As a real estate investor and owner of a vacation rental property, I’ve dealt with numerous ownership questions first-hand. I’ve also read various resources over the years in order to supplement my own experiences. Yet, there are many different resources out there on various topics, from the true costs of owning a second home to the rules and regulations governing different vacation property types such as waterfront properties. As a result, it’s sometimes hard to get a clear picture of what you should know before buying a second home and what ownership is truly like. With this in mind, I set out to create one resource that provides you with everything you need to know before buying a second home and, in particular, a vacation home.  

I should point out that I use the terms “second home” and “vacation home” interchangeably, mostly because second homes are often bought as vacation homes. Still, if you’re looking to buy a second home for another purpose, such as a part-time residence, investment property or eventual retirement home, the principles discussed in this article will still be relevant. Also, while this article focuses on subjects that are relevant for vacation homeowners in the United States and Canada, most topics will be relevant in other jurisdictions. With this in mind, if you’re wondering whether buying a second home is right for you, then you’ve come to the right place.

For an overview of how to buy a vacation home, explore my article on How to Buy a Vacation Home: A Practical Guide.

Setting the Stage

As you contemplate buying a second home, keep in mind that you will have your own unique set of circumstances, from personal finances to the locations you are interested in. Therefore, you should seek appropriate advice from qualified advisors, including accountants, lawyers and realtors, in your hunt for a second home. I can’t emphasize enough the importance of utilizing each of these experts, who have saved me countless headaches and likely thousands of dollars. Still, based on my own knowledge and experience, this is everything you need to know before buying a second home.

Types of Second Homes/Vacation Properties

As you consider buying a second home, a logical starting point is to consider the various types of properties. First up are the usual suspects in houses, condos, cabins and cottages. 

Houses, condos, cabins and cottages

Each of these property types are fairly well understood so I won’t describe them in detail, other than to highlight what you really need to know for each: 

• House vs. condo. With a vacation house, you’ll have more privacy than a condo but also higher maintenance costs. One of the things I like most about my vacation condo is that it’s fairly hands off. I can leave it vacant for extended periods of time and, other than minimal upkeep, I don’t have to worry about major repairs or landscaping the yard, for instance. It does help, however, to have a proactive and well run strata (or HOA). Still, if you want more privacy and can handle more responsibility and expense, a vacation house may be right for you.
• Cabin vs. cottage. While cabins and cottages differ primarily by the materials used to construct them, I typically consider them one and the same. Sure there may be different maintenance considerations for a log cabin versus a brick cottage, but the premise is the same. Typically a cabin or cottage is located in a more remote location close to nature. Thus, in addition to the considerations above for a vacation house, you’ll need to take into account how remoteness will impact your use and enjoyment.

Waterfront and water-access only

Waterfront properties are unique for many reasons, including the additional regulations that govern such properties and additional maintenance required. They’re in high demand and as a result typically hold their value. But the premium paid for waterfront is not the only relevant consideration as you need to keep the following in mind before buying a second home on the waterfront:

• Home inspections. In addition to the typical items to look out for in a house inspection, corrosion caused by salt in the air and mildew/mold issues from higher moisture levels can all cause damage on a waterfront property. Boundary surveys, elevation certificates and water quality tests can also be important. For instance, how far above the sea level or the lake shore is the house and is the area prone to flooding? In short, be sure to hire qualified home inspectors, surveyors and other experts before buying a waterfront property.  
• Understand what you own. With waterfront property, it is particularly important to review the legal description to determine where the lot extends. Additionally, you will need to determine whether there are any additional encumbrances on title that would otherwise limit your use of, or access to, the waterfront. Whether the property is located in the United States or Canada, it may be worthwhile to run this by a real estate lawyer before buying a second home on the waterfront. 
• Understand the limitations that come with it. Understanding what restrictions come with the property and what you can build on it are particularly important. Governmental regulations on waterfront properties govern such things as site density, minimum building setbacks from the water, the kinds of uses that are permitted, whether you can build a dock or seawall and even building design. In the United States and Canada, you may also need approval from other government departments including the U.S. Army Corps of Engineers and Department of Fisheries and Oceans (in Canada) for work in and around the water.
• Additional maintenance. Not surprisingly, waterfront properties require additional maintenance and expense in order to keep the property in tip-top shape. Potential issues include:
  • Humidity resulting in mold 
  • Corrosion from salt in the air (in the case of oceanfront)
  • High winds causing structural damage 
  • Falling trees in open areas
  • Floods 

In order to combat these issues, consider storm-proofing the house and ensure you have adequate insurance coverage. In short, waterfront properties are expensive to maintain so be prepared to pay double a typical maintenance budget.

• Water-access only. For some, owning your own private piece of paradise is appealing yet the remoteness and/or inaccessibility of water-access only properties may deter some buyers. Obtaining financing for these types of properties can also be difficult. While not for everyone, the general feedback I’ve received from other owners is that water-access only properties are an affordable alternative if you have access to reliable transportation and are willing to forego modern day conveniences. 

Fractional ownership and timeshare

Fractional ownership structures and timeshares are also an affordable option for those interested in dipping their toe into vacation home ownership. I’ve personally never been drawn to these types of properties because I’ve always (a) viewed outright ownership as a better investment and (b) liked to have complete freedom and control in terms of the use of my property. With this in mind, this is what you need to know before buying a second home that falls into one of these categories:

• Fractional ownership.  With partial ownership, several buyers each hold an equal interest in the title to the property. This is different from a timeshare where title to the property is 100% held by you as the principal owner. As an owner of a fractional interest in a vacation home, you’re also often allowed to use the property for a longer duration than a timeshare. From an investment perspective, you may see an increase in the value of your fractional interest over time.
• Timeshare – With a timeshare, your usage rights will vary slightly depending upon the type (e.g. fixed week, floating etc.). You also have no control over the property and they are notoriously hard to sell. Yet, timeshares are quite affordable, there is less responsibility as an owner and you’ll have certainty as to where and when to take your vacations. For these reasons, a timeshare is a lifestyle purchase as opposed to an investment. Importantly, I’ve heard of too many cases of timeshare owners making emotional decisions when buying-in originally so be sure to take some time before buying.

Leasehold

An owner of a leasehold property has an exclusive right to occupy the property for a specified period, in some cases up to 100 years or more. At the end of the lease, the right to occupy the property reverts to the owner. For this reason, leasehold properties are typically more affordable and there are often restrictions with what you can do with the property during the term of the lease. If you’re looking at your second home as an investment property, then I would avoid buying a second home that is a leasehold since you don’t actually own the property and therefore don’t typically enjoy the same upside in price appreciation. 

