Our Canadian winters can be brutal. If you want to have a piece of paradise, a vacation home in a nicer climate may be on your bucket list. Perhaps you may even want to retire there. Our Anne Winch Real Estate Team has put together some information on what you should be aware of before you decide to buy a vacation home.
A vacation home might be the best place for you to unwind and get away from it all. Is it a good investment? With so many people working from home, it just makes sense to look for a vacation property.
The pros
If you have some extra money you want to invest, buying real estate can be a great investment with the right property. You can also rent out a cottage or vacation property to offset the cost of your mortgage.
- Extra source of income – depending on your property you can rent anywhere between $1000/week for a rustic property to $25,000/week for a Muskoka mansion.
- You can deduct relevant tax deductions for your rental property.
- Vacations would not cost as much with your own property.
- A vacation home is a place to relax. Memories can be truly priceless.
The cons
It can be expensive to own a rental property.
- Mortgage, property tax, insurance and utilities can add up.
- Tax implications: any income will be added which could mean you are in a different tax bracket.
- Capital gains are taxable.
- Rental properties can come with some headaches – rental bookings, and solving any infestation of insects/rodents.
- Not an instant return on investment; it may take at least 10 years before you notice any return.
Here are some tips if you plan to buy a vacation rental.
- Get preapproval with a mortgage broker or financial company.
- Get the property inspected – there could be more problems with a country property.
- Check out the utility bills to get an idea of the costs.
- Have septic inspected and water tested.
- Research and find the price of other properties nearby including rental data.
Owning a rental home can be joyous but it is also a responsibility for you. We hope that this information can help you decide if a vacation property is something you may wish to do. If our Team can be of help, don’t be afraid to reach out.