Rich at any age: choosing a vacation property

In summer weekends, Canada's urban centres become virtual ghost towns as city slickers - and their tag-along family and friends - flock to cottages for a little R&R. While you may have spent your 30s and 40s being one of those tag-alongs, your 50s could be the right time to think about a recreational property of your own. After all, your mortgage may be paid off (or close to it) and you're probably starting to think about what you'd like to do in your retirement years.

"We get plenty of people buying a cottage to use now, and by the time they retire they plan to expand it or tear it down and build a year-round retirement home," says Robert Hamersma, a RE/MAX agent specializing in cottages in Ontario's Kawarthas region.

The boom in second homes is extending far beyond the standard lakeside cottage. The population of many mountainside towns has grown exponentially as developers build chalets and condos for outdoor enthusiasts and their skis, bikes, fishing tackle and other gear. Beaches are another big draw, with buyers looking for small "summer homes," often in subdivisions a short walk from the sand.

The fractional cottage has become the latest trend for recreational property buyers. With prices starting in the $60,000 range, these work much like timeshares. Owners buy the right to return to the same property for a set number of weeks each year. Unlike renters, these buyers actually own, and can later sell, their fractional stake in the property.

How do you find the property that's right for you? Start by thinking about access. You'll probably want to buy relatively close to home so that you can take advantage of the property. Each additional half-hour you have to drive is going to substantially reduce your usage and enjoyment of a second home.

If you want to use the property year-round, make sure that the jarring dirt road you drive down in summer is passable in winter. If you're considering an island home, consider not only the present but the future. Sure, it's fun to boat or snowmobile to the property now, but do you really want to be doing that in your 60s? Think, too, about your health in another decade or so. If you have any worries, you may want to buy near a community with an emergency hospital.

Second homes are called that for a reason. Just as with your principal residence, you have to budget money for utility bills, furniture, appliances, and perhaps yard work as well if you don't want to do the chores yourself. Even a modest property will eat up a couple of thousand dollars a year, on top of the mortgage payments and property taxes, in general maintenance expenses. If you don't want the fuss of maintaining your property, consider buying a condo or fractional cottage, which usually include maintenance in their fees.

Your biggest financial hurdle may be finding an affordable place to buy. Prices for recreational properties have soared in recent years and bidding wars on choice properties are common. Royal LePage's 2005 Recreational Property Report found the average price for a waterfront property nationwide was almost $236,000, a $30,000 increase over the previous year.

Property taxes are rising as well, with five-figure bills not unheard of in some of the tonier locations. Some cottages have gone on the market because the long-time owners can no longer afford the tax hit. In an extreme example, in one municipality on Lake Huron, property assessments increased by more than 75% between 1999 and 2003. Some owners had tax bills that doubled from one year to the next.

One way you can offset costs is by renting out your property for a few weeks or weekends a year. The downside, of course, is all the additional wear-and-tear on your property, as well as potential liability issues.

In the end, a cottage is as much an emotional investment as a financial one, with its real value being that it's a place for family to gather. As Hamersma puts it: "A person can buy a painting and see it appreciate in value. But are you going to gather the family around a Rembrandt or a Picasso and spend the whole weekend admiring it?"