Different Second Home Uses

In addition to buying a second home for vacation purposes as a “home away from home”, there are many different reasons to buy a second home. Here are a few insights I’ve learned over the years about these other specific uses:

Vacation home vs second home vs investment property

I find there is a lot of confusion as to the difference between a vacation home, a second home and an investment property and the implications of each. Importantly, the designation of your property can have implications on your mortgage terms and tax treatment. While I encourage everyone to obtain their own independent tax advice, here are some important things to know:

• Vacation home vs second home. In short, there is no real difference between the two. More specifically, a second home is a residence you intend to occupy for part of the year in addition to your primary residence. Typically, second homes are owned as vacation properties but they could be used for other purposes (such as a condo in the city for work). 
• Second home vs investment property. An investment property differs from a second home in that it is owned primarily for investment purposes, typically through rental income, rather than as a second residence. A vacation rental property is one such example of an investment property, where the primary purpose is to generate income from the property as opposed to using it as a second home. 
• Mortgage implications. Mortgages for second homes will typically be associated with stricter lending criteria and higher interest rates than primary residences. For an investment property, such as a vacation rental, you can expect interest rates to be even higher and even higher down payment requirements, although every lender will have their own lending terms. 
• Tax implications. Depending upon the designation of your vacation home as a secondary residence or revenue-producing investment property, and the thresholds set by the Internal Revenue Service (IRS) and Canada Revenue Agency (CRA), you may be required to report and remit tax on any income derived from your property. Additionally, taxation of capital gains upon the sale of your vacation home is treated differently from a primary residence. 

For a more complete discussion of mortgage terms and tax implications for vacation homes, see below under Vacation Home Financing and Tax Considerations, respectively. 

Owning a vacation rental property

Thanks to the popularity of vacation rental platforms such as Airbnb and VRBO, it’s easier than ever to own and operate a vacation rental property. Yet there are many items to take into account before investing in one, from the tax implications of ownership to how to manage your property. While I speak to tax considerations a little later on, here are some other things you need to know before buying a vacation rental property:

• Short-term rental regulations. Many cities and towns in the US and Canada have restrictions on renting out your property short-term. This can range from a simple requirement to obtain a business license to an outright ban altogether so be sure you understand the local regulations. Rules can change overnight as well so it’s best to invest in those areas that cater to tourists, such as resort municipalities, where vacation rentals are viewed more favorably. 
• Vacation rental platforms. I’ve used multiple platforms over the years and each of them has their strengths and weaknesses. Importantly, it’s never a good idea to rely 100% on one vacation rental platform so I recommend using multiple platforms. I also recommend that you create your own website so that you can (a) take direct bookings through friends and family without having to pay any fees associated with rental platforms and (b) slowly build-up search engine optimization over time in order to show up in Google search results. If you do end up taking direct bookings, ensure you require a sufficient damage deposit and execute a short term rental agreement like the one provided here.
• Property management. When deciding whether to manage the property yourself or hire outside management, it ultimately comes down to your willingness to spend additional time and resources dealing with guests or whether you’re willing to pay someone else to do it. If you decide to hire a property manager, expect to pay between 25% to 30% of the rental fees. My wife and I manage our vacation rental and, in my experience, the biggest issue is finding good, reliable cleaners. If you’re willing to do the cleaning yourself then that’s one less issue to worry about. 
• Cell phone and internet access. This is more of an issue for remote properties, but you’ll need to be able to communicate with your guests and deal with issues as they arise. It’s therefore important to have reliable cell phone reception and internet access. 
• Insurance. This one should be obvious but you’ll need to ensure that your insurance policy adequately covers a vacation rental property. More specifically, be sure to understand the specific terms of your policy. For instance, my policy requires all guests to be 21 years or older so our house rules require it.
• House rules. Speaking of house rules, it’s important to establish house rules for your guests to follow. By doing so, you can minimize damage to your home and otherwise control the guest experience.
• Vacation rental mortgages. In order for your lender to properly assess the risk profile of your loan it will need to understand the proposed use of the property. Accordingly, be sure your lender is aware that you intend on renting out your property when you submit your loan application.

Owning a family vacation home

Dealing with family dynamics can be difficult when it comes to managing a vacation home that is shared by multiple family members. Establishing house rules and splitting up the time equitably between family members are each important. Having a proper exit strategy is also particularly important in case things don’t work out as planned or one of the family members experiences unexpected financial hardship. Before buying a vacation home with a family member, consider whether ownership as tenants in common makes more sense than joint tenants. With a tenancy in common, each family member may control an equal or different percentage of the vacation home and has the right to leave their share of the property to any beneficiary. This provides more flexibility than joint tenancy where, upon the death of an owner, title passes to the surviving owner. Note, however, that if there is a mortgage on the property, typically all borrowers sign the mortgage documentation meaning that if there is a default the lender may realize the debt on all family members.

Owning a weekend home

With a weekend home, the property will be vacant during the week when not in use, perhaps even over the winter months entirely. With this in mind, here is what you need to know:

• Costs vs benefits. With all vacation homes, and weekend homes in particular, you’ll need to ask yourself how much you can reasonably expect to use the property? In particular, ask yourself whether it makes more financial sense to rent versus own a place in your desired area. If you can regularly rent something for a reasonable price, then perhaps it makes more sense to rent instead of own.
• Travel time. Personally, I’ve always steered away from trips that are 3 hours or more unless I am planning on staying there for three or more days. Ideally, your total travel time will be under two hours if your vacation home will be used primarily for weekend use. Otherwise I just find that you spend too much time travelling to your destination as opposed to actually enjoying it. For other travel time guidelines, I find these rules of thumb useful. 
• Secure storage. If you want to avoid packing, securing and transporting all of your gear every weekend, such as a boat, ATV, paddleboard, kayak or canoe, I recommend having secure storage on site where these items can be permanently stored. 

Second Home Financing

Securing sufficient financing to buy a second home, with reasonable terms, may be the most important consideration for many would-be second homeowners. As mentioned earlier, mortgages for second homes will typically be associated with stricter lending criteria and higher interest rates than primary residences. For vacation rental properties, you can expect interest rates to be even higher in addition to even higher down payment requirements. For reference, even though I have a strong credit history, consistent income and sufficient savings for a 20% down payment, only one of the Big Five Banks in Canada was willing to lend to me when I purchased my vacation rental property and my mortgage was about 75 basis points higher than a mortgage for a primary residence. The reality is that there are fewer lenders willing to lend you money to buy a vacation rental, and those that do require a higher interest rate due to the increased risk profile.

Curious to know about how much you can afford in a second home? Be sure to explore this second home affordability calculator.

Based on my own experience, and the stated policies of major banks in the US and Canada, here is what you need to know:

• Credit score.  A credit score of 700 or more will increase your chances of approval, however a minimum of 640 is typically required.
• Interest rates. Expect interest rates to be as much as 0.25% – 0.5% higher than primary residence interest rates. For a vacation rental property, you can expect interest rates to be even higher (e.g. 50 to 75 basis points). With today’s low interest rate environment, however, it’s a great time to get affordable vacation home financing.
• Down payment. Expect to pay between 20% – 30% as a down payment. To lower the risk of default, lenders require higher down payments.
• Maximum debt-to-income ratio. Your debt-to-income ratio should be no more than 43% overall. Your debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt. This includes the mortgage on your primary residence, the new mortgage on your vacation home and any other outstanding debts. 
• Distance from primary residence. In the United States, if you want to take advantage of the more beneficial lending terms (e.g. lower interest rate) associated with second homes as opposed to investment properties, your second home must typically be at least 50 miles away from your primary residence. Otherwise, your second home may be viewed as an investment property in the eyes of a lender. In Canada, the distance from your home will similarly be taken into account as to whether you truly intend to use the home as a secondary residence or an investment property.

