# Investing In A Cottage?



## Caller1982 (Jul 4, 2010)

Does anyone have any experience with purchasing a cottage as an investment property? I admit it's seasonal and very hit or miss (depending on location and price paid) but it's a very alluring idea to have a property that you can visit on the weekends when it's not rented out, while the weeks that it is rented out in July/August go towards paying off your mortgage.


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## mrcheap (Apr 4, 2009)

I've known a couple of families that own compounds in cottage country and rent out many cottages as a business. I suspect buying a single cottage for yourself and renting it out when you're not using it would be a very poor investment.

How are you going to get the keys to and from the guests? How are you going to make sure it's clean? How are you going to respond to maintenance problems (when you're a couple hours away)? How are you going to advertise your unit? How are you going to collect payments from them? How will you manage bookings? etc, etc, etc. You obviously could hire someone near the cottage to do this sort of thing, but then that's another cost to pay (on top of maintenance, property tax, the mortgage, etc).

Even if the tenants were subsidizing your costs (I strongly doubt renters would cover all your expenses), the PITA factor would be huge.


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## andrewf (Mar 1, 2010)

Good points raised above. It really depends on what kind of rent you can generate from a cottage. If you can get 8 weeks during the summer at $1500 to $2000 per week, plus some weekends in the lower season, you could see income in the $12,000 - $16,000 range per year. Expect property taxes of around $2000, insurance and maintenance another $2000 (perhaps higher). Then we have $8,000 - $12,000 to cover mortgage and utilities. I'm not sure what is reasonable for utilities, but let's say it's another $1000. At 6% interest, you can service $116k - $200k in mortgage debt (not including principle repayment). You're not going to get a cottage that can yield that kind of rent for less than $300k (if not higher). 

So if you think you can get 12 weeks out of it in a season (booked solid from June to end of August), you might be looking at $18k to $24k in rental income, with $13k to $19k after taxes, maintenance, insurance and utilities. With that, you can service $216k to $316k in debt at 6%. So I'd say you'd need to get a good 12 weeks of rentals out of it to cover the cost of the cottage, but then you won't see much use out of it yourself, unless you come up short in terms of rent income.


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## the-royal-mail (Dec 11, 2009)

Yes and then there's the whole winter security issue and spring cleanup/fall shut down work. I think this scheme is going to be more WORK than it's worth.

Remember there's a lot of rhetoric out there regarding renting. Two of the famous quotes:

1. "we want renters so they pay our mortgage"
2. "don't throw your money away on renting, you are giving it away, invest in your own property instead"

Both are hogwash.

If money is what you need/want, go to work.


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## chaudi (Sep 10, 2009)

I would look for a piece of land less than 2 hours from TO, with lake access. Build 4-6 small luxury cottages and rent for $100+ per day. Keep one for your self to watch over the place. Set up a side business providing food, booze, and boating activities to your guests. I would target the tourist industry. You would need a good web site.

Of course this is work, if you don't dealing with people then forget it. Then you option would be build a cottage and flip it, utilizing local bear power.


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## Cal (Jun 17, 2009)

Caller1982 said:


> Does anyone have any experience with purchasing a cottage as an investment property? I admit it's seasonal and very hit or miss (depending on location and price paid) but it's a very alluring idea to have a property that you can visit on the weekends when it's not rented out, while the weeks that it is rented out in July/August go towards paying off your mortgage.


Agree with Mr. Cheap. The cleaning between guests, keys, laundry for bedding will all result in you going up and doing this weekly, or hiring someone to do it.

Have you ever owned a cottage? It is alot of work. As an owner there isn't as much of relaxing putting your feet up as there is cutting grass, painting and doing maintenance.

And as per chaudi 'Build 4-6 small luxury cottages and rent for $100+ per day. Keep one for your self to watch over the place.' I am sure that you would need help selecting a lot or lots that the building inspector would even approve something like this. As a rule in cottage country they will allow 1 dwelling per lot.

If you want a cottage for personal use to enjoy. Then by all means. Even if you wanted to purchase a cottage, that is winterized, for year round use, to rent it out could be a PITA as it wouldn't be very close to check on things or do the maintenance.

