah Poole and her husband, Chris Bradley, found their dream cottage on Long Point on Lake Erie, they knew they wanted it, scary designation and all.

Like many cottage buyers, Poole and Bradley weren’t exactly cottage hunting when they found it. They were reality-checking the price on a relative’s cottage property that they were considering buying, looking at comparables in the area. A day in the car confirmed their hunch: the property had been overvalued. As they reached the end of the road on Long Point, they started to turn around—and noticed a For Sale sign. It was in front of an 800 sq. ft. three-bedroom cottage built on stilts close to the water, on property labelled “hazard land” by the province. “Basically, it’s at increased risk for damage by the natural elements,” says Poole. That risk isn’t hypothetical: there were once about 100 cottages along this strip, but because of a ferocious storm in the 1980s, there are now only about 40. “You can’t get traditional financing for it. You can never make it bigger,” says Poole. “So we knew we’d better love it.”

“And if you’re on leased land, the mortgage amortization has to be five years less than the term of the lease.”

The bottom line: “Generally, the more like a house in the city it is, the easier—and more affordable—your financing is going to be,” says Pamela Valent, a mortgage agent with Mortgage Architects in Mississauga.

Go local or go home
Will you get a better deal using a banker (or a mortgage broker or an insurance agent) in cottage country or one in the city? Not surprisingly, the experts differed based on their location. Locals will have the benefit of specific local knowledge and can help you navigate around unique issues such as flood risks, island properties, and other concerns. But your regular banker or broker will know your particular circumstances, especially if you have an existing working relationship. “It’s not just about mortgaging the property, it’s about finding the right mortgage product for your life,” says Farhaneh Haque, the director of mortgage advice with TD Canada Trust. “You need someone who understands your goals and that you trust enough to have an open conversation with.” Either way, the earlier in the process you connect with a lender, the more likely it is you’ll get a solution that fits your needs and saves you money.

And don’t forget insurance
If you can’t insure it, you won’t be able to mortgage it. Common insurance hazards, such as old woodstoves and fireplaces, steel oil tanks, outdated electrical service, galvanized plumbing, and uninspected septic systems, can all raise red flags—and possibly insurance premiums —says Cam Guthrie of HJM Insurance in Guelph. For seasonal properties, you’re more likely to get “named perils coverage” than a comprehensive policy, meaning that sewer backup, water damage, food loss caused by a power outage (more common in cottage country), and other risks may not be covered. And if you’re thinking of defraying your expenses by renting out your cottage, count on higher insurance premiums.

One option you should consider: some companies offer bylaw coverage, which offsets additional expenses if, after fire or other damage, the existing buildings can’t be rebuilt on the same footprint (for instance, a building 30 feet from the shoreline might now have to be set back 100 feet).

And as with other financial experts, the earlier in the process that you involve your insurance broker, the easier it will be for them to get you the best deal.

Cottage and lot
“Rustic” was the word agent Steve Lesak of Bancroft Real Estate used to describe the cottage that Stephen Jamrik and Peggy Perkins wanted to view in spring 2011. They’d spotted the Papineau Lake property, northeast of Bancroft, on a realtor’s website and in a flyer at the Spring Cottage Life Show before it appeared on MLS, and told Lesak they wanted to be the first in line to see it. “Rustic” was kind: Lesak wouldn’t let them walk on the deck because the supporting posts had rotted out. Part of the roof was covered with a tarp, there was water damage inside, and the carpet reeked.

“But if the bones were good, we knew it would be worth it,” says Perkins of the $275,000 property. “There are $400,000 teardowns on that lake.”

Jamrik and Perkins were smart: they’d been pre-approved for financing and had built in a portion for renovations. They had lined up contractors who could give them accurate quotes on the fixes required. And so, once they had the inspection done, they were well-positioned to offer what they considered a fair price: $260,000. Topped up with $60,000 worth of renovations, the cottage they ended up with was a winterized, year-round road-access, 900 sq. ft. three-bedroom with 800 sq. ft. of deck on 1.3 acres, with three outbuildings and 200 feet of sandy waterfront, treed on both sides for maximum privacy.