Some of the best ways to finance a second home include:

• Second home mortgage. This is the same as a traditional mortgage except that a second home mortgage will exist over, and be secured against, your second home as opposed to your primary residence. 
• Home equity line of credit. A HELOC acts much like a credit card in that you can borrow up to a certain limit and are only required to pay interest on the amount actually borrowed. In order to be eligible, you will need to have equity available in your existing home. Depending upon the lender, you may be able to utilize up to 80% of the equity in your home (or lower in the case of federal financial institutions in Canada), assuming there is no outstanding mortgage or other loan secured against your home.
• Second mortgage. A second mortgage is just that – a second mortgage over your primary residence. These are riskier from a lender’s perspective as the lender will be in second position to the first lender should you default. 
• Cash-out refinance. With a cash-out refinance, you cancel your existing mortgage and enter into a new mortgage with a larger amount than owed on the previous mortgage. You can then use the extra cash to buy a vacation home.
• Private lenders. If traditional banks won’t lend you money, then you may be able to obtain financing from private lenders such as friends, family, a private investor or even peer-to-peer online lending. Just be aware that private lenders typically charge higher interest rates and/or other fees given the heightened risk in lending to someone that the banks won’t.  

True Cost of Owning a Second Home

Before buying a second home, it’s important to understand the true cost of ownership in order to ensure you can afford the carrying costs. In my experience, people tend to underestimate ownership costs so you can expect your monthly bill to be higher. To begin with, let’s look at my own example.

For an accurate estimate of your monthly ownership costs, be sure to explore this cost of owning a vacation home calculator. 

Vacation Home Cost Example

As an example, here is a breakdown of the one-time costs and ongoing carrying costs of my vacation rental property (all in Canadian dollars), which was purchased for $715,000 at the beginning of 2019 and was partially furnished:

• One-time costs:
  • Down payment: $143,000 (20% of purchase price)
  • Property transfer taxes: $12,300
  • Conveyancing fees and disbursements (legal): $1,630.87
  • Minor renovations and furnishings: $4,743.41
  • Special assessment in Fall of 2019: $4,029.75
• Recurring costs (monthly):
  • Mortgage: $2,898.26
  • Property taxes: $246.96 ($2,963.52 annually)
  • Insurance: $70 ($840 annually)  
  • Utilities: $40
  • Cable, internet and streaming services: $122
  • Maintenance and repairs: nil 
  • Ongoing accounting and legal fees: $41.67 ($500 annually)
  • Strata fees: $557.83

Based on the above, my monthly carrying costs are $3,976.72 but I would expect that number to be slightly higher after factoring in additional nominal costs not reflected above. If I add the one-time costs (e.g. property transfer taxes, furnishings, special assessment etc.) and spread them out over the 2.5 years I have owned my home, my monthly carrying costs have been roughly $4,733.52 over that period. Further, while I have not yet spent any material amount on repairs and maintenance, I expect this will catch up to me soon and that my spending will be in line with a more typical allocation of between 1% – 4% of my home’s value being spent annually on maintenance.

Other costs that may be relevant depending upon the circumstances and location of your property include:

• HOA or resort fees
• Vacancy, general excise and other taxes (location/use specific)
• Management, cleaning and other vacation rental ownership fees

Despite your best efforts to plan for everything, I can attest to the fact that unexpected costs arise from time to time. If it’s not a special assessment from your condo association, then it will be your hot water tank or furnace that will give out. As such, keep some cash available for these unexpected costs. 

Opportunity Cost

Perhaps one of the most overlooked costs is opportunity cost, or the forgone benefit that would have been obtained from the next best alternative. This is not easy to calculate in every instance but I recommend trying this real estate ROI calculator. It’s a simple calculator that shows the expected return on investment (ROI) from your second home over the life of the mortgage and, for comparison purposes, the ROI should you instead choose to invest in the stock market over that same period. A little later on I will explore my own expected ROI from my vacation rental property and compare it against a stock market investment. In the meantime, let’s move on.  

Second Home Maintenance

As I’ve already covered off the principal costs associated with owning a second home, I won’t explore maintenance costs any further. I will, however, provide the following insight into second home maintenance generally:

• Less may be more. The more stuff you have in your home, the more that can go wrong. While AC units and hot tubs are nice to have, consider whether it’s necessary to have them in your second home. If not, you may be better off without them. 
• Prolonged vacancy. If your home will remain vacant for long periods, consider hiring someone to check on the property. In fact, you may not have insurance coverage if your home is left empty for 30 or 60 days, depending on the policy. By having someone check on your property every 30 days, you can typically satisfy the minimum requirements under your insurance policy. 
• Install a security system with remote monitoring. Consider installing a security system with remote monitoring to reduce risk of vandalism or theft. With smart video cameras, you also have the ability to keep tabs on your property in case of unexpected events such as a flood caused by bursting pipes or an electrical fire. 
• Winterizing. Simple steps to winterize your property will keep the cold out, the heat in and your energy bill down. Steps like flushing the water heater, adding window insulation film and adding draft guards under doors will all help and with only minor expense.   
• Storm proofing. If your second home is in an area that is prone to storms, you will save yourself a lot of headache by storm-proofing the house as much as possible. Adding storm shutters, trimming trees away from the house and removing clutter from around the yard are simple things you can do. Larger projects, such as structural upgrades, may be necessary and will require hiring qualified help.

Second Home Tax Considerations

First, a word of caution. Tax rules are complex and everyone’s circumstances are different. Accordingly, you should consult a qualified tax adviser in connection with your own tax planning. 

As you consider buying a second home, it’s important to understand the tax consequences of ownership. The two most significant tax implications of ownership are typically (i) taxation of revenue derived from your property and (ii) taxation upon the sale of your property. Let’s take a closer look at each.

Taxation of Rental Income

In both the United States and Canada, the IRS and CRA, respectively, will have an interest in any commercial activities associated with the property and, in particular, rental income. Thus, you will need to give adequate consideration to the tax consequences of renting out your second home.

In the United States, if you rent out your property for 15 days or more, then the IRS may view your property as a rental property. As a result, you will be required to report any rental income and pay appropriate tax. One of the benefits of operating a rental property, however, is that you can deduct various expenses, including property taxes, insurance premiums, condo fees, utilities, mortgage interest and depreciation. These deductions can then be used to offset a portion of the rental income, thus reducing your tax burden. Note, however, that if you also use your rental property as a residence, limitations may apply to the expenses you can deduct. According to the IRS, you’re considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for more than the greater of: (i) 14 days, or (ii) 10% of the total days you rent it to others at a fair rental price. An accountant with experience in this area will be able to advise you as to which expenses you can deduct based on your individual circumstances.

