Buy the cottage life for a fraction of the price

Despite a bad rap, fractional cottage ownership can be the perfect answer for those looking for a little piece of paradise without all the maintenance and costs.

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cottage_322Prices for lakefront cottages and chalets in key Canadian vacation hotspots rivaled the housing prices of some of the finer neighbourhoods in Toronto, Calgary, Vancouver and Montreal over the last decade. Thankfully, prices in cottage country started to soften about 24 months ago, making it easier to own a piece of paradise.

Still, the thought of paying between $250,000 and $1 million for a waterfront vacation property leaves some Canadians cold.
That’s when fractional ownership seems to make sense. Known as “cottage-lite,” fractionals started to appear in the early 1990s at American ski resorts. It was an ownership option for people who wanted vacation properties but didn’t want the expense or hassle of owning real property.

Much like deeded timeshares—where you pay to use a property for a certain number of weeks each year—a fractional ownership allows you to own part of the property with exclusive rights of usage for a certain number of weeks. The benefit is you don’t have to add a second set of expenses that comes with owning a property, such as property taxes, maintenance fees and utility costs, among others.

“I don’t have to worry about shoveling the walk or maintaining the dock,” explains Don Cruikshank, a Thornill, Ont., semi-retired engineer who paid $71,000 for a fractional in Ontario’s Muskoka region. “Every year we simply drive up and find the place in good condition and ready to enjoy.”

Cruikshank bought his Muskoka fractional—which includes the use of a three-bedroom cottage on a 43-acre complex, with over 4,000 feet of shoreline, for five rotating weeks each year—in 2007. As part of his ownership, his family has access to tennis and basketball courts, canoes, paddle-boats and trails. Every year he pays approximately $2,500, which pays for a property manager, insurance, property tax, utilities, repairs and cleaning. Then, each year in June, the co-owners choose their weeks for the upcoming year. “Even though we haven’t always had first picks, we’ve always got the weeks we wanted,” says Cruikshank.

A similar property in the area would’ve cost Cruikshank at least $500,000, not including annual costs. “I bought worry free cottage living,” he says.

There are some drawbacks, however. Financing fractionals can be difficult, as most banks won’t approve a mortgage for this type of vacation home purchase. Also you can’t customize the interior design, and the resale is significantly less than with cottage properties—and some properties depreciate in value. For instance, the luxury complex of Parkside Resort and Spa in Victoria, B.C.—named the best new resort hotel in the province by the Urban Development Institute in 2010—initially offered investors fractionals of condo units from $115,000 to $121,000. Less than a year later, the complex was in receivership with more than $61 million in unsold inventory.

Still, some fractionals do seem to retain their value. For example, in the seven years Cruikshank has owned his fractional it’s appreciated between $4,000 and $9,000.  To ensure you buy a property that, at the very least, retains its value, examine the property as you would a condo. “We aren’t governed by the Condo Act, but we do follow the principles of that Act,” says Cruikshank. Fractionals that hold a reserve fund and that undertake special assessments at regular intervals (to determine the need for major upkeep) are usually better maintained and, as a result, keep their value. Also, look for fractionals in areas that are really well trafficked—ski resorts, lakefront properties and other vacation hotspots. This demand keeps the value up. According to research firm Ragatz Associates, there were more than 250 fractional developments in North America in 2006 and these properties can now be found throughout the world.

 

14 comments on “Buy the cottage life for a fraction of the price

  1. Or, you could, like, rent a vacation property instead. Then you have no ownership hassles, fees, or declining value. And you can actually go somewhere different if your tastes change, or skip a year if money is tight.

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  2. Yep, agree totally Gérard. Take the $71000, invest, earn say $2500 a year, add the $3500 you have to pay for upkeep and bingo, $6000 vacation fund with no strings. Timeshares make very little sense to anyone but the salesperson. All the ties with none of the freedom. IMHO.

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  3. Who wants 5 weeks "spread out" I dont do cottaging unless its at least 3 weeks in a row.

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  4. One paragraph say they don't incurre expenses of having a cottage. Then two paragraph later they talk about the maintance fees. Romana King do better research for your stories. Lets face it many of fractional ownerships seller will be selling at a lose when they want to sell.

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  5. Buying cottages either fractionally or for real is not a good investment. I bought a cottage in Quebec 30 years ago for $45,000 and recently sold it for $225,000. Over the years a large amount of money was spent on renovations and improvements. The taxes (school and property), electricity and insurance (at the time of sale) cost about $ 250 per month. Trouble is that most cottages are open for 4 to 5 months a year but the costs continue for 12 months. If I had invested the $45,000 in a dividend mutual fund such as PH&N Dividend D in 1983, my investment would now be worth just over $900,000. Buying a cottage is buying a dream and a lifestyle. Don't think of it as a real investment.

    Barry

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  6. Agree David. I had the unfortunate experience of working for a company selling timeshares. It was probably one of the most unprofessional working environments of my career. People who can't afford to do this, are offered 22.5% financing and usually after realizing what an incredibly terrible decision they made, return and cancel. It doesn't make sense to anyone unless they have unlimited finances. In the real world, those that can afford to vacation, do. Don't recommend time share for anyone.

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  7. The article initially states the "benefit is you don’t have to add a second set of expenses that comes with owning a property, such as property taxes, maintenance fees and utility costs" but later adds "every year he pays approximately $2,500, which pays for a property manager, insurance, property tax, utilities, repairs and cleaning". This is added to the initial $71,000 to go to the same place 5 weeks of every year. How many owners are sharing this time? There are only so many weeks throughout the summer. Just doesn't appear to be worth it.

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  8. where do i find out more about this cottage deal. is there a web site or details as i am interested in buying

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  9. Thinking…how about fractional wives?

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  10. If it quacks like a duck and waddles like a duck, chances are it is a duck. This deal has time share written all over it. Try getting your investment out of this.

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  11. Disagree! I have nothing but positive things to say about purchasing your own cottage. Lakefront properties are there with some searching. A cottage by the lake offers so many opportunities for all ages of your family. Yes, they are a lot of work, but worth every $. Nothing like waking and watching the day come awake, coffee in hand, by the water.

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  12. I already own a cottage, but totally agree with Gerard .. If you're looking for the cottage lifestyle without buying a cottage, then rent. You get to try all sorts of locations over the years, with no money up from and minimal cost annually. There are lots or really nice cottage that people bought and don't use regularly, but rent them to help with the ongoing costs.

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    • No.

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