Is owning a cottage worth it? Depends on your budget,
Take a close look at all costs before taking the plunge
If you felt green with envy this weekend as friends packed up their cars for the journey to cottage country, you may be telling yourself it’s finally time to take the plunge. Winter is too long, summer too short and the city too noisy and sticky to bear.
The smell of pine needles, a quiet sunset on a dock and the contentment that comes with cottage country. That’s the life.
If you’re serious about taking the plunge, it’s time to take a hard look at what it will really cost to be a cottager.
According to Royal LePage, the average cost of a Kawartha waterfront property with road access to the property is $450,000.
The average cost of the same cottage in Muskoka is between $525,000 and $650,000.
And that’s just the beginning. There’s taxes, maintenance, fees to dock and store your boat at a marina, maybe winter plowing of your road, Internet and TV — and the list goes on.
You have to do your homework before jumping in, advises financial planner Sandi Martin.
“Do you actually have room right now to add the type of expenses that come with a cottage?” is the question you need to ask, she says.
A realtor, mortgage broker or the seller of the cottage can give you an idea of the expenses to include and their annual cost. Or ballpark the costs of your primary house and add a few thousand dollars. Put those numbers into your budget and ask: Can I afford it?
Gerry O’Reilly, CFO of a Toronto-based tech company, bought his home-awayfrom-home on Lake Haliburton 10 years ago for $225,000. He enjoys every summer weekend there, plus two weeks’ vacation and a few weekends in winter with his wife and three kids.
Three years ago, he renovated the cosy, 600-square-foot property.
About $250,000 later, he has a threebedroom cottage that is double the size, kisses the lake and has a highly coveted western-facing view.
Though he doesn’t regret a penny spent, O’Reilly admits a cottage is expensive. “Be ready to spend,” he says. General maintenance is top of the list, he says. There’s always something that needs attention. He calculates he spends about $12,000 a year paying bills and maintaining the property.
“(A cottage) is a luxury,” says O’Reilly who estimates that someone spending 50 days a year at the cottage, is paying approximately $250 per night for the privilege.
“You can either stay at the Four Seasons in Toronto or you can stay at a cottage. You can’t justify it economically, but it gives a new dimension to your life. It’s the greatest purchase you can make from a spiritual perspective.”
That may be true, but even a dose of spirituality has its price — and buyers need to beware. “Preparation is everything and the owner shouldn’t be surprised by these carrying costs,” says Erica Nielsen, a retail banking executive at RBC.
She says you should try and get a feel for the projected increases to make sure you can afford to carry the costs going forward.
The same goes for municipal tax increases, utilities and insurance.
“There are historical rates of growth in those costs, so build those into a solid financial plan,” she says.
Some costs can’t be foreseen and O’Reilly is well acquainted with those. A heavy winter snowfall damaged his eavestroughs. The cost to repair them was $1,000.
“It’s really important to plan as best as you can for the unforeseen,” says Nielsen, who advises setting aside a sum as part of the annual budget.
Her “unforeseen event” was repairs to the road leading into her property.
Depending on how much of a down payment you have, you may be faced with mortgage insurance.
Mortgage insurance on your primary home will not cover a second one as it is specific to each property. Canada Mortgage and Housing Corporation (CMHC) no longer offers second property mortgage insurance, but other insurers such as Canada Guarantee and Genworth Canada do.
So where does that leave you? Should you invest in cottage country? It depends on the individual and what they’re looking for, says Nielsen. If the decision is based on lifestyle there will be different trade-offs than if your goal is the cottage as an investment.
Martin agrees. As an investment, it’s probably not a wise one, but the nonfinancial considerations are what you need to think about after you’ve quantified everything else.
So if you’ve established you can afford it, “ask yourself how important is what you’re getting out of it.”
For Martin it’s a resounding “not worth it.”
Considering the invaluable family time and tranquility the cottage allows, O’Reilly sees it differently.
“Life is short and money doesn’t go with you,” O’Reilly says.
“If you make every decision in life based on money you may not have a very good life.” Elisa Birnbaum is a Toronto freelance writer.