Fig­ure out use be­fore buy­ing prop­erty

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 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, be­cause of the part-time oc­cu­pancy.

Fi­nanc­ing

From RBC Royal Bank Canada at 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.

Cal­gary­her­ald/files

De­ter­mine what you re­ally want be­fore sign­ing the dot­ted line.

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