And to fix a toilet, a 2 hours drive away would be an unreasonable thing for me to do with my investment $.


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## Four Pillars (Apr 5, 2009)

It's probably not a great investment to buy a single cottage. However, if you want to buy a cottage anyway, then renting it out for part of the summer can certainly make it easier to pay for.

Alternatively, consider buying a partial ownership in a cottage. A friend did this and says it's pretty good. There are companies who set this up and you can buy 1/10 shares. 

Or just rent.



FYI - July and Aug are the only good rental months.

My parents cottage costs about $8k/year for everything.


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## Square Root (Jan 30, 2010)

Very bad idea. Owning a nice cottage is very expensive. I am sitting by the water at our cottage as I write this. Place is fantastic and it has really enhanced our life style but it costs us about $30k per year in basic expenses-taxes/heating/boat/insurance etc. Plus other upgrades that we felt were necessary. Owned it for about 13 years and capital appreciation has probably just kept pace with ongoing expenses over this period. This is over a very good period for capital appreciation given the baby boom generation demographics. Would never rent it-but often loan it to close friends. My view is: cottages are lifestyle decisions not investments. As such cottages are best left sans mortgage. It is difficult to rent a starter cottage for a decent amount. To get good rent you need a cottage worth in excess of $500k probably. Good cottage renters are hard to find and keep. Cottages are great-for personal use only.


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## Square Root (Jan 30, 2010)

chaudi said:


> I would look for a piece of land less than 2 hours from TO, with lake access. Build 4-6 small luxury cottages and rent for $100+ per day. Keep one for your self to watch over the place. Set up a side business providing food, booze, and boating activities to your guests. I would target the tourist industry. You would need a good web site.
> 
> Of course this is work, if you don't dealing with people then forget it. Then you option would be build a cottage and flip it, utilizing local bear power.


Totally impractical-ever been to a cottage?


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## K-133 (Apr 30, 2010)

If you're serious about having a place to go to relax, while generating income, then you should also consider other types of properties such as hotel rooms. These can run similar to the cost of a home, but are both maintained and managed for you.

My experience with these is that with a reasonable downpayment, it will pay for itself. 

My advice, if you are interested in this path, is to begin by considering destinations relatively close to home, or somewhere near where you often visit annually.


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## MoneyGal (Apr 24, 2009)

My family owns two waterfront cottages (Okanagan and Kawarthas) and we have many years of experience renting. 

The one issue that no one has mentioned so far is liability. You are bringing together people operating outside their normal settings, "on vacation" (often = booze), and your boating equipment. Bad combination if you don't know the people VERY well, and your insurance will NOT cover your liability if you are renting the space, your renter has an accident and sues you(r insurance company), and you have not disclosed the commercial activity to your insurance company and purchased the appropriate (expensive) riders. 

However. That said, I love cottaging and the rewards are not investment rewards for me. Here's a picture from yesterday in the Kawarthas.


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## CanadianCapitalist (Mar 31, 2009)

Square Root said:


> Place is fantastic and it has really enhanced our life style but it costs us about $30k per year in basic expenses-taxes/heating/boat/insurance etc. Plus other upgrades that we felt were necessary.


Wow. 30K (or even half that) can buy a lot of vacation. I can't agree more that a cottage sounds like a rather expensive lifestyle choice. Personally, we'd like one but probably when the kids are a bit older.


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## Square Root (Jan 30, 2010)

CanadianCapitalist said:


> Wow. 30K (or even half that) can buy a lot of vacation. I can't agree more that a cottage sounds like a rather expensive lifestyle choice. Personally, we'd like one but probably when the kids are a bit older.


Agree. Our place is pretty nice. Electricity heating costs $7k,per year, taxes also $7k, insurance $6k, boat $2k, other maintenance (mostly deck related), $3k. Really adds up. No doubt it can be done much cheaper. But they can be expensive. Having said that there is nowhere in the world we would rather be on a nice sunny summer's day. PS we travel a lot as well. About 65 days this year. Life is good.


