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A Cottage Romance

Buying a vacation property requires a careful balance of emotion and logic.

Owning a cottage (or cabin as we say out west) pulls on your heartstrings. It’s a sexy idea and one I have fantasized about for years. I grew up holidaying with my family at cabins in Whistler and Mt. Baker and a lakeside cottage outside of Winnipeg. Some of my best childhood memories were born there and I see myself pining after the same experiences for my own kids.

But as a real estate investor and a numbers guy, I always examine the logical side of any property investment. The fundamentals I use to evaluate a deal can make even the sexiest cottage look less inviting when use, carrying costs and location don’t add up.

Head vs heart

Before you buy a cottage, you need to ask yourself: Is this an emotional asset or a financial one? That chalet in the mountains or waterfront cabin can be intoxicating while on vacation, but this type of purchase comes with enormous carrying costs and needs a sober perspective in order to make it both financially rewarding as well as an exciting adventure.

As a straight-up investment, I have yet to see a vacation property out-perform a fundamentally strong urban centre. Most vacation ‘hotspots’ have a much more volatile market. When times are good, people have the disposable income to buy and when there is an economic downturn, the non-essentials are the first to be sold. If this is a pure investment, take the sexy out of the equation and find a great long-term urban property.

Share the investment

Still, there is great value, in more ways than one, that can come from a vacation home. Throughout my teen years and beyond, co-owning a cabin in Whistler made sense for our family of seven, and another family of five, for whom skiing created a particular bond. We all lived in Vancouver, which gave us proximity to one of the greatest ski mountains in the world.

This Whistler cabin and my grandparents’ Falcon Lake cottage turned out to be great investments financially as well. Whistler was on its way to becoming one of the world’s most recognized resorts both summer and winter. The Falcon Lake property has been in the family for 65 years and has served generation after generation of water skiers and kumbaya enthusiasts giving a great return on investment and long-time appreciation.

KNOW YOURSELF BEFORE YOU BUY

When it’s time to buy, strip away the glamour and sex appeal to clearly evaluate the investment you’re making. This is the criterion I follow:

1. Is the location perfect?

Have you visited many times and still can’t get enough of this location? Do you see potential for others to want to be there too—now and in the future?

2. Can you afford it?

Understand ALL the costs associated with carrying that property including insurance, taxes, maintenance, utilities, snow removal etc. If the money becomes a stress, it defeats the purpose of buying.

3. Is this for your ego?

If so, forget the house and buy a Porsche. It’s way cheaper.

4. Are you ready to maintain it?

It’s a house, not a hotel. It doesn’t take care of itself. I have watched my parents or grandparents spend endless hours on vacation doing tasks around their property just to maintain it. Are you handy and motivated?

5. Is it rentable?

If your lifestyle changes you may want it to pay for itself. Investigate similar vacation homes in the area. What are they renting for? With airbnb, craigslist, etc., this is becoming a much easier and cost-effective option.