In Canada, if you rent out your property then you will similarly be required to report any rental income and pay tax on it. As an owner of a short-term vacation rental property, an important threshold to keep in mind is the annual revenue limit of C$30,000. If you exceed that limit over four consecutive quarters, you will be required to charge and remit GST/HST on any rental income. Keep in mind that, similar to the US, you’re also able to deduct appropriate expenses from any rental income to reduce your tax burden. 

Whether you’re located in the US or Canada, be sure to retain accurate records of the rental income you’ve received and all of the expenses claimed on your tax return in case you’re ever audited. The retention period is three years in the US and six years in Canada.  

Taxation Upon the Sale of Your Second Home

In the United States, if you have held your second home for more than one year, any profit on the sale will be taxed as long-term capital gains. Notably, tax rates for long-term capital gains are more favorable at 15% or 20% (to the extent that your taxable income exceeds the thresholds set for the 15% rate). Prior to selling your second home, you may want to consider the taxable exclusion of $250,000 ($500,000 if married filing jointly) in gains from sales of a primary residence. To qualify, you would need to treat your second home as a primary residence for at least two of the last five years prior to selling. Note, however, that a reduction is made on a pro rata basis to reflect the period of rental, vacation home or other “non-qualifying use”. Also, keep in mind the IRS’ rules on depreciation recapture tax upon the sale of a rental property. This occurs as a result of a taxpayer deducting the depreciation of a rental property from the taxpayer’s ordinary income. The taxpayer has to report any gain from the disposal of the rental property (up to the recomputed basis) as ordinary income.

In Canada, when you sell your second home any gain will be subject to taxation. This differs from the gain realized from the sale of your primary residence, which is tax-free. If you have not claimed any depreciation expense (or “capital cost allowance”), you will realize a capital gain or loss on the sale. If the sale price is more than your cost, one-half of the capital gain is included in your taxable income. If you claimed capital cost allowance, then selling the property may result in a recapture of your capital cost allowance. When you change your principal residence to a second home or rental property (or change your second home/rental property to your principal residence), it’s called a change in use for tax purposes and the CRA may treat it as if you sold the property. For a principal residence, you don’t have to pay tax on any capital gain up to the point of conversion to a second home. For a second home, any gain accruing up to the point of conversion to a principal residence is taxable. Lastly, if you’re collecting GST/HST as an operator of a short-term rental property, you are required to collect GST/HST on the sale of your property.

Pros and Cons of Owning a Second Home

Any discussion about buying a second home would not be complete without considering the pros and cons of owning a second home. With this in mind, here is my list of the pros and cons of owning a second home:

Pros

• Relatively secure investment. Real estate prices in the United States and Canada tend to go up over time and have not experienced the same volatility as other asset classes. 
• Additional ways to increase ROI. By owning a vacation home, you have the ability to maximize your return on investment through home renovations and/or rental income when the home is not in use (but be mindful of the tax implications).
• Borrowing is cheap. Given the low interest rate environment, borrowing money to buy a second home is cheap (assuming you meet the stricter lending criteria). Because of this, you can build wealth using the bank’s ‘cheap’ money.
• Hosting friends and family. Owning a vacation home is a great way to bring family and friends together as there will be no shortage of visitors.
• Retirement. What better way to plan for retirement than owning a second home as an eventual retirement home?
• Pride of ownership. Speaking from personal experience, one of the best things about owning a vacation home is the joy it brings. Quite frankly, this is often the biggest reason to buy a vacation home.

Cons

• Real estate historically outperformed by stock market. If you’re buying a second home for investment purposes, it’s worth noting that real estate in the United States and Canada has historically been outperformed by the stock market. 
• Lack of diversification. Spending further money on real estate may be risky, especially if you’re not well diversified in other asset classes. 
• Ownership isn’t passive. Unlike owning stocks, owning a second home isn’t passive as it will require ongoing time and commitment, from paying annual property taxes to renewing your insurance.  
• Ownership costs. The expenses can pile up pretty quickly as your second home will require ongoing repairs and maintenance.
• Usage may be less than you expect. This will certainly vary from owner to owner but you may find that you don’t actually use your property as much as you expect. I have historically only used my property roughly two weeks a year but then again I’m also operating a vacation rental property. 
• Vacation home moochers. While hosting friends and family is one of the benefits of owning a vacation home, you may also have to deal with freeloaders looking for a free stay.

Is Buying a Second Home Worth it?

With the above in mind, is buying a second home worth it? As mentioned previously, this real estate ROI calculator enables you to directly compare how a real estate investment will perform (with or without rental income) against a stock market investment. Let’s consider some return on investment scenarios using my own example:

• Vacation home purchase price: $715,000
• Down payment: $143,000
• Mortgage terms: 3.61% interest rate with a 25 year amortization schedule
• Monthly rental income: $5,000
• Aggregate monthly expenses: $2,000

Based on the above assumptions, the real estate ROI calculator shows that I’m netting an extra $102.58 per month in rental income, which would not be available if I instead chose to invest in the stock market. Therefore, I need to compare the value of my vacation home plus $102.58 in monthly rental income after 25 years against investing $143,000 (i.e. the size of the down payment) in the stock market over that same period with no additional contributions. Here’s what it shows under the following scenarios:

Scenario 1: Vacation Home Appreciates 4% Annually and Stock Market Grows 8% Annually

• Value of vacation home (and net rental income) at end of term: $1,971,116.09
• Value of stock market investment at end of term: $1,049,645.16

Scenario 2: Vacation Home Appreciates 4% Annually and Stock Market Grows 6% Annually

• Value of vacation home (and net rental income) at end of term: $1,971,116.09
• Value of stock market investment at end of term: $638,490.68

Scenario 3: Vacation Home Appreciates 2% Annually and Stock Market Grows 8% Annually

• Value of vacation home (and net rental income) at end of term: $1,209,119.17
• Value of stock market investment at end of term: $1,049,645.16

As you can see, I’m better off buying a second home in each of the above scenarios. Of course, the above doesn’t take into account appropriate tax planning strategies. For instance, by utilizing a tax sheltered account such as a 401K plan in the United States or RRSP/TFSA account in Canada, you may be able to shelter some or all of the tax burden of a stock market investment. All of the sudden investing in the stock market doesn’t look so bad, especially if you can’t claim a primary residence tax exemption under the vacation home scenario. The other difficulty is that not all of the benefits or drawbacks of buying a second home can be objectively measured. After all, you can’t put a price on the time spent with the kids (or grandkids) and the lifelong memories that result. On the flip side, it’s hard to quantify or value the additional time spent maintaining your property. Personally, I’m very happy with my vacation home. From the revenue it generates as a vacation rental to the joy it brings me and my family, I expect to hold onto it for many years, and ski trips, to come. 

With that, I encourage you to consider each of the items noted above in this article before buying a second home. This is certainly everything I wish I knew before buying my vacation home.

About the Author

Peter is a father, entrepreneur and real estate investor. Together with his wife, he owns and operates a vacation rental property in Whistler, BC and is eager to pass along his knowledge and personal experience.

The post Buying a Second Home: Everything You Need to Know Beforehand appeared first on Vacation Property Online.

