Buying A Vacation Home ...

Can Be A Good Real Estate Investment!

It's easy to understand why most people think about buying a vacation home. The chance to get away to a beautiful cottage setting every weekend, where you can enjoy nature at its best has great appeal for most of us.

Yet, the cottage is much more than just a weekend getaway, it's a significant investment. Before making that kind of financial commitment, it's important to weigh all the possibilities regarding buying a vacation home.

There are many factors that can have an impact on the potential appreciation of a vacation property. We've all heard the old saying that the three most important factors to consider when buying a home are location, location and location.

This is particularly true when choosing and buying a vacation home ... but with a twist. When choosing a cottage, there are three separate and very different aspects to your location that should all be considered.

The first location question to consider is the property's proximity to major metropolitan centers. Nearby cities are where most potential buyers are located, so this will have an impact on any potential increase in resale value of your cottage.

With gas prices on the rise and a population that's aging, a long and arduous commute isn't likely to gain in appeal over time. On the other hand, planned extensions or improvements to roads and highways could have a major impact on future resale values. Make sure you consult with a real estate agent to find out what road improvements may be coming into the area that you're considering.

The second location aspect to consider is the cottage's proximity to water. Waterfront property is generally the most sought after, and therefore command the highest prices. While it's difficult to find a bargain in a prime waterfront property, it is usually an investment that pays off in the long run.

When buying a vacation home, if you can afford the premium price for a waterfront cottage, you will not only add to your family's enjoyment of the property, you will also improve your chances for an excellent return on your real estate investment.

The third aspect of your vacation property location is its accessibility. Can you drive directly to the property or is it water access? Can you easily access the cottage year round, or is it only a seasonal residence? A real estate agent can be a wealth of knowledge to help you weigh the various options available to you, and help you plan an investment strategy to get the most value when buying a vacation home.

Once you've reviewed the location factors and decided on a buying strategy, you can start reviewing properties in your price range.

One thing to remember when buying a vacation home is that, unlike city properties, You cannot assume that even the most basic services are present in a cottage property!

For instance, is there hydro service to your lot? If not, it is typically a very expensive proposition to bring in power, and the price will largely be determined by the distance from the nearest township power sources. If you do have electric service, what is its capacity?

Many cottages built in earlier times may not have service that is adequate to run high capacity appliances. You may find that you can't run that dishwasher or microwave without blowing a fuse. Again, wiring updates can be costly.

Another major facility to question is water supply.
Is your property serviced by the town's water supply or do you have to bring in your own drinking water?

Is there a well on your property or do you have easy access to a public well? What about water pressure?
Is it at just a trickle after water is pumped uphill from the lake?

If your cottage property is not connected to the city sewage system, you'll also need a septic system.

If you need one installed, or if it's time to upgrade to a new bigger capacity, this can be costly, and should be factored into your purchase price.

When you work with a real estate agent that is a cottage specialist, you can weigh all your options to determine whether you're going to get the best return on your real estate investment.

Before you make your offer to purchase, make sure you discuss how to protect your real estate investment with your financial advisor.

For example: Generally in Canada, the appreciation on a principal residence is not subject to capital gains tax, while appreciation on additional properties is taxable.
How the ownership is structured and what names go on the deed could potentially save you thousands of dollars if and when your vacation property investment is liquidated.

Final Note For Buying A Vacation Home:

Cottage properties have increased in value dramatically in recent years. Make sure your accountant or lawyer discusses the various ownership options with you, so that you keep the maximum amount of your cottage investment for yourself, your family, and your heirs.


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