Aidan Walsh and his wife, Natasha Sarracini, were also in the market for rustic, but saved even more by opting for a water-access property. Walsh had heard about an island for sale on Grey Owl Lake, near McKellar, Ont., through a friend’s realtor. Although it was November and the listing agent wasn’t eager to show it, Walsh and his real estate agent, Shirlene Johnston, made the trip. The one-acre island featured a cabin built in 1948. The appliances were propane, the bathroom housed a composting toilet, and the water supply came from both a cistern and lake water. While the couple had a budget of $300,000, the other properties they’d looked at were pushing $400,000. “And they all had their issues,” says Walsh.

But while the listing agent had termed the three-bedroom cabin a teardown, Walsh was charmed by it. “It’s not a looker from the outside, but it’s filled with history,” he says. The price tag? $149,000. Walsh’s offer of $145,000 was accepted. “It’s not ideal for a lot of people, but we love it,” he says. The property had been in one family since the cottage was built. “I can imagine kids in the 1950s running around making the paths that criss-cross the island. Each one leads to a spot with a purpose: the quiet spot with the hammock, the spot for seeing the sun go down. We were lucky to get it.”

Smelly, wet, warm, and dark
Whether your idea of a great deal is a don’t-change-a-thing 1948 cabin or a reno-the-heck-out-of-it fixer-upper, a raft of considerations can tip your bargain into a boondoggle. Septic systems are on the list of costly fixes. “Get a septic inspection,” says broker Mike Barkwell of Re/Max All-Stars Realty in the Kawarthas. “If you have to replace it, you could be looking at $20,000, plus or minus.” In Ontario, the county health unit may have records indicating whether the septic was properly installed or inspected, but Peterborough lawyer Peter Lillico cautions that the septic inspection record may be filed under the installer’s name. On the flip side, he says, just because the county has no record of complaints about a property’s septic, “it doesn’t mean there’s not sewage bubbling up after a heavy rain; it just means no one’s seen it.” A proper inspection by a licensed septic tank installer is essential.

Water systems and water quality are the second significant concern. If you’re not connected to a municipal water system, “is it lake intake, a dug well, a drilled well?” asks agent Sherri Cobus of Royal LePage O’Neil Realty in Renfrew, Ont. In all of those cases, she counsels buyers to insist on water potability tests.

Insurers will insist that fireplaces and woodstoves are WETT-certified (WETT stands for “Wood Energy Technology Transfer”); removing or repairing a non-compliant wood energy source will add to your costs. If you’re planning on using the cottage in winter, factor in the costs of winter heating and, in the case of propane and oil heat, ensure that you’re able to keep storage tanks accessible for winter refills. Electric heat may be more convenient, but it’s not cheap and, if you’re in a spot deemed “remote” by your hydro utility, you could be looking at hefty delivery fees, as Sarah Poole and Chris Bradley discovered with their Long Point property. Their hydro delivery charges top $400 every six months.

Of course, going off the grid can cut many of those costs as well as the cottage price—but may also make financing and insuring your property more expensive.

Up above and down below
“Cottages seem to grow, adding one room at a time,” says Roger Frost of Napoleon Home Inspections in Barrie. And since much of that work is done by weekend do-it-yourselfers without building permits or inspections, what you’re buying can be, well, idiosyncratic. Frost has seen roofs built around trees and supported by now-hidden original roofs. Since water can be so damaging—especially if it comes in for weeks or months when a cottage is closed for a season—you need a leak-free roof (or a price that’s low enough to reflect the work you’ll have to do). While buyers often comment on uneven floors, those concern Frost less. “Most can be easily levelled,” he says.

Critters
Mice and bats are common in older cottages and typically fall into the category of fixable problems, says contractor Waddell. “You definitely want to get a quote from a pest-control person on dealing with them, though, and that cost should be factored into what you pay for the cottage,” he says.

Goin’ down the road
Access roads and shoreline road allowances both affect cottage prices. Properties with year-round public road access are going to cost more than comparable properties on private roads, which come with their own headaches. Are the terms of access and the road location described accurately in the deed? Who pays for maintenance and snow-clearing? And have you factored those ongoing costs into your budget?

In Ontario, most waterfront properties have a 66-foot shoreline road allowance owned by the local township. In many cases, those local authorities have let property owners purchase this land, though not all owners have done so. Ensure that the allowance is included in the property you’re buying—or that the price is low enough to cover your costs of surveying and purchasing that allowance. “My advice: Buy it if you can,” says lawyer Lillico.

