The current economic climate results in more and more people choosing local and less expensive destinations for their vacations. No one wants to take less time off, but getaways are planned carefully and with a budget in mind. Renting someone else’s cottage an hour or two away can be the perfect escape for a family or couple looking to get out of the city and partake in a bit of nature without overspending.
Current low interest rates, moderate prices and less competition offer an attractive advantage for generating extra income. Many financial institutions offer vacation and second home mortgages with specialized terms, allowing you to pay off the property faster.
Some things to consider before buying a cottage or vacation home include:
- Is it nearby a small town? It it secluded just enough or too much, making buying commonly forgotten necessities and last-minute items a hassle?
- Would you prefer to have a private beach on the river, lake or ocean, or would you rather just be closer to a large public beach?
- Is it large enough to retire to eventually, with enough bedrooms and bathrooms, or is it merely cozy enough for a weekend or two?
- Are winter activities such as skiing, ice-fishing and Ski-dooing possible, or is the landscape only appropriate for summertime fun?
- Do you require indoor plumbing or would you not mind using an outhouse?
- Are you close enough to a hospital, fire department or police services in the case of an emergency and for peace of mind?
A vacation property is not quite the same as a house, but all the amenities needed for everyday life can still apply for the most part along with a few legalities and cost issues to consider.
Figure out how much money it will cost to clean up after each guest (or do the work yourself for less), childproof certain areas of the cottage (this is a hefty concern for potential guests with small children) and repair or maintain the cottage and property all year along with utilities, taxes, furnishings, a small emergency fund and of course the mortgage. Once this is figured out, how much do you need to charge and how often for you to cover costs and pay the mortgage or even break even and profit from it?
Speak with an insurance broker about the possible damage the cottage may incur before signing up. If there is a risk of damage caused by malice, or vandalism, they should know about it. Other insurances to consider are fire, theft, and flood.
Acquiring a vacation property can be a wise choice and a great way to make some extra income instead of an unreasonable luxury. You could run your own bed and breakfast, rent out the place yourself or allow non-profit organizations to use it for a sizeable tax deduction. In between, enjoy a relaxing week or two away from it all with your own family.
Heather Rose is a Toronto based Journalist, who is a regular contributor to the Muddy York Real Estate Blog. Heather website is located at heatherroseportfolio.squarespace.com.
