By Julie Jaggernath

When our friends came home from holidays wanting to show us their photos, I certainly didn’t expect to see an aerial photo of the vacant lot they had bought. They were so happy with the cabin they had rented that they jumped on the opportunity to get one of their own. It’s an idea we’ve toyed with over the years too.

For us, as for so many others, vacations give us time with family and friends, we get to know a few new friends along the way and we can kick back and relax in a way we don’t get to at home. It’s only natural to want to bring a piece of those vacation feelings home, and everyone finds a different way to do that. My son collects tiny treasures in every pocket that only he can love. My daughter takes photos of everything she sees. For others, a journal or bottle of wine top the list. It’s when souvenirs come with a mortgage that we need to take a step back and see if we’re making a smart financial choice.

Vacation Property Buying Checklist

Here’s what tops my vacation property buying check list:

Location

• Is it easily accessible or do you need to depend on a costly ferry or minimally maintained service road to get there?
• Is it close enough to home so that you can use it on weekends or is it just for longer stays a few times a year?
• If you still need to build a cabin, is the property serviced (e.g. water, hydro, gas, sewer)? A property that still needs to be serviced just got a lot more expensive.
• What other building or zoning affects the area? If you love the area, others likely do too. Right now it’s quiet and peaceful, but will it stay that way if the road gets widened to accommodate a new resort, or if a hydro tower is built nearby?
• Is this really a location you’d like to come back to year after year, even if the great people you met there last year are never there again?

Planning for Teenagers, and Beyond

• What changes can you anticipate with your routine as the years go by? Employment changes, retirement or needing to stay close to home to take care of a family member will impact your ability to get away.
• As your kids get older, will they still enjoy family vacations? Teenagers may not want to spend time away from friends or may have work and school schedules that make family vacations all but impossible to plan.
• Could your kids or extended family use the cabin without you there?

Does it Really Make Cents?

• Beyond the initial expense of buying a lot, consider how you will pay for building a cabin. Will you invest sweat-equity during vacation time or take on additional financing and supervise contractors doing it for you?
• What ongoing expenses do you need to plan for? Maintenance, insurance, property taxes and strata fees typically top the list of what not to forget.
• If the property increases in value, what additional tax implications could you face because it’s not your primary residence?
• And don’t forget, Mother Nature has a way of adding her two cents worth when we can least afford it!

Many people choose to buy vacation property as an investment and rent it out when they’re not using it themselves.

• Before you even consider this option, find out if rentals are permitted in that area.
• If your intention is to use rental income to help off-set expenses, consider when you want to use it yourself. If it’s during peak times, can you afford to lose that portion of your rental income?
• You will have additional insurance and maintenance costs, possibly property management costs to facilitate rental usage, as well as further tax considerations.

Over time, your vacation property may not pay for itself. It may decrease in value and not be the golden egg to fund your retirement. What are you doing to prepare for that possibility? As history has recently demonstrated once again, you don’t want to put all of your investment eggs into one basket. Diversifying your investments will protect you from extreme circumstances, which means that your vacation property investment should not be at the cost of RRSP contributions and savings for other lifestyle and family expenses.

A well thought out, realistic budget should be your first step to hanging onto those lovin’ summer feelings. You need to know that you can afford your current lifestyle and that you have what you need for the future, without saddling yourself with debt. Depending on your family situation, your future expenses could be significant post-secondary costs, home renovations or new vehicles, just to name a few.

The last thing you want to do is turn your dream into a nightmare. Before you take on the additional commitment, consider what you value most about your lifestyle, and let that guide your vacation decisions too.

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