Fre­quency of use vi­tal for in­sur­ance

Calgary Herald New Condos - - Recreation & Investment Properties -

Some ad­vice for own­ers of recre­ation prop­er­ties, as well as for po­ten­tial buy­ers:

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, stand-alone 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, be-

cause 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-to­date ap­praisal done to de­ter­mine the home’s cur­rent value.

Rent­ing

From High Coun­try Prop­er­ties Man­age­ment Ltd at www. high­coun­tryprop­er­ties.com:

There are sev­eral ways to rent out your recre­ational prop­erty. If you buy a condo, it’s likely there will be an on-site 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.

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.

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