Fig­ure out level of use be­fore mak­ing pur­chase

Calgary Herald - Calgary Herald New Condos - - Recreation & Investment Properties -

Some ad­vice for own­ers of recre­ation prop­er­ties, as well as for peo­ple con­sid­er­ing mak­ing a pur­chase:

Buy­ing prop­erty

Types of recre­ation prop­er­ties avail­able in Canada: Apart­ment-style suites; Town­homes; Chalets; Recre­ational ve­hi­cle (RV) lots;

Frac­tional-own­er­ship ho­tel/ re­sort-style prop­er­ties; Is­lands; Acreages; Cabins; Water­front prop­er­ties. Things to con­sider when choos­ing a recre­ation prop­erty:

What do you plan to use it for? Will it be strictly for recre­ation? Are you in­vest­ing for even­tual re­turn on in­vest­ment, or as a de­ferred re­tire­ment res­i­dence?

How of­ten do you plan to use the prop­erty? Is it lo­cated close enough that you can visit reg­u­larly (on week­ends) or is it far­ther away?

What do you want to do with the prop­erty when you aren’t oc­cu­py­ing it? Are you in­ter­ested in rental pools, frac­tional own­er­ship, or both?

Re­search the lo­ca­tions you wish to con­sider, and con­sult with real­tors and oth­ers who are fa­mil­iar with the area. Be aware of any zon­ing or leg­is­la­tion that might have an im­pact on your goals and bud­get.

Make a list of your most im­por­tant ques­tions and take it with you when vis­it­ing prop­er­ties.

In­sur­ing

From The In­sur­ance Bureau of Canada at www.ibc.ca:

How the va­ca­tion prop­erty is used and how of­ten it is oc­cu­pied will dic­tate which in­sur­ance pack­ages are ap­pro­pri­ate for you.

How much time do you spend there? Do you use it year-round? Do you rent it out at some point dur­ing the year? The an­swers to th­ese ques­tions are im­por­tant when you are con­sid­er­ing what type of cov­er­age to buy.

Most in­sur­ance com­pa­nies will con­sider pro­vid­ing in­sur­ance for your va­ca­tion prop­erty only if you in­sure your pri­mary res­i­dence with them as well. You can have your va­ca­tion prop­erty listed on your home in­sur­ance as a secondary or sea­sonal lo­ca­tion, or you can have in­sur­ance for the prop­erty as a sep­a­rate, stand­alone pol­icy.

Va­ca­tion prop­erty in­sur­ance is al­most al­ways pro­vided as a “named perils” pol­icy, in­stead of a com­pre­hen­sive pol­icy.

Named perils means you have in­sur­ance cov­er­age for spe­cific risks, such as fire, ex­plo­sion or smoke dam­age.

Cov­er­age for cer­tain risks, such as wa­ter dam­age or van­dal­ism, may be more dif­fi­cult or ex­pen­sive to ar­range, be­cause of the part-time oc­cu­pancy.

Fi­nanc­ing

From RBC Royal Bank Canada at www.rbc.com:

There are three main fi­nanc­ing al­ter­na­tives for pur­chas­ing a va­ca­tion home:

A con­ven­tional mort­gage al­lows you to fi­nance up to 75 per cent of the pur­chase price of the home, thus re­quir­ing a down pay­ment of at least 25 per cent.

An in­sured mort­gage makes it pos­si­ble to fi­nance up to 95 per cent of the value of a sec­ond home. If you hap­pen to al­ready own a cot­tage that has no debt on it, then you can also re­fi­nance that ex­ist­ing prop­erty for up to 90 per cent of its value and get an in­sured mort­gage to pur­chase an­other va­ca­tion home.

A home eq­uity line of credit makes use of the eq­uity built up in your pri­mary res­i­dence to let you bor­row up to 75 per cent of the value of the home less the debt still ow­ing on it.

You will need to have an up-to-date ap­praisal done to de­ter­mine the home’s cur­rent value.

Rent­ing

Hot spots

From High Coun­try Prop­er­ties Man­age­ment Ltd at www. high­coun­try prop­er­ties.com:

There are three main ways to rent out your recre­ational prop­erty. If you buy a con­do­minium, it’s likely there will be an on­site rental pro­gram.

Sim­ply sign up, make a list of when the prop­erty is avail­able for rent and you will re­ceive a cheque, ei­ther monthly or quar­terly, for rev­enue less ex­penses and a man­age­ment fee.