Whether you’re buying a beach house as a primary residence or a second home, you will need to take into account the unique characteristics of such properties before buying. The same is true whether you are buying a beach house in Tofino, British Columbia or Corpus Christi, Texas, although each location will have its own unique considerations. From understanding zoning restrictions as an owner of a waterfront home to considering house elevation and weather preparedness, there are many things to look into. With this in mind, we’ve outlined some of these consideration below and other useful tips for buying a beach house. Here’s how to buy a beach house in five easy steps.

1. Understand Your Finances

Understanding how much you can afford is an important first step so that you better understand your budget. If you’re buying your beach house as a vacation home, click here for a useful overview of affordability criteria. Next, you will need to secure a mortgage. Importantly, be sure to secure a mortgage before you start looking for a beach house. This is especially true in a competitive market, as sellers will want to deal with qualified buyers.

For a traditional mortgage on a primary residence, competitive rates are available given the low interest rate environment. If your beach house will be used as a vacation home, note that most lenders will have stricter lending criteria because the risk of default is higher with a second home. Mortgages for second homes are also often coupled with higher interest rates (e.g. 0.25% to 0.50% higher) and larger down payment requirements (e.g. 20-30% instead of 5-10%). 

Once you’ve secured a mortgage, prepare a detailed budget to ensure you’re comfortable with the monthly mortgage payments and beach house expenses. Try our mortgage calculator and vacation home cost calculator to help generate your budget. When preparing your budget, be mindful that waterfront properties can carry additional expenses, such as higher water and sewer rates, higher insurance fees (especially if the area is prone to flooding or hurricanes), boat dock and lift fees, as well as septic tank and well upkeep costs.

2. Settle on a Location

If you haven’t yet settled on a location, do some research of popular beach destinations in the locations you’re interested in. Narrow down locations based on real estate prices (and what you can afford), activities available in the area, climate and other relevant criteria. Once you settle on a general area (or areas) stay in a vacation rental close by to get a feel for it. If you like one particular area over others, then narrow your search accordingly. From there, find a qualified realtor that specializes in waterfront properties in the area.

3. Work With a Knowledgeable Realtor to Find the Perfect Beach House

A knowledgeable realtor that has experience buying and selling waterfront properties in the area will be an invaluable resource. They should understand the local market and know what to look out for when buying a beach house. A good realtor will not only have access to MLS listings but also properties that have not yet been listed but may be available for purchase. This may include first access to listings before they reach the general public or even properties that aren’t listed at all.  

With help from your realtor, now comes the fun part of searching for, and viewing, available properties. Remember to be patient as it can take some time to find the right property. Once you’ve found the perfect beach house, submit an offer and sign an agreement to purchase. The agreement to purchase should be subject to a satisfactory inspection and review of appropriate documentation.

4. Conduct Appropriate Due Diligence

Beach houses have their own unique set of considerations and therefore its important to conduct appropriate due diligence prior to closing the purchase and sale. In particular:

Understand zoning regulations and restrictions

First, you will need to understand what restrictions there are on what you can build on the property. Governmental regulations on waterfront properties govern such things as site density, minimum setbacks from the water, the kinds of uses that are permitted and even design and construction. Further, are you able to build a dock or maintain an existing one? Can you build or maintain a seawall? The answers to these questions will need to be understood before you purchase. Separately, if you plan on renting out your beach house, are there short term rental regulations in place in the area? Be sure to check whether short term rental restrictions currently exist and consider whether they might change in the future.  

Understand what you own

In the United States, the State owns the land below the water and the United States has an overriding interest in preserving public navigation. The waterfront property owner has the right to access and accretion (such as sand build-up over time).  

In Canada, Federal and Provincial rules dictate that you only own up to the foreshore, meaning that your property goes just to the high water mark, and you must permit access across the publicly owned land below. As an owner of a beach house in Canada, you have the right of access, the right to protect your property from erosion and the right to accretion as land builds up over time. 

Be sure to review the legal description to determine where the lot extends. In some cases, the property boundary could end well before the water’s edge. Also, it will be important to determine whether there are any additional encumbrances on title that would otherwise limit your use of, or access to, the waterfront. 

Hire a qualified home inspector and other appropriate experts

In addition to the usual house inspection touchpoints, corrosion caused by salt in the air and mildew and mold issues from higher moisture levels can all wreak havoc on a waterfront property. Boundary surveys, elevation certificates and water quality tests can also be important for a waterfront property. For instance, how far above sea level or the lake shore is the house? Is the area prone to flooding? As sea levels have been rising at a rate of 3.2 millimeters per year, and are expected to rise even more quickly by the end of the century, be sure that the beach house is built at an adequate elevation.

5. Close and Enjoy

At closing, you will sign various documents that will transfer money to the seller and transfer ownership of the beach house to you. After the transfer of ownership, you will get the keys to your beach house and you can now enjoy your home!

Other Tips on How to Buy a Beach House

Here are some other useful tips for buying a beach house:

• Confirm that reliable cell phone and internet service is available in the area as certain coastline communities may have spotty reception.
• Install a security system with remote monitoring so that you can keep tabs on the property while its vacant.
• Consider storm-proofing the beach house by adding storm shutters and stainless steel finishings to fight corrosion from salt in the air.
• If this will be owned as a second home, appropriate tax advice should be sought to better understand the tax consequences of ownership.

We hope you’ve enjoyed this article on how to buy a beach house. Be sure to explore our other articles on buying a vacation home including our checklist on buying your first vacation home.

The post How to Buy a Beach House in Five Easy Steps appeared first on Vacation Property Online.

When people think about buying a vacation home in the United States or Canada, they often imagine getaways to Maui, Lake Tahoe, Palm Beach, Whistler, Muskoka Lakes, Mont Tremblant and other vacation hotspots. Typically, people are drawn to vacation properties as places to go to relax. While it is undoubtedly true that second homes serve that purpose, they can also make fantastic investments. Typically buying real estate is a wise decision, as property values tend to appreciate over the years. But is a vacation home a good investment relative to other asset classes? With this question in mind, we consider the pros and cons of owning a vacation home as an investment.

Curious about your potential return on investment should you decide to purchase a vacation home? Simply complete the inputs in our vacation property investment calculator to find out more.

The Good

Historically Safe Investment

Like many other industries, real estate is prone to price fluctuations. Yet, by looking at historical home prices in the United States and Canada, it’s clear that real estate offers a fairly safe investment.

In the United States, apart from the housing crash of 2008 (which prices have since recovered) real estate prices have increased consistently since the 1950’s, going from a median home price of US$180,039.29 (inflation adjusted) in 1953 to over US$300,000 in 2021. Canada has also had historically steady growth when it comes to real estate. In fact, Canadian real estate prices have continued to appreciate despite the 2008 housing crash in the United States.

In short, it’s rare to have a complete collapse in prices as historical real estate prices illustrate. Instead, real estate prices have typically shown slow and stable growth over time.

Additional Safety Net

Perhaps one of the reasons why real estate is a relatively safe investment is that the land and structure you own will always be worth something. People will need a place to live and travel. This fact remains true both in a bull market and a bear market. While your vacation home may go down in value, it will never be worthless like other investment types.

