Recently, more and more Canadians are getting out and exploring their own backyard as part of their summer vacation plans, with Ontario’s cottage country being a prime and popular location. In turn, this trend has inspired some people to consider buying a cottage of their own.
From both a lifestyle and investment perspective, Durham Region and Kawartha Lakes are two of the best places for Canadians to buy vacation property. However, given the unique nature of cottages, there are a number of important factors to consider before you buy.
In this blog, we’ll look at whether buying a cottage in Ontario makes sense as an investment for you and your family.
Wondering whether or not you can live in a cottage year-round? Click here to find out.
Are Cottages A Good Investment?
When it comes to the question of “is buying a cottage a good investment?” There’s no simple yes or no answer. In reality, there are a lot of perks to owning a cottage, but it’s also a pretty significant financial commitment. To that end, making a successful investment in a recreational or vacation property involves all kinds of personal, financial, and economic variables.
It’s also important to remember that cottages fall under the umbrella of real estate, and as a result, buying a cottage involves navigating the same kinds of trends and conditions as the residential real estate market. This will also impact your investment.
So, what do you need to know if you want to buy a cottage, but also want to ensure it’s a solid investment? More on that next.
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Should I Buy a Cottage?
If you’re thinking about buying a cottage, start by asking yourself how much use you’ll get out of it. On paper, having a waterfront retreat to escape to whenever you like sounds great, but it’s important to be realistic. Just like with any kind of major purchase, you’ll want to get your money’s worth – it’s as simple as that.
Beyond just the financial aspects, owning a cottage can also be a major commitment in terms of time. Depending on where you live, you could be looking at a multi-hour drive one way just to get there.
Take time to think about some of your long-term plans and commitments and how they may fit in with your trips to the cottage. For example, if one of your kids plays baseball or soccer every weekend during the summer, finding the time to get out to the cottage can be tricky.
What Are The Financial Benefits?
Now that we’ve looked at the practical considerations of investing in a cottage property, let’s explore some of the financial elements.
Like we mentioned up top, cottages are ultimately a type of real estate and just like residential homes, buying one can make for a solid investment. With the help of a knowledgeable real estate agent, buying a cottage in a market poised for steady demand in the long term can lay the foundation for strong appreciation in value, leading to future gains.
On top of the equity you can build, owning a cottage also presents unique opportunities to earn passive income in the short term. With the rise of short-stay accommodation platforms like Airbnb and VRBO, we’ve seen an increase in cottage owners choosing to rent out their property on days that they don’t plan on using it.
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Capital Gains Tax on Cottages
Another major consideration in terms of investment (especially your ROI) will apply when you eventually sell your cottage. In Canada, vacation properties and other non-principal residences are subject to capital gains tax. So, when you finally sell your cottage, you will be taxed on a percentage of your gains.
That said, there are potential strategies for reducing or deferring capital gains that may apply to your circumstances. You’ll want to work with your financial advisor or accountant to help you hold on to as much of your return as possible.
Find Your Perfect Cottage
Cottage properties differ from traditional homes in many ways. So, you’ll want an expert by your side. That’s where we come in – Puckrin & Latreille.
With more than 175 years of combined experience in our local market, we know everything there is to know about recreational properties and cottage-style homes in Durham Region and Kawartha Lakes. We’ve helped countless buyers find the perfect cottage property – and we can do the same for you.
Searching for the perfect place to call home? We can help. Call 905-985-7300 to reach our team, or email us at hello@liveplayinvest.com.
Book a Meeting
Whether buying or selling a home in Port Perry and the surrounding area, our team has you covered. Book a call with us today to get started.