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## kcowan (Jul 1, 2010)

Our family had a cottage on the water for 55 years. Just 80 miles from Toronto. Many fun memories from summers there as kids. But we spent 8 weeks there in the summer (Dad came up at weekends).

When Dad died in 2000, I sold it for $200K (50 foot frontage, tear down cottage) because of the added investment needed to make it currently usable.

I was really happy we had it to get away from the city. But it was not a good investment. A lifestyle expense


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## fred123 (May 8, 2010)

Investing in cottage real estate and carpentry is my retirement hobby / investment. I've got 4 on the go (in Manitoba), all waterfront. Purchase prices of the properties were $10K to $30K. I'm building cottages on 3 of them. I have'nt yet tried to sell one. Based on current market conditions 2 of them have appreciated significanty. Taxes and insurance average less than $1K/yr each. I don't rent them out, so there is no income. Here's what they look like:
http://www.dropbox.com/gallery/2116412/1/Cottages?h=031cba

Fred


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## chaudi (Sep 10, 2009)

If you want a cheap alternative to a cottage it would by a boat, preferable 26-28ft that is trainable by your own vehicle.
You can take a boat to many different lakes launch at even find a place to anchor it in front of a marina or someones property. You can a have canoe or dinghy to get out it on weekends. Essentially mooring it for free.
You should take a sailing/boating course. You can store in some rural place with your own tailor. The next year you can try a new lake! Even in TO if you sail a boat out 5 km you'll feel like your far away.

A Boat offers some great advantages over a cottage. No neighbours, no tax, no bills, no trees to block the view (cottages can feel very dark and wet), perfect view all the time! no leaves to rake or grass to cut. You can get a heater in a boat too. 

It gets down to how many days do you want to use it per year. 60 days a year @30k is $500 a day! How many days will you spend maintaining it?


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## Sampson (Apr 3, 2009)

CanadianCapitalist said:


> Wow. 30K (or even half that) can buy a lot of vacation. I can't agree more that a cottage sounds like a rather expensive lifestyle choice. Personally, we'd like one but probably when the kids are a bit older.


+1. In my books, that would be 1.5-2 months at a resort in Tahiti every year.

A cottage would be nice though.


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## the-royal-mail (Dec 11, 2009)

Good post by chaudi. I tend to agree. We could also say the same things for the RV lifestyle. Far more economical and flexible than the cottage thing.

My main objection to the cottage is that you are basically paying two mortgages, two tax bills, always worry about security and spend your summer weekends driving and working on the property. Sorry. I work all week. In the evening and after work I want to NOT work. Owning a cottage is a serious drain on that.

A lot of people perhaps don't know that you can rent a cottage for far cheaper than owning your own and can go at will. 

I actually get a lot more enjoyment out of daytripping and exploring rural towns and such, then go home at the end of the day. A lot cheaper and simpler. I think cottages are more of a status symbol than anything else.


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## K-133 (Apr 30, 2010)

+1 Chaudi

I'm considering a yacht in place of a cottage for many of the reasons stated above.

I will likely pay for mooring at a local club, for the convenience of having the boat close to home for weeknight excursions.


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## Four Pillars (Apr 5, 2009)

Boats are great, but I think you're comparing apples to oranges.

Boats are to cottages what a studio apartment is to a house.

Boats are much, much smaller - mobile, yet very confining if you are not at port.


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## Square Root (Jan 30, 2010)

the-royal-mail said:


> Good post by chaudi. I tend to agree. We could also say the same things for the RV lifestyle. Far more economical and flexible than the cottage thing.
> 
> My main objection to the cottage is that you are basically paying two mortgages, two tax bills, always worry about security and spend your summer weekends driving and working on the property. Sorry. I work all week. In the evening and after work I want to NOT work. Owning a cottage is a serious drain on that.
> 
> ...