Therefore, many people look at property as a relatively safe investment with less downside than other equities. If you are looking for a way to preserve your wealth, real estate is often a stellar way to do this. Of course, there is an added benefit that you get to enjoy your investment while simultaneously knowing that you are using your money wisely. If the worst case scenario happens and there is a complete crash in the real estate market or tourism industry, then at least you can use your vacation home for weekend getaways or family vacations.

Real estate is also unique in that there are relatively well-defined processes for extracting equity out of your home without actually selling the property at comparatively meager interest rates. If you ever find that you need money, unlike stocks and bonds, you can apply for a second mortgage or a home equity line of credit (HELOC) and access your equity for an interest rate that is typically only slightly above inflation. Meanwhile, while you are borrowing that money, your underlying asset – the vacation home – continues to appreciate and can still earn rental income to pay that HELOC back.

Ability to Generate Rental Income

When you are not using your vacation home, you have the option of renting it out. If you buy in a prime tourist destination, your home will be able to command fantastic rental rates. If you hire a property manager to coordinate these rentals for you, then most of the work will be taken care of for you. If you would like to manage things yourself, then there are any number of vacation rental platforms to choose from. 

There are also tax benefits to renting your property out when you are not using it. Expenses you incur while renting it out (e.g. property taxes) can offset rental income. If your annual property tax bill is $2,000 per year, and you rent out your vacation home 80% of the time, then you can write off $1,600 of your taxes against that income.

Of course, tax laws in the United States and Canada are nuanced and varied, so you should consult with a qualified accountant before deciding to rent out your particular vacation home.

Renovations Increase Value

Investing in your vacation home has two benefits. First, it enables you to enjoy it more while you are using it. Second, it increases the value of your vacation property.

Furthermore, if the renovations help to rent the property out or increase the amount of rent you can charge, you might be able to deduct those expenses against rental income (again, consult with a tax professional for your particular circumstance).

This point is particularly true if you buy a vacation home at a discount that needs work. As a quick example, suppose that you buy a distressed property for $300,000. Houses of similar size go for $500,000. Now, you put in $50,000 worth of renovations to make it habitable. Over the next five years, you put in another $50,000 to make it pristine. In the meantime, you’re able to enjoy the property and occasionally rent it out for other people to use.

After all those renovations, your home is now worth $600,000 because it is better than all the other homes on the market. You put in $400k between the purchase price and renovations. You were able to rent it out for some passive income during those five years. After all that time, your home is now worth $200k more than you paid for it, netting you $100k in additional equity after the cost of the renovations are taken into account. You got a place to enjoy, some passive income, and still come out ahead financially. If you’re willing to put a little bit of elbow grease into a distressed property, a vacation home can be a great way to make a little bit of money while having a fun and enjoyable place to go.

It Can Help You Achieve Your Savings Goals

If nothing else, owning a vacation home results in forced savings.

A vacation home can act as a delightful savings account. If you sometimes find it challenging to save, buying a vacation home as an investment can help you achieve your savings goals without being a bank account that you can withdraw from effortlessly. For some people, it’s easier mentally to save money by investing in a goal or a dream than it is to sock away cash for the sake of socking away cash. If you fall into that category, a second investment home might help you achieve your savings goals.

Of course, unlike a bank account that might earn 1.5% interest if you are lucky, the capital appreciation on a home has historically been much higher. If you are looking to accelerate your wealth building, having properties besides your principal residence is a fantastic way to achieve that.

Tax-Advantaged Wealth Building

You needn’t rent out your property to see the benefits of investing in a vacation home. Any property appreciation that you achieve is tax-deferred until you sell and is subject to capital gains tax instead of regular income tax. In the United States, capital gains are generally included in taxable income, but are typically taxed at a lower rate. For instance, short-term capital gains are taxed at rates up to 37% and long-term gains are taxed at rates up to 20%. In Canada, you are taxed on 50% of the capital gain, not 100%. If you held a property for ten years that appreciated in value by $100,000, you would owe tax (at the relevant rate) on 50% of that ($50,000). Whether you’re resident in the United States or Canada, you can take advantage of the lower level of taxation on capital gains. 

Of course, if you invest in stocks, bonds, etc. you also get this tax advantage, but those tend to be a little riskier than real estate. Further, if you put that money in relatively safe investments like Certificates of Deposit (in the US) or GICs (in Canada) and savings accounts, then you owe income tax on any interest generated from those accounts immediately once you earn it. With real estate, you don’t realize a gain until you actually sell your vacation home. Therefore you can defer any tax obligation until you decide to sell. Real estate blends the best of all worlds by offering a tax-advantaged way to build wealth while still providing strong returns on investment.

You Can Build Wealth Using the Bank’s Money

One somewhat unique property of owning real estate as an investment tool is that the bank will lend money at relatively inexpensive interest rates to purchase it. This money will then typically earn a higher ROI than the underlying mortgage costs. In effect, buying an investment property enables you to make “free” money.

Consider the following example. Suppose you buy a $500,000 home. You put down 50% or $250,000. The bank puts down the other $250,000 at an interest rate of 3% on a 25 year amortization schedule, and the property appreciates 8% per year. At the end of 5 years, your home will be worth $734,000. Not bad! You’ll also owe $213,000 on the mortgage after paying approximately $71,000 in monthly payments, $37,000 of which went towards the principal. You can sell your property for $734k and pay off the $213,000 balance with the proceeds. You will have $521,000 left after the sale (excluding real estate commissions, taxes and fees). That $521,000 is off of your original $250,000 investment plus the $71,000 in mortgage payments. Therefore, your net profit is $200,000, which is not bad, considering you only put in $321,000! That’s an ROI of over 60% in 5 years.

The reason you were able to have such a substantial return on investment is that you were earning 8% on the full value of the vacation home, while only paying 3% to the bank on half of that value. No other investment has access to “cheap” money quite like this. The margin rates on stocks are quite expensive. Bonds don’t have loans like this either. The only investment with interest rates that hover this low is real estate.

The Bad

Historically Outperformed by Other Investment Types

While past performance is not necessarily indicative of future performance, historical returns are an important consideration for any mindful investor. At the very least, the long term results of different investment types will paint a clearer picture as to what you can reasonably expect over the long term. Given that there are various different competing investments you can make, from stocks and bonds to gold and other precious metals and even crypto currencies, it’s important to do your research before you put your money to work.

Comparing historical real estate returns, however, is not necessarily an apples to oranges comparison with the stock market for instance. For example, real estate returns can vary substantially from city to city so national data may not be completely accurate. Further, with real estate you have the potential to not only earn a return on your investment through price appreciation but also rental income which is not always easy to measure. Finally, real estate purchases are typically highly mortgaged (or leveraged), which can magnify gains. Still, by working with the available data we’re able to see how real estate stacks up against other investments.

