INVESTING IN COTTAGE PROPERTY
Friday Jun 26th, 2020Share
Investing in a cottage property
These days the cottage market is booming, and for good reason. It’s easy to understand why so many people want to own a cottage. A peaceful hideaway in a natural setting where we can enjoy time with our family has universal appeal. Yet, in these times of rapidly increasing prices, buying a cottage means a lot more than just financing a weekend getaway. Today, a cottage is a very significant investment, so you need to know your facts before you buy.
There are many economic and demographic factors that fuelled the boom in cottage properties. There are currently over 9 million baby boomers in Canada who have either already inherited or are poised to inherit the wealth of their parents’ generation. We’re entering an era that will see the greatest transfer of wealth in the history of this country. The ‘boomers’ – good earners in their own right -- are busily spending their new-found wealth upgrading their existing homes and buying second vacation home properties. And what does that mean to cottage prices? Well, simply put, demand will go up, availability will decrease, and that will force prices up. It’s already been happening for the past couple of years and don’t expect that trend to end any time soon. For cottage properties, even more so than residential, a great location is hard to come by and usually commands a premium price. Don’t expect that you’ll be able to ‘wait out’ today’s boom and pick up a bargain later. With that strategy, you might be disappointed.
There are many other factors that have an impact on the potential appreciation of a cottage property. From an investment standpoint, you have a lot to gain by buying the best location you can now, to reap the benefits of rapidly increasing equity. When choosing a cottage, the first question to consider is the property’s proximity to major metropolitan centers. With gas prices reaching unprecedented heights and an aging population, a long commute isn’t likely to appeal. Planned road expansions could also have a major impact on future resale values. Make sure you consult with your Coldwell Banker real estate professional to find out about any improvements that may be coming into the area where you’re looking.
Waterfront locations are the most sought after and command the highest prices, but it’s usually an investment that pays off long term. In return for the premium price, a waterfront cottage adds to your family’s enjoyment of the property while offering an excellent return on your investment. Another aspect that determines value is 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?
Remember that unlike city lots, you can’t assume even the most basic services are present in a cottage property. For instance, is there hydro service to the lot? If not, it can be expensive to bring in power from the nearest source. If you do have electric service, what’s its capacity? Many cottages built years ago don’t have adequate service to run today’s appliances. What about the water supply? Is your lot serviced by town water or a well? If your lot isn’t connected to the city sewage system, you’ll need a septic system. If yours is inadequate or outdated, replacement can be costly. That’s not to say that a cottage needing some updating isn’t a good buy. Just be sure that all these questions are factored in when you determine the offer price. Your Coldwell Banker professional will help you weigh all your options to get the best return on your investment.