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Mortgages,  Travel

Is a cottage a good investment?

Summer has begun and many Canadians are flocking north to cottage country, to relax and get away from the hustle and bustle of the cities. For many Canadians, owning a cottage is a dream. There’s something about having a place to call your own. A place that your children can grow up in and build memories. And we did as well – although, my parents never purchased a cottage.

When we were young, they would rent the same wonderful cottage every year, about an hour north of us and minutes from the beach. It neighboured two other cottages, side-by-side, which my uncles had rented as well. They were pretty sizeable cottages, but we come from a pretty sizeable family and we all shared living quarters with one other. All in all, including us kids, there were about 20 of us. Many of my closest cousins were there. And some of my fondest memories were there: playing soccer in the grassy fields, swimming in the neighbourhood pool, hiking adventures and days at the beach, and catching frogs and skipping stones. We made fun and memories out of pretty much nothing.

So I completely get it and I completely get generations of cottage owners wanting to pass it down. But although the idea of it sounds lovely, my wife seems to think that because I don’t want to ‘own’ a cottage, that I’m not really a cottage person and that’s not really the case. I also like to travel and explore new places, experience different cultures and not necessarily be tied to one place. Aside from being tied to one place and not being able to afford one right now, there are also countless other financial reasons why I don’t think it makes sense for us.

What’s it worth to you?

Unless you want to drive for a while, it’s not uncommon to see little cottages within an hour’s drive of us, selling for upwards of $200,000. In fact, it’s fairly common to see some going for upwards of $300,000. And unless you plan on that being your primary residence, it’s pretty pricey, especially considering the short seasons we have here. At most, I think most provinces get about two months of great summer weather – two months! July and August really are the prime cottage months with temperatures where I am, hovering around the high 20’s, with anywhere from 5-10 days above 30ºC (86ºF) and the water’s generally much cooler. Yes, there are the avid cottagers that go year-round, and some who work from their cottage, but I would say those are few and far between. Saying, if you owned one, that you’d go more often and actually doing it are two different things.

But here’s where financially the thought of a cottage, just doesn’t make sense to me. I can rent a cottage for the price of about $1000/week, $2,000/week for one that sleeps about 8 people or 2 families, which essentially brings me back down to $1,000. So my thought is, would I rather spend $300,000 on a cottage, or take three-hundred $1,000 vacations? Let’s say it’s a beautiful $2,000/week cottage, $300,000 can still buy me 150 one-week vacations, 75 two-week vacations – or another way of looking at it – 75 years worth of $2,000 vacations, twice a year.

Look, even if you were to spend $10,000 to take your family on a nice big trip once a year, you would still be able to do that for the next 30 years. And that doesn’t include a pinch of maintenance costs, which can be really expensive. Decks and docks, replacing old plumbing/septic tanks, just to name a few. And it also doesn’t include the mortgage carrying costs. For most buying into the cottage market, it’s usually their second home. And after interest costs and all is said and done, that $300,000 cottage is closer to a $400,000–$500,000 cottage.

On the bright side

Now, I’m not saying cottages are bad investments. Some things hold sentimental value. And in some markets, you may be able to find a cozy little cottage for $50,000. Or maybe you live in an area where you get longer periods of sunny weather. And if you’re comfortable sharing that family cottage, there’s also the ability to turn that cottage into a rental property, in which, even a couple of months a year can help cover your annual maintenance costs and help to pay down some of your mortgage. Which depending on the area, could turn out to be a great investment, provided you can afford the upkeep costs.

Now this cottage example could be a metaphor for so many other things. Whether it’s a cottage or any other long-term investment/purchase that you’re thinking of, put aside your beverage and Muskoka chair, stop romanticizing for a second, and ask yourself if it’s worth owning. Are there other options? Or how can you get the best value out of your investment?

Dream of owning a cottage? Own a cottage already? Is a cottage a good investment? What are your thoughts?

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