In the United States, the long-term nominal (not inflation-adjusted) annualized return from 1928 to 2020 was 4.0% for U.S. real estate. By comparison, US large-cap stocks returned 9.8% over the same period. In Canada, similar data suggests that equities have been a more effective way to grow wealth compared to real estate.  For instance, from 1996 to 2020, house prices in Canada increased on average 5.7% whereas the TSX composite index rose 8.0% over the same period. Of course, none of the data can accurately account for rental income nor the magnified returns when using the bank’s money.

In short, the data suggests that US and Canadian real estate are a relatively poor investment choice as compared to other asset classes. Keep in mind, however, the limitations with this data as further described above.

Not Truly Passive

The reality is that owning a vacation home will require a certain level of active involvement.

If you plan on renting out your vacation home, perhaps as a short term rental, then you’ll need to manage the bookings, collect payments and attend to other matters, although short term rental websites such as Airbnb and VRBO have certainly made this easier. Yet you will still be responsible for the guest experience and have to deal with any issues that arise. Even if you hire a property manager there will still be annual obligations such as paying property taxes, renewing insurance etc. Undoubtedly, unexpected issues will arise such as major repairs or renovations that will require your time and resources. 

By comparison, investing in the stock market is a truly passive investment and, as illustrated above, may outperform real estate in the long run.

Lack of Diversification

Diversification is an important component of any investment strategy. Simply put, rather than risking all of your resources on any single idea, venture, or asset, it’s important to invest in multiple asset classes. For instance, while investing in gold may turn out to be a prudent choice over a five year period, it may turn out to be a bad choice for the next ten years after that. Similarly, the real estate market has periods of strong growth and little to no growth. Look no further than the 2008 financial crisis for a recent example of a period of depressed real estate prices. 

Assuming you own your primary residence, then committing further money to a vacation home may be risky, depending upon how well diversified you are in other asset classes.

Stricter Lending Criteria

Mortgages for vacation homes will often be accompanied by larger down payment requirements, higher interest rates and more stringent lending guidelines.

This is because vacation home mortgages are more risky as owners may be more willing to default on their vacation home mortgage (as opposed to the mortgage on their primary residence) when faced with financial hardship. For example, many lenders will require at least a 640-credit score, and a 20% to 30% down payment on a vacation home. The higher down payment reassures lenders that you’ll make your payments on time. You can also expect to pay mortgage rates that are 0.25% to 0.5% higher than you would for a primary residence

If you can’t satisfy these more stringent lending criteria or the requirements otherwise make the investment uneconomic, then there may be other more attractive investments to make.

Increased Leverage

Assuming you qualify, a second home mortgage will increase your leverage and overall debt to income. While you may be able to handle the monthly payments (with or without rental income), it’s not without risk. For instance, as the COVID pandemic has shown, unforeseen events can seriously impact your finances. Whether it’s loss of income due to career setbacks or loss of rental income due to a downturn in the travel industry, there are many potential events that could adversely affect your finances. Even weather related events could result in your once promising vocational rental sitting idle. 

The point is that with increased leverage comes increased risk. Most financial experts recommend that you have a debt to income ratio of no more 43% overall and 30% on housing expenses. Try to ensure you stay within these limits and, when crunching the numbers on your vacation home, assume the worst. If you can handle the monthly payments in the worst case scenario, then buying a vacation home may just be a good idea.

Vacation Home Freeloaders

If you’re buying your vacation home as an investment then it can often be a challenge for friends and family to accept that they can’t use the property whenever they want, either for free or at a substantially reduced rate. Many people may even feel entitled to use your property. This is where it becomes more difficult as an investor as opposed to someone who simply wants a second home to spend time with friends and family. As an investor, you should be maximizing your investment and looking for new ways to generate revenue or increase your return on investment. Yet some people can’t understand that. With alternative investments such as stocks, you won’t have this issue as your uncle’s second cousin can’t borrow your Amazon shares for the weekend. If you do rent out your property, provide a universal friends and family discount between 10-20% and don’t deviate from it.

Vacation Home as an Investment: So Where Does That Leave Us?

Like any other asset class, investing in real estate has its pros and cons. Historically, home prices in the United States and Canada have shown consistent if not unspectacular returns. Yet you can also extract value through rental income and home renovations all the while using the bank’s money to do so. What really separates buying a vacation home as an investment from other investment types is the dual purposes for which it serves. While a vacation home can make a great investment, there are intangible benefits that can’t be measured. You can’t, for instance, put a price on pride of ownership or memories with the grandkids. The joy that a vacation home can bring is something that other investment types just can’t come close to matching.

Ultimately, if you’re looking to maximize your return with a truly passive investment then perhaps investing in the stock market is more appropriate. However, if you’re willing to assume all of the responsibilities as a vacation homeowner, then you can still enjoy the fantastic returns on investment while you have fun!

No matter what your investment and lifestyle objectives are, buying a vacation home as an investment can often get you there. For more articles and resources on buying a vacation home click here.

The post Vacation Home as an Investment: Is a Vacation Home a Good Investment? appeared first on Vacation Property Online.

1. Mont-Tremblant, Quebec
2. Cape Breton Island, Nova Scotia
3. Kelowna, British Columbia
4. Banff, Alberta
5. Whistler, British Columbia
6. Muskoka Lakes, Ontario
7. Niagara-on-the-Lake, Ontario
8. Tofino, British Columbia

Methodology

Each of the above markets was assigned a VPO Score based on the following criteria:

• Affordability
• Activities & Amenities
• Year Round Use
• Family Friendly

For more information on these markets, including popular activities and a detailed VPO Score breakdown, click here. Using the criteria noted above, here are the eight best places to buy a vacation home in Canada, ranked from #8 to #1.

#8. Tofino, British Columbia

• The skinny: Primarily a summer destination, Tofino is a true outdoor paradise. From the crashing waves on one of Tofino’s many beaches to the impressive forests, nature is never far away. While the temperature can dip in the winter months, many travellers frequent Tofino’s beaches even in the winter months to take in the beautiful winter swells. Tofino comes it at #8 on our list primarily because it ranks low on affordability and activities/amenities available.
• Closest major city: Victoria (315 km)
• Population: 1,932
• 2018 median sale price: $940,500
• 2019 median sale price: $1,250,000
• 2019/2018 Price (%): 32.9%

#7. Niagara-on-the-Lake, Ontario

• The skinny: Located where the Niagara River and Lake Ontario meet and less than 30 minutes from Niagara Falls, Niagara on the Lake, Ontario (or “NOTL” as the locals call it) is popular among tourists, retirees and day trippers. Shopping, wine tasting and tours to Niagara Falls are all popular activities as is the colonial-style architecture. NOTL also plays host to many festivals throughout the year which draws both locals and tourists to the lakeside community. NOTL scored relatively low in the affordability category and average in all other categories. 
• Closest major city: Toronto (129 km)
• Population: 17,500
• 2019 average sale price: $809,000
• 2019/2018 Price (%): 7.7%

