Sunday, July 29, 2007

Cottage Ownership

On a beautiful Sunday like today, one can easily imagine how nice it would be to own a cottage on the lake. Not only would a waterfront cottage be a great place to unwind on the weekend, but it could eventually be my principal retirement residence and in the meantime, act as a potentially significant cash flow generator.

With this in mind, I picked up a copy of The Cottage Ownership Guide by Douglas Hunter since it is promoted as being the guide to how to buy, sell, rent, share, hand down and retire to your waterfront getaway.

Well, I must honestly say that this book definitely fits its billing! The book definitely covers all aspects of cottage ownership with special commentary about the unique aspects of ownership in Canada and the United States.

I'll share just a few of the many insightful tips mentioned in the book when looking for your ideal cottage:

  • Check the cottage association's newsletter and/or minutes of its annual general meeting for the latest news
  • Get in contact with the lake association or ratepayers' group (The Federation of Ontario Cottagers' Association maintains a list of groups in the province)
  • Obtain the lake's history of algae blooms (apparently, once a lake had experienced a bloom, the odds were 50-50 that it would have another) and any measures taken to control their reoccurence
  • Find out how much the water level changes
  • Is the property on a flood plain? (Lists for each province and territory are available online)
  • Where does the sun set?
  • Which way does the wind blow?
  • Is road access available year-round?
  • Is the road private or public? Who pays for its maintenance?
  • Do the neighbours rent out their cottage?
  • Get a well record created by a licensed driller
  • Is there a grandfather clause for zoning regulations?
  • Check the survey to see if there is a shoreline road allowance? If so, you don't own your waterfront, and that your deck and boathouse and maybe even your cottage are encroaching public land. You can usually purchase the road allowance from the municipality.
  • Check for other road allowances (like concession or sidelot) and restrictive covenants and easements
  • What are the permitted public uses for the shoreline in front of private property in your area?
  • Where does the waterfront end and the lake begin? ("In the common law of both Canada and the U.S., the furthermost limit of private shoreline property is considered to be the high-water mark (though some title deeds describe ownership extending to "the water's edge" or "the low-water mark"). Local regulations, for instance, may require a setback from the water's edge measured in relation to the high-water mark. And how is the high-water mark determined? From historic date drawn from observed water heights or, lacking that, by inspecting the shoreline for physical signs.")
  • Are there any limitations to construction, renovations or expansions?
The book also discusses taxes and how to reduce the 'buy-now, build-later tax hit.'

I have no problems recommending The Cottage Ownership Guide to anyone considering an investment in a cottage or waterfront property.


FourPillars said...

Very interesting post.

My suggestion for any would-be cottage owners is to consider renting unless they have lots of time to use the cottage.
My parents own a cottage in northern Ontario and they pay about $7000/yr for it (no mortgage). They were teachers when they worked so they were able to use it a lot during their working years. Also - it was only a one hour drive from our house so it was pretty accessible for frequent visits.
If you work a normal job and only get 3-4 weeks of holiday and the potential cottage is several hours drive then you really have to ask yourself how much you will be using it and figure out if renting isn't a better option.
Another option which I'm sure is in the book is buy part ownership of a cottage. A friend of mine did this and it works great - it's run by some company and you buy 1/10 of the cottage and share all the expenses. This is also a good option for someone who is working full time.


White Eagle said...

Thanks fourpillars.

Yes, the book also covers part ownership.

After reading the book and contemplating the idea of owning a cottage, I've come to the realization that it's not everything it's cracked up to be as you have to worry about additional maintenance, insurance, taxes, security costs amongst others plus heading to the cottage on the weekend leaves no time to get things done around the house.

That being said, it would be nice to acquire a piece of waterfront property when I'm closer to retirement and slowly build a nice little dream home to settle into.