Toronto lawyer Jayson Schwarz advises clients to make an up-to-date survey a condition of the sale and to ensure that the lands being sold match that survey. Yes, the survey costs money, he says, but it can cost far more to deal with problems arising from inaccurate property descriptions of, for example, rights of way and property boundaries.

Water hazards
A swimmable or boatable waterfront will notch up a cottage’s price tag, but there are ways to get water access at a lower cost. Willing to climb steps? “The more elevated the property, the better the price,” says Parry Sound agent Shirlene Johnston. Or, like Aidan Walsh, you can opt for island living—factoring in the costs of boat purchase and maintenance, and mainland boat mooring. If you’re planning on renovating your island find, expect to at least double the costs, says Waddell. “It’s the cost of barging materials in, getting there. It’s just expensive.” Getting rid of the junk left behind by the vendors can also be costly, so make it a condition of the sale that they remove what you don’t want (something that applies to mainland cottage properties too, though it can be less costly there).

One key consideration: do you really want to swim or boat? Kathy Belcourt was fixated on lake living as she searched for a cottage with her husband, Paul, but eventually they settled on a cabin in the woods on the Muskoka River. “I realized that the lake didn’t matter to me, the water did,” she says. And so for $185,000, they got a 1.25-acre lot with 210 feet of river waterfront and a cabin with three bedrooms, living room, kitchen, bathroom, and an enclosed porch on town sewer and water in Baysville, Ont., just over an hour’s drive from their home in Creemore.

A boater’s poor mooring may be a naturalist’s dream, says Lisa Scott, a broker and the president of the Bancroft and District Real Estate Board. “A weedy or more natural shoreline means you’re going to see blue herons and frogs and all sorts of wildlife,” she says. “That might appeal to someone who just wants peace and nature.” And it will likely come with a lower price tag. For boaters looking for a deal, opting for a canal or smaller-lake location with access to a larger lake can reduce costs, says real estate broker Mike Barkwell.

One other piece of advice: what you see isn’t necessarily what you’ll get. Water levels shift, so Renfrew agent Sherri Cobus advises asking where the high-water mark is. You can also get a lake-bank assessment from the local conservation authority to ensure that your bank is stable, advises Dianne Alexander of Re/Max Land Exchange in Bayfield, Ont.

Neighbours and the ’hood
Karen and Dan Bycok had a wish list: Haliburton Highlands; a lake big enough for water sports; and a level lot with good access and shoreline. After a couple of years of hunting for a place in the low $200,000s, they realized that their budget didn’t match their list. Fortunately, their financial picture had changed: Karen had completed her last maternity leave, and their oldest child was out of daycare and in school, giving them more budget headroom. They bumped up their range to $275,000 to $350,000, but still struggled to find what they wanted.

Then Dan spotted a property on Haliburton Lake. The three-season cottage had been listed in fall 2011 for $329,000, and then been dropped to $319,000 in February. “We knew the lake,” says Karen. “I’d gathered information from the lake’s cottage association website as well.” After visiting the snow-covered property, they were confident it was what they wanted. “Even in winter,” she says, “the cottage was dry and well-maintained.” They ended up paying $295,000.

Buying in winter can net you savings because sellers may be more eager to sell before the next cottage season and there are typically fewer buyers competing for properties, but you’ll be buying blind when it comes to whether the shoreline matches your needs. You’ll need to rely on a realtor who knows the lake, photos provided by the vendor and, like the Bycoks, your own knowledge of the area.

What’s going on
Look through local newspapers for articles about potential developments and other issues that may reveal the real reason that cottage you’re considering is such a bargain: First Nations land claims, mineral prospecting, and proposed wind farms, quarries, and garbage dumps can all prompt current owners to sell and may not be evident on a weekend drive through the area.

Enjoy the trip
“The further you are from civilization, the more likely you’ll find a bargain,” says Smiths Falls Royal LePage broker Pauline Aunger. Properties within a two-hour drive of major centres and those closer to the amenities of smaller towns will typically command a higher price than those off the beaten track. That’s what Hope and Dwight Strong opted for when they bought their Star Lake cottage, 20 minutes from Parry Sound, more than two hours’ drive from their Oakville home. They picked up their fixer-upper for less than $200,000 and were able to invest more in renovations. “It’s not a million-dollar place,” says Hope, “but it’s ours.”

This story originally appeared in the April 2013 issue of Cottage Life.

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