#6. Muskoka Lakes, Ontario

• The skinny: A popular getaway for those seeking an escape from the hustle and bustle of busy city life, Muskoka Lakes, Ontario is Canada’s true cottage country. The township includes Lake Muskoka, Lake Rosseau, Lake Joseph and many other smaller lakes. Muskoka Lakes received top marks in the family friendly category but scored poorly in the activities/amenities category. 
• Closest major city: Toronto (238 km)
• Population: 6,588
• 2018 Single Family Median Price: $327,750
• 2019 Single Family Median Price: $350,000
• 2019/2018 Price (%): -6.8%
• 2020 Median Price Forecast: $385,000
• 2020 Median Price Forecast (%): 10.0%

#5. Whistler, British Columbia

• The skinny: Traditionally an alpine ski town, Whistler, BC is now a year round destination. Mountain biking, hiking, ziplining, swimming and whitewater rafting are just a sampling of the spring and summer activities that Whistler offers. Looking for a place to shop and eat? Look no further than Whistler Village, which has won numerous design awards over the years. Whistler scored high in the year round use and family friendly categories, but poorly in the affordability category. 
• Closest major city: Vancouver (121 km)
• Population: 11,854
• 2018 Single Family Median Price: $2,400,563
• 2019 Single Family Median Price: $2,359,875
• 2019/2018 Price (%): -1.7%

#4. Banff, Alberta

• The skinny: A resort town located in Banff National Park, Banff, Alberta offers the typical comforts from home while maintaining a delicate balance between commercial development and nature. Located on the eastern side of the Canadian Rockies, Banff is surrounded by towering mountains and beautiful countryside. Banff is also home to natural hot springs which draw tourists from far and wide. During the winter months, there is no shortage of ski terrain as Mt. Norquay, The Lake Louise Ski Resort and Sunshine Village are all close by. Similar to Whistler, Banff scored high in the year round use and family friendly categories, albeit at a lower price point than Whistler. 
• Closest major city: Calgary (127 km)
• Other nearby destinations: Canmore (24 km)
• Population: 7,851
• 2019 median detached/semi-detached price (Bow Valley): $975,000 (+14.7% from 2016)
• 2019 townhouse median price (Bow Valley): $700,000 (+18.6% from 2016)
• 2019 apartment median price (Bow Valley): $500,000 (+22% from 2016)

#3. Kelowna, British Columbia

• The skinny: Often called “Canada’s Napa Valley”, the beautiful Okanagan Valley is home to dozens of wineries, rolling vineyards, golf courses and more all overlooking picturesque Okanagan Lake. In the center lies the bustling city of Kelowna, BC.  As the largest city in the Okanagan Valley, Kelowna has more to offer than just beaches, wineries and sun.  Look no further than Kelowna’s downtown core where you’ll find restaurants, shopping, a casino and a lakeside boardwalk. Kelowna is the most affordable entrant out West and had a strong showing in all other categories. 
• Closest major city: Vancouver (389 km)
• Other nearby destinations: Vernon (51 km), Penticton (63 km)
• Population: 131,654
• 2018 Single Family Median Price: $659,950
• 2019 Single Family Median Price: $640,000
• 2019/2018 Price (%): -3.0%

#2. Cape Breton Island, Nova Scotia

• The skinny: Cape Breton Island, Nova Scotia has more to offer than just picturesque views and historic sites as tourists flock to the region year-round for sailing, golfing, cross country skiing and many other activities. The areas of Baddeck and Ingonish are particularly popular and real estate in these areas is in high demand as a result. Bras d’Or Lake is similarly popular among vacationers looking for some R&R and, as compared to the rest of the country, waterfront property in the region is quite affordable. Cape Breton Island scored particularly well in affordability (the best in the group) and the family friendly category. 
• Closest major city: Sydney
• Population: 98,722
• Average residential price: $153,352
• 2019/2018 Price (%): 10.5%

# 1. Mont-Tremblant, Quebec

• The skinny: The champ is here! A four season resort town, Mont-Tremblant has a bit of everything for the outdoor enthusiast. From skiing and snow shoeing in the winter, to hiking and swimming in the summer, there’s no shortage of activities to keep you occupied throughout the year. It’s no wonder Mont-Tremblant is one of the best places to buy a vacation home in Canada. Mont-Tremblant scored high in all categories, including affordability and activities/amenities.
• Closest major city: Montreal (137 km)
• Population: 9,646
• 2018 Single Family Median Price (Laurentides): $200,000
• 2019 Single Family Median Price (Laurentides): $206,500
• 2019/2018 Price (%) (Laurentides): 3.3%

The post Eight Best Places to Buy a Vacation Home in Canada – Ranked appeared first on Vacation Property Online.

Featured markets include:

• Tofino, BC
• Whistler, BC
• Kelowna, BC
• Banff, AB
• Muskoka Lakes, ON
• Niagara on the Lake, ON
• Mont Tremblant, QC
• Cape Breton Island, NS

To launch the map, click here. Scroll through the map and the associated illustrative listings to obtain sample information at each price point, including property type, square footage, number of bedrooms and bathrooms and special features such as waterfront. Note that the information is based on data as of the date specified and is provided for illustrative purposes only. As data is derived from listing prices it may not be indicative of sales prices.

Be sure to also check out our detailed overview of the above markets here.

So How Much Do Vacation Homes Cost Across Canada? 

The Tofino and Whistler regions are among the most expensive recreational real estate markets in the country. For $500,000, you can purchase an 860 sq ft condo in Tofino or 450 sq ft studio in Whistler. By contrast, $500,000 will get you almost 2,000 sq ft or prime waterfront living in the Cape Breton region or a three bedroom, two-and-a half bathroom townhouse in Kelowna. $500,000 will also get you a three bedroom, one-and-a-half bathroom waterfront cottage in the Muskoka Lakes region. A more modest two bedroom condo is available at this price point in Banff. 

At the $750,000 price point, condos and townhouses are the norm out West, although you can purchase a four bedroom, three-and-a-half bathroom house in Kelowna. In Whistler, a one bedroom, one bathroom condo is available while a larger two bedroom and two bathroom condo is available in Tofino. In Banff, a three bedroom, 2 bathroom townhouse covering over 1,300 sq ft is available. Further east, three and four bedroom homes are available in Niagara-on-the-Lake and Mont-Tremblant, respectively. Finishing out East is the Cape Breton region where a three bedroom, four bathroom home on the lake is available at this price point.

For $1 million, houses are still out of reach in Whistler and Banff although two and three bedroom condos are available, respectively. Otherwise, houses and waterfront cottages are the norm in all other markets, including a three bedroom and four bathroom house in Niagara-on-the-Lake and almost 1,800 sq ft of waterfront living in the Muskoka Lakes region. $1 million will also get you over 3,000 sq ft of house in Mont-Tremblant. And finally out in Cape Breton, $1 million will get you a four bedroom house (on the lake).

Finally, if you have money at your disposal then consider buying your own island in Muskoka Lakes, Ontario for a cool $3.5 million. At $2.5 million, Tofino waterfront is within reach and, at a modest $1.5 million, relatively speaking, almost 4,000 sq ft of luxury waterfront awaits on Cape Breton island.

Here is a more detailed overview of how much vacation homes costs throughout Canada’s most popular vacation and recreational destinations:

Thanks for reading and be sure to contact us if you have any questions or feedback.

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