As you are reading this on what is hopefully a beautifully sunny and warm day, sitting on your dock on the water, what could be better than being at your cottage.
There is no question of how nice it can be, but do you really have to own it to enjoy it?
Occasionally clients ask our view on buying a cottage. This question usually leads to a broad discussion where the financial equation is only one part of the picture. Their stage of life, kids’ ages, desire to explore or stay put, comfort with property maintenance, and even their experiences growing up, play a big part in deciding whether to buy or not.
For me, I am pretty certain at this stage of life (with three school-aged children), we are not cottage buyers. I know that not everyone will agree with this opinion, but I know it is the right decision for me and my family. Here are five reasons why I won’t buy a cottage.
- Trying to juggle the summer plans of our kids leaves only two to four weeks of possible time the kids could be at the cottage each summer. At a different stage in life, cottage ownership could make more sense.
- We want the freedom to explore different parts of Canada in the summer (maybe even beyond Canada), and don’t want to feel that we are tied to one location. In addition, we can rent a cottage that is ideal for the age and stage of our kids — both in terms of water safety, and with an eye to places to visit within an hour of the cottage.
- I can’t fix anything myself. My wife is pretty good at it, but neither of us wants to spend our time away working on the property or even feeling guilty about what needs to be done. We want to enjoy it.
- Financially, there are better investments. Over the last 35 years, residential real estate in Canada has averaged a gain of 5.4 per cent annually. Over the same period, North American stock markets have averaged 10 per cent returns or more. If the growth is tax free on a personal residence, then the gap is smaller, but for a cottage there are usually capital gains taxes to deal with. For those who talk about needing to deduct investment management fees from returns, that can be true, but you would also need to deduct real estate taxes and non-capital expenses from the return on the cottage. Looking at the options, I would rather not lock up my capital in a cottage.
- Finally, no more freeloading friends and family to worry about. I know that many families love to invite people up to their cottage. It is often greatly appreciated. However, it can get very tiring after a while, and when it isn’t greatly appreciated, it can become a real weight on the relationship. When renting, you can occasionally invite people to join you, but they know not to expect the annual invite.
Reproduced from the National Post newspaper article 31st July 2015.