Are You Ready for a Cottage?

It took a while for the summer to get started.  At one point in May, it seemed like the winter might never end, but it was worth the wait. Like many of you, we spent as much of the summer as we could at a cottage.  It was a fantastic experience.  Relaxing and spending quality time with family, eating well and occasionally squeezing in a quick beverage!

We don’t own a cottage and until this year, the thought of owning one just didn’t seem practical.  Our family is still in England and Northern Ireland so most years involves a trip back to Europe.  Throw in our son’s crazy baseball schedule (go High Park!) and we can count on one hand the number of weekends that we could spend on the dock.  This year was so great, though, that we started looking at how we could make it work.  Here are a few alternatives.

Split Ownership

Cottage ownership is a significant investment of both time and money.  Finding someone to share that commitment with immediately cuts the burden in half.  There are many things to consider though before becoming cottage buddies.

How much do you really like each other?

There’s a big difference between spending a weekend together and jumping in to what could be a lifetime commitment.  Typically with these arrangements, weeks are split between the two families with a few weeks or weekends where both families will stay up together.  If you can find another family that you enjoy spending time with, you can increase the times you spend together and get more use days in your cottage.

Have a written agreement.

Buying a cottage is exciting and you’re probably embarking on this journey with close friends or family.  You wouldn’t be going in to it unless you thought it would work, but it’s important to document ground rules and expectations before you take the plunge.  Important questions should include how the weeks and weekends will be divided up.  Will you rent the property to help with expenses or keep it just for your own use?

Probably the most important question is, what happens when one party wants to sell and the other doesn’t?   Your agreement should specifically address this eventuality.  Normally, both parties agree that if one party wants to sell and the other doesn’t that the family that doesn’t want to sell will have the opportunity to buy the other’s share based on fair market value at the time of the proposed sale.  This value can will usually be established by an independent appraiser.  If this is not possible, then the parties agree to sell and divide up the proceeds.

Rent Your Property

A good friend of mine once advised me that the time to buy a cottage is when you can afford to never use it and not feel bad about it!  The easiest way to achieve this is to have lots of money!  If you can do it, that’s always a good strategy!  Another way to achieve this goal is to rent your cottage when it’s not being used.

This summer we spent a lot of time in rented cottages.  We were amazed at how difficult it was to find nice accommodation on a nice lake for two families.  It was even harder to find something nice at a reasonable price.  Prices often started from $500 a night and went up from there.  This was bad news for us when we were looking to rent, but could be good news if we want to buy.

Depending on how much time you are willing to give up, the rental income could cover your costs such as property tax and maintenance and maybe even start to eat in to the mortgage.  Just remember that you can’t rent it if you are in it!  It sounds obvious, but people can get frustrated that either they are not making enough money or getting enough weekends for themselves.  For us, our plan would be to rent it more in the early years while our kids are busy and we are still making trips back to Europe and then use it more for ourselves as we get older and the kids move out.

If you need anymore information, don’t hesitate to ask.  We have been fortunate enough to qualify for Royal Lepage’s annual Chairman’s Trip and network with cottage country’s top performers and we would be more than happy to facilitate.

Until next time

Alex Porritt