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Is Buying a Cottage a Good Investment Right Now?

The cramped feeling of lockdown along with rapidly rising real estate prices in the Greater Toronto Area encouraged everyone living in the city to start looking to the outskirts for an easy getaway that doubles as a potential investment opportunity.

The sudden demand induced a frenzy as people with cottage fever began surfing real estate listings for cottages with gorgeous lakefronts lush with trees and surrounded by sandy shorelines. But was that the right decision to make for the 40% of Canadians working from home, and is buying a vacation home a good investment right now?

According to industry research, the price of single-family recreational homes increased by 11.5% in the first nine months of 2020, and the aggregate price of a waterfront property increased by 13.5%. It is predicted that Canada’s recreational property market will increase an additional 8% by the end of 2021. Based on that information, buying a vacation home can be considered eye candy for potential investors. Drive a few hours away from Toronto and paradise is right at your doorstep.

“Rural residences allow families to work from home and be able to enjoy the natural sanctuary at the same time. It’s like a mini vacation every day or every weekend. It’s really the best of both worlds,” says Kiya Hashemi, Sales Representative from Ferrow Real Estate’s resale division, Ferrow Property Group. Not only has the pandemic made cottage country land more desirable, but prices vary depending on where the rural residential property is in proximity to highways, bodies of water and many other factors.

“An average size rural residential property with an unground pool or lake access that is within 30 minutes of the GTA is selling around $1,500,000 on average,” adds Hashemi.  Although price appreciation and the idea of having a “home away from home” sounds all fine and dandy, there are other factors that need to be considered if you’re planning to invest in a cottage.

Since there aren’t that many cottages in rural regions that are newly developed, you would need to take into consideration the cost of maintaining a cottage that’s older.  “Different municipalities have different rules for short term rentals and more municipalities are imposing rules on rentals for recreational properties, requiring all cottages to register with the city and pay tax for rentals. Failure to do so can result in steep penalties,” says Kathryn Evdokimova, also from Ferrow Real Estate Inc

Getting a mortgage for a rental property oftentimes comes with higher rates as well. While the payout can be big – the weekly revenue ranges between $1,000 for a rustic retreat to $25,000 per week for a glamorous getaway at a Muskoka mansion. Your income must offset and far surpass your mortgage payments and tax implications.

Just North of Toronto however, there are a few hidden gems in Muskoka, Ontario. A new development is underway giving cottage seekers and investors a mini getaway spot away from the city. The Summit Muskoka is promising sandy beaches and phenomenal amenities alongside a private club. Waking up a stone’s throw away from Huntsville to enjoy the serene calmness of the lake with a mesmerizing view is still possible at a decent price. The amenities include a private gym, lounge, party room, yoga, and meditation space.

There are many pros and cons to purchasing a cottage as an investment. New cottages are much easier to maintain, and they come with numerous amenities, while older cottages can be tricky due to the upkeep and constant maintenance. However, purchasing a cottage comes down to personal choice. If you can maintain your cottage and navigate the rules of local municipalities, just know that there are still great opportunities out there to take advantage of.

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