 Don't know about status symbol. But as I have said many times-Cottages do not make financial sense. It is a lifestyle thing. I am sitting on our dock as I write this-just beautiful-very quiet. Just took a swim as quite warm. Agree they are expensive-but I have heard that there are about 250,000 cottages in Ontario. Must be a fair number who think it's worth it? Not for everyone (a good thing otherwise it would be too crowded up here). Boats are fine but not the same- certainly not cheap either (insurance, gas, maintenance, storage, depreciation). We have all the luxuries here and use it all year round. Maybe 100-120 days per year. Probably the best $30k we spend each year.


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## MoneyGal (Apr 24, 2009)

The water (Kawarthas) is incredible this year. It was 72F on Victoria Day weekend! Our cottage is 60 years old (note: no mortgage!) and we've never recorded and end-of-May temperature that warm.


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## Square Root (Jan 30, 2010)

chaudi said:


> If you want a cheap alternative to a cottage it would by a boat, preferable 26-28ft that is trainable by your own vehicle.
> You can take a boat to many different lakes launch at even find a place to anchor it in front of a marina or someones property. You can a have canoe or dinghy to get out it on weekends. Essentially mooring it for free.
> You should take a sailing/boating course. You can store in some rural place with your own tailor. The next year you can try a new lake! Even in TO if you sail a boat out 5 km you'll feel like your far away.
> 
> ...


Again doesn't sound like you are speaking from direct experience? I hire cleaning staff and gardener for the $30k as I really don't like to work at all up here. Maybe all in cost runs $250-300 per night. (not including opportunity cost of capital outlay) It would cost a lot more than that to rent a place like ours. Again not cheap but in my view,speaking from experience, very much worth it to us. To each his own.


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## Square Root (Jan 30, 2010)

MoneyGal said:


> The water (Kawarthas) is incredible this year. It was 72F on Victoria Day weekend! Our cottage is 60 years old (note: no mortgage!) and we've never recorded and end-of-May temperature that warm.


Yes-it's been a great summer so far. Last two were awful.


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> The water (Kawarthas) is incredible this year. It was 72F on Victoria Day weekend! Our cottage is 60 years old (note: no mortgage!) and we've never recorded and end-of-May temperature that warm.


After this week (2500 degrees in T.O.), you'll be able to cook noodles in your lake. 


@Royal - the rent vs buy question has to include amount of usage. If someone uses their cottage enough, then owning is cheaper than renting.


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## heyjude (May 16, 2009)

the-royal-mail said:


> My main objection to the cottage is that you are basically paying two mortgages, two tax bills, always worry about security and spend your summer weekends driving and working on the property. Sorry. I work all week. In the evening and after work I want to NOT work. Owning a cottage is a serious drain on that.simpler.


I agree. But one of the appeals of recreational property is that it's your personal space. Because I really wanted that, I chose to buy a fraction, 4 weeks a year. Maintenance is all taken care of. It works great for me at a very reasonable cost. I know others who bought larger fractions with the idea that they could rent them and make money. They are not making any money. A cottage or other recreational property is fundamentally a lifestyle investment, not a financial investment.


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## OhGreatGuru (May 24, 2009)

heyjude said:


> A cottage or other recreational property is fundamentally a lifestyle investment, not a financial investment.


I agree.


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## hystat (Jun 18, 2010)

I wanted the cottage lifestyle, so I moved to the "cottage" in 1994 (it's a brick bungalow on the water). Only one property to maintain. 

I had 2 years of marathon commutes year 'round (90 to 120 minutes each way!!), but then I advertised and found a snowbird couple and I babysat their luxury condo from Oct to April, so that reduced my windshield time in the winter. 

I did a lot of traveling for my job back then (on the road 15 weeks/yr) so the commuting was intermittent but still not recommended and not for anyone with a family.

The whole time I was gunning for a particular job in cottage country that I finally got 7 years ago.... now I drive 12km to work (I can actually boat to work too)

As far as investment... well... this house has appreciated much more than the one I left in the suburbs of T.O. and being the principle residence, it's a tax free gain so I think I have made the cottage an investment, but I paid for it with driving and other sacrifices


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## Square Root (Jan 30, 2010)

hystat said:


> I wanted the cottage lifestyle, so I moved to the "cottage" in 1994 (it's a brick bungalow on the water). Only one property to maintain.
> 
> I had 2 years of marathon commutes year 'round (90 to 120 minutes each way!!), but then I advertised and found a snowbird couple and I babysat their luxury condo from Oct to April, so that reduced my windshield time in the winter.
> 
> ...