You can also ar­range for the ser­vices of an out­side prop­erty man­age­ment com­pany that spe­cial­izes in va­ca­tion rentals.

Again, you will need to come up with a sched­ule of when you want to use your va­ca­tion home.

Then, the man­age­ment com­pany will look af­ter mar­ket­ing your prop­erty, han­dling reser­va­tions and pay­ment, pro­vid­ing linens, clean­ing and main­te­nance, and send you a cheque for rental rev­enue, less ex­penses and a man­age­ment fee, usu­ally about 40 per cent.

You can do it your­self, but first you will need to make sure zon­ing by­laws al­low short-term rentals in your area.

Then, ar­range ap­pro­pri­ate in­sur­ance and keep suit­able ac­count­ing records. Also, ar­range for some­one to han­dle clean­ing, emer­gency re­pairs, or any check on dif­fi­cul­ties that your guests may ex­pe­ri­ence.

Some signs to look for that an area is primed for recre­ation prop­erty growth:

Sig­nif­i­cant in­vest­ment, in terms of peo­ple buy­ing prop­er­ties, de­vel­op­ers build­ing prop­er­ties, and gov­ern­ments in­vest­ing in in­fra­struc­ture.

Up­grades to trans­porta­tion that al­low im­proved ac­cess from a wider area, such as the es­tab­lish­ment of Cal­gary-to-Co­mox flights.

Talk to lo­cal real­tors for their take on the lat­est trends in their area.

Prox­im­ity to other hot spots (such as Kelowna, B.C., or Can­more) can cause a rip­ple ef­fect where lo­ca­tions far­ther out (such as Pen­tic­ton, B.C., or Crowsnest Pass) ex­pe­ri­ence growth.

Se­cu­rity

Many of the same tips that ap­ply to home and prop­erty se­cu­rity in the city also ap­ply to recre­ation prop­er­ties in the coun­try.

In­stall timers to turn lights and ra­dios or TVs on and off pe­ri­od­i­cally.

Ask a neigh­bour (or the prop­erty’s pri­vate se­cu­rity, if ap­pli­ca­ble) to check in on the site oc­ca­sion­ally. Just as in the city, mow­ing the grass and shov­el­ling the walk gives prop­er­ties that lived-in look. The neigh­bour can also check for prop­erty dam­age or signs of mishaps such as water­line leaks.

Re­in­force win­dows with metal grates, and in­stall sturdy doors. The more work a thief faces to break into a prop­erty, the more likely they will give up and choose an eas­ier tar­get.

Turn off wa­ter and elec­tric­ity be­fore leav­ing a prop­erty for an ex­tended pe­riod.

Don’t leave valu­ables in an unat­tended prop­erty. Also avoid leav­ing items such as liquor, hunt­ing ri­fles and ex­pen­sive equip­ment be­hind.

If pos­si­ble, in­stall an alarm sys­tem that is ei­ther mon­i­tored or pro­grammed to no­tify you in the event of a break-in or other emer­gency.

Con­sider join­ing — or start­ing — a crime preven­tion pro­gram such as Ru­ral Crime Watch.

Clearly la­bel any pos­ses­sions left on the prop­erty with non-re­mov­able stick­ers.

In­form lo­cal po­lice or RCMP when the prop­erty will be unat­tended, and pe­ri­od­i­cally con­tact them to find out if there have been any se­cu­rity is­sues near your prop­erty.

Bud­get­ing

Some tips for mak­ing sure buy­ing a recre­ation prop­erty doesn’t leave you with un­ex­pected sticker shock:

Be aware of clos­ing costs, such as lawyer fees and home in­spec­tion fees.

An ac­coun­tant can help you nav­i­gate the tax­a­tion im­pli­ca­tions, both in terms of what taxes you have to pay up front, whether any taxes like GST can be de­ferred, what taxes are ap­pli­ca­ble if you rent out a prop­erty, and if any re­bates/ write-offs are avail­able.

Lo­ca­tion and ameni­ties play a role in de­ter­min­ing on­go­ing costs, such as condo/strata fees.

Con­tact lo­cal real­tors, mort­gage bro­kers, etc. to find out if an area has unique taxes or other fees that need to be fac­tored into the pur­chase of the prop­erty.

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