How to invest in cottage real estate like a Hollander

For this week’s top story, we’re looking at how you can invest in cottage real estate.

By Carli Whitwell

“Will you come to my cottage this summer?” For Canadians, these are eight of the most beautiful words in the English language—whether uttered by character Shane Hollander in Heated Rivalry or when your own friends invite you over to their summer place. The only thing sweeter? Owning a cottage of your own.

Hollander, played by Canadian actor Hudson Williams, has one heck of a cottage. In the show, it’s located in Quebec. In real life, it’s in Muskoka and was designed by the Toronto, -based firm Trevor McIvor Architect. Real estate experts say it’s worth several million. 

But turns out you don’t need to be a player in, uh, fictional Major League Hockey to afford waterfront property. A perfect storm of factors have significantly cooled the market since its pandemic heights when we saw prices go up as much as 40% in some cottage areas in Canada. 

“This is a perfect market, especially for first-time buyers. Prices are down, there's inventory to choose from and mortgage rates are stable,” says Sandra Clements, broker manager with Remax Hallmark Eastern Realty in Peterborough County and the Kawarthas. “Waterfront is always a great investment. They’re not making any more. So it doesn't matter where you purchase it, whether it’s here, whether it’s Muskoka or whether it’s Prince Edward County.”

We asked the experts how to break into the Canadian cottage market. 

What to look for in a cottage

“Finding the right waterfront property can be tricky for some people because they might have really specific criteria—they absolutely want to see the sun rise, or they must have a sand beach or they want to be on a particular lake,” says Maryrose Coleman, sales representative and senior vice president, sales from Sotheby’s International Realty Canada. 

Because of this, she adds, a dream property, especially if you’re not working on a Hollander budget, isn’t very likely to pop up every week. “If you’re looking for value, it’s really important to start searching early.”

Prep a list of everything you want in a cottage and work with a local realtor who can help you access platforms like HouseSigma or Realtor.ca. Then you’ll get a sense of what you like, don’t like, and the price range your dream cottage falls into. “You have to do the research, you have to look at the properties, and then you’ll start to see the patterns of where the value is,” adds Coleman.

Think of it like dating. We’re not saying you should buy the engagement ring before you meet the one, but you should have an idea what you’re looking for in a partner so you know when you’ve found the one. (Just ask Hollander and Rozanov.)

How to prequalify for a cottage mortgage

Working with a broker will help you learn exactly what you can afford—especially because mortgages for waterfront properties can be more complicated than regular houses or condos.

For mortgage issuers, secondary or vacation homes in Canada are divided into two types of property: 

1. Type A are traditional homes or condos (think road access, heat and running water), which require 5% minimum downpayment. 
2. Type B are seasonal with no permanent source of heat. Running water may not be be potable. This type requires at least a 10% downpayment.

The prime rate, at the time of publishing, is at 4.45%, and Samantha Garrod, a Muskoka-based mortgage broker, doesn’t expect the extra-low 1.98% interest rates from five years ago to return anytime soon. Many of those low-interest mortgages are up for renewal this year, which could force more people onto the market if they can’t afford their payments. 

When to get the best deal for a cottage

Winter is always slower in the cottage market because the snow, while beautiful, hides what you need to know about the property. “It’s really hard to accurately assess a waterfront property in the winter unless you’re familiar with it, because you can’t see the lake, you can’t see the shoreline… You can’t walk into it and touch it with your toes,” says Coleman. While there are ways around this, she adds, such as looking at summer photos or using an auger to test water depth, these may not give a clear picture. You could score a deal, but you could also end up with unexpected surprises. That’s the trade-off.

Spring is generally the hottest time to buy, adds Clements. “People want to enjoy the summer on the lake this year,” she says of the spring market. “If you could hold out through the summer, you may have a bit more negotiating power. Fall is definitely the time to buy.”

On the flip side, if you’re hoping to sell, Coleman recommends either selling ASAP or settling in for the long haul—at least five to 10 years. “People thinking about selling were hoping the market would stabilize