Interesting if somewhat unusual circumstances. Sounds like everything worked out great. Congrats. Now that we are retired we spend less and less time at our downtown Toronto condo. Feels more and more like a hotel suite. Nice contrast to the outdoor life at the cottage and Alberta though. I still don't view personal use real estate as an investment. This is not to say you can't make money on it at times-especially if it is levered with debt. Too illiquid, transaction costs very high, need to live somewhere,etc. Sure is a great lifestyle choice though.


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## kcowan (Jul 1, 2010)

Square Root said:


> Interesting if somewhat unusual circumstances. Sounds like everything worked out great. Congrats. Now that we are retired we spend less and less time at our downtown Toronto condo. Feels more and more like a hotel suite. Nice contrast to the outdoor life at the cottage and Alberta though. I still don't view personal use real estate as an investment. This is not to say you can't make money on it at times-especially if it is levered with debt. Too illiquid, transaction costs very high, need to live somewhere,etc. Sure is a great lifestyle choice though.


Yes I think they are lifestyle choices. For the commuting poster, it looks like he had a plan and eventually made it work for him.


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## james_57 (Jul 5, 2010)

the-royal-mail said:


> Yes and then there's the whole winter security issue and spring cleanup/fall shut down work. I think this scheme is going to be more WORK than it's worth.
> 
> Remember there's a lot of rhetoric out there regarding renting. Two of the famous quotes:
> 
> ...


You are so correct. There is an endless list of reasons why. Including stuff you cherish suddenly gone missing...even rocks. Oh, and the cleaning... But learning how to be a landlord might be worth something, especially if you plan to own a small apt building.


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## Ihatetaxes (May 5, 2010)

Bought a cottage in Muskoka in 2001 and found it to be a giant pain in the butt with all the driving, maintenance and shopping. It was like running a B&B for our friends and family as with guests most weekends that meant more laundry, shopping, etc. We would get home Sunday nights and the grass at home wasn't cut, dry-cleaning needed to be picked up and grocery shopping done. Our stress levels were higher that summer than ever before. Sold the place and made a quick $60k profit after costs and now we rent for a week or two each summer.

I think cottages are great for retired people and can see buying another one when I am at that point.

Back to the original post though - there are some excellent cottage management companies that will look after renting your cottage for you. You do need expensive insurance (I was quoted a 300% increase) but if you rent it out enough it might be worth the policy and wear and tear on the place. Take out valuable furniture and personal items though as renters like to use and abuse.


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## james_57 (Jul 5, 2010)

Ihatetaxes said:


> Bought a cottage in Muskoka in 2001 and found it to be a giant pain in the butt with all the driving, maintenance and shopping. It was like running a B&B for our friends and family as with guests most weekends that meant more laundry, shopping, etc. We would get home Sunday nights and the grass at home wasn't cut, dry-cleaning needed to be picked up and grocery shopping done. Our stress levels were higher that summer than ever before. Sold the place and made a quick $60k profit after costs and now we rent for a week or two each summer.
> 
> I think cottages are great for retired people and can see buying another one when I am at that point.
> 
> Back to the original post though - there are some excellent cottage management companies that will look after renting your cottage for you. You do need expensive insurance (I was quoted a 300% increase) but if you rent it out enough it might be worth the policy and wear and tear on the place. Take out valuable furniture and personal items though as renters like to use and abuse.


Great story with a happy ending!


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## kcowan (Jul 1, 2010)

Ihatetaxes said:


> Bought a cottage in Muskoka in 2001 and found it to be a giant pain in the butt with all the driving, maintenance and shopping. It was like running a B&B for our friends and family as with guests most weekends that meant more laundry, shopping, etc. We would get home Sunday nights and the grass at home wasn't cut, dry-cleaning needed to be picked up and grocery shopping done. Our stress levels were higher that summer than ever before. Sold the place and made a quick $60k profit after costs and now we rent for a week or two each summer...


