Buying a cottage for partial use and partial rental in another country

[MsPeacock]

I've been toying with the idea of getting a summer cottage in Canada (I am a US citizen and live in the US) with an eye towards eventual retirement summers - or possible remote-work summers in years ahead. Real estate prices being what they are, I can pay all or nearly all of the house cost from my discretionary spending savings. My kid's college funds are fully funded and I am ahead of track for retirement savings.

I really don't know the first steps in making such a purchase - e.g. how to go about purchasing a foreign property, how to evaluate for possible vacation rental potential, etc. My eventual plan would be to spend 4-5 months a year or so in the cabin per spring/summer, so I am not looking for just an occasional weekly rental (e.g. the frequent debate about buying a beach house vs. renting).

At this point looking for resources, things to consider when making this sort of purchase, ideas, etc.

TIA for replies. :)

[SunnyDays]

Paging @Freedomin5!

[centwise]

I don't know any specifics, but if you are looking for a lake cottage in Canada, it sounds like you are planning to occupy it during the entirety of the rental season, so I doubt you would be able to rent it out in the off-season. If you are thinking more about the mountains (i.e. renting it out to skiers in the winter) I think condos are generally more available than something you would call a cottage or cabin.

[Daleth]

Make sure you include a budget item for hiring a Canadian real estate lawyer to discuss your proposed use for the cottage (a lawyer in the province where you're hoping to buy). You'll want to find out what local landlord-tenant laws are, as well as potentially local Air Bnb rules/taxes/laws.

A few questions to ask:
 

• What happens if you get a sucky tenant--how hard is it to evict them, how long does it typically take, how much does that cost?
• How do property management companies work up there, and is that an economically and legally good option for you?
• Can you rent to someone for 9 or 10 months, so that you could have the place each summer? (After making sure this is legal, check with a property management company if it's viable--is there a market locally for <12 mo leases and for fall/winter/spring leases, and is it easy to get new tenants every fall?)

[Villanelle]

I don't know any specifics, but if you are looking for a lake cottage in Canada, it sounds like you are planning to occupy it during the entirety of the rental season, so I doubt you would be able to rent it out in the off-season. If you are thinking more about the mountains (i.e. renting it out to skiers in the winter) I think condos are generally more available than something you would call a cottage or cabin.

This is along the lines of my first thought as well.  Unless you are going to be in a place that is known for outdoor winter activities, how much rental market is there for Canadian winters?  It's a place people go in summer, and then they fly south for warmer winters.  For likely the same reasons you want to be there in summer not winter, your potential renters want the same. 

You could look in airbnb for places in the same area and see what their winter rates are, but that will only be moderately helpful as you won't know their vacancy rates, and you won't know if what you are seeing are regular rates of Covid-affected rates. 

[Freedomin5]

We own a three-season cottage in Canada, about three hours drive outside of Toronto in the Muskoka region (a very very very popular cottage region in Ontario). Cottages in the area run from $150,000 for a manufactured home in a non-lakefront location to multi-million dollar magazine worthy spreads on prime lakefront property. Definitely expect to pay a huge premium for lakefront property. With COVID and the move to WFH, Toronto and other city folk have been selling their homes and moving out of the city, driving up cottage values. In Ontario, summer (July-Aug) is your peak season. Cottage season starts after Victoria Day (late May) and runs to Thanksgiving (mid-October). Your cottage is rentable during the shoulder seasons (May/June and Sept/Oct) but may not command as high rents. In the winter it gets too cold and there’s too much snow and depending on where your cottage is, the roads may not be passable. The cottages that do well in winter are located near ski resorts.

A few things I’ve learned:

Property management for cottages run from 25-30% of rents collected.

Vacationers will absolutely trash your place. To them this is a normal hotel, not your home. Don’t keep anything too precious or personal in your home. Expect to replace pillows, bedspreads, vacuums, brooms, kitchenware, and furniture on a semi-regular basis.

The times you want to use the cottage is likely when vacationers will also want to use your cottage.

You can’t just close up the cottage in the winter. You need to winterize it and have someone make sure that it’s still standing and whatnot especially if when there is a heavy Snowstorm.

We barely broke even and it was a pain having to replace all the broken/stolen things. A better idea if you only want to come up for the summer is to buy a three-season cottage in a cottage resort. The resort management will take care of everything for you when you’re not there. It’s also cheaper because it’s only open six months of the year and your resort fees cover everything (boats, beach, paddleboards, etc). You can rent out the cottage if you’re not using it. The resort management will take care of that for you for an additional cost. At the end of the day, a cottage is an expense, not an investment.

[Freedomin5]

Forgot to mention, I am only familiar with cottage property in Ontario. Of course, there are many lakes and other areas in Canada that are equally beautiful and may be cheaper. I"m thinking you could probably find lake/cottage areas in pretty much every province in Canada. I think the advice may differ depending on the province in which you wish to purchase a cottage property.

[MsPeacock]

We barely broke even and it was a pain having to replace all the broken/stolen things. A better idea if you only want to come up for the summer is to buy a three-season cottage in a cottage resort. The resort management will take care of everything for you when you’re not there. It’s also cheaper because it’s only open six months of the year and your resort fees cover everything (boats, beach, paddleboards, etc). You can rent out the cottage if you’re not using it. The resort management will take care of that for you for an additional cost. At the end of the day, a cottage is an expense, not an investment.

This is one of the things I am considering. My thought it is to purchase a cottage (or condo or whatever) that I can afford without needing to rent it out. I can avoid a lot of potential complications that way.

I am looking mainly at Ontario and Quebec because it is the most accessible to me just driving up (without spending 6 days in the car or something).

Very helpful to consider winterization and such.

Thank you!


ETA - I am definitely on the less fancy end of the spectrum in what I am looking for - so not these giant fancy places. More like a 2 bedroom somewhat rough place, or a modular home/trailer set-up.

More like this: https://www.realtor.ca/real-estate/22655345/81-highland-drive-otonabee-south-monaghan

[Freedomin5]

If you’re looking for rough and in a less populated location, be aware of break-ins. Lots and lots of break-ins when people know you’re only there a few months of the year. And they’ll be able to tell in the winter because of the tire tracks (or lack thereof).

We’ve avoided that problem by having our cottage in a resort.

I’m going to PM you.

[SunnyDays]

Why do you want a cottage in Canada?  I would think there would be lakes wherever you live that would be more convenient.  Hours long drives get old pretty fast.

[Fishindude]

Friend of mine has a cottage on the Canadian side of Rainy Lake.
Due to covid travel restrictions, he's not been able to go there for a year now.   I wouldn't do anything until the dust settles on this issue.

[AMandM]

If you set up a Canadian bank account to use for your cottage-related expenses, and its balance goes over $15k (I think), you'll need to file a special form come tax time. You might also want to consult tax lawyers, both US and Canadian, about the effect on your income taxes of foreign rental income.