How long will it take you to use up that $60k on rentals, not to mention avoiding the maintenance costs?


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## Ihatetaxes (May 5, 2010)

kcowan said:


> How long will it take you to use up that $60k on rentals, not to mention avoiding the maintenance costs?


That $60k went against the mortgage of our principal residence when we sold the cottage. We now tend to rent nicer cottages including one in the Kawarthas that is $3500/week but a great place that sleeps 12-14 so we tend to share that one with family. I find a week or 10 days at a cottage actually lets you relax vs racing up every weekend and really Saturday is the only true day off (after arriving late Friday and by Sunday we were always starting to pack up and think about the best time to hit the highway and avoid that late afternoon traffic jam on the 400 south).

That was before we had kids - can't imagine all the weekend driving with two little ones in the backseat and all the extra stuff we would be packing and ferrying back and forth.


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## Berubeland (Sep 6, 2009)

You really couldn't give me a cottage. Well OK you could give me one but I wouldn't buy one  to use it. 

What really does me in is the Friday and Sunday traffic to and from the Cottage. It's just ridiculous. My friend had a cottage on the Trent Severn waterway and I went up to help her fix it up a few times. Every weekend the packing and unpacking, then the solid traffic jam. 

If you could stay for a couple weeks or drive up on odd days and come back on Monday it would be OK I guess.


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## kcowan (Jul 1, 2010)

I have a friend who says he spends $150 every Saturday during the season April to October to supply his cottage projects. (Tobins Island).


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## james_57 (Jul 5, 2010)

kcowan said:


> I have a friend who says he spends $150 every Saturday during the season April to October to supply his cottage projects. (Tobins Island).


The last time i did the roof, 10 yrs ago, it was $4,000. A decade before that, it was the foundation. Every year, there are repairs. I have re-plumbed the place a few times (and i hate plumbing). A cottage is a lifestyle choice. Its a love-hate relationship sometimes, but we are still married.


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## canabiz (Apr 4, 2009)

I remember reading somewhere that 5% of Canadians own a cottage and 95% of us wants to be friends with that other 5% ;-) We got invited to a friend's cottage the past couple of seasons and we always brought food or contributed some money. Work out great.

I couldn't picture myself going to the same cottage every other weekend. Heck I prefer not to go back to vacation spots that I have already been. I may rent something for our extended family but that will be the extent of my involvement for cottages. Definitely a lifestyle choice and to each his own.


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## Square Root (Jan 30, 2010)

This is a good debate except for the fact that neither side will ever change their mind. Certainly cottages can be a pain if you let them. They can certainly be money pits too. But if you can afford it and maintain your personal space there, they can be wonderful. Sitting on our deck overlooking the lake as I write this. No where else I would rather be. Sense of ownership with my clothes in the closets, our dishes in the cupboards, our furniture throughout, my boat at the dock. This is very important to us. Agree may not be for everyone and money will be an issue for most, but we (and many others) just love it. Looks like a great weekend coming up.


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## MoneyGal (Apr 24, 2009)

I think the key differential is that you do not think of your cottage like an investment. 

I said there are two family cottages in my family. They've been in the family for more than 50 years each. 

I would not go and buy even a share in these cottages now for investment purposes, and I doubt I'd even do it for pleasure reasons. 

However, I do enjoy - very much - spending time in these family-owned cottages. This has nothing to do with investing for me.


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## kcowan (Jul 1, 2010)

Yes the fact that lakefront property has appreciated faster than other properties is no reason to buy one as an investment. It is a reason to buy one soon if you want that lifestyle. 

A number of my fellow retirees have maintained their cottages. One of them sold his home in the Toronto area and was homeless for a couple of seasons because his cottage is on an island and is unusable during the winter. He finally bought a winter home in Bracebridge so that he could be close to the cottage.

Others have downsized to a Toronto condo but they all keep their cottages. I hope that our affinity to our PV condo will become as strong an attachment as a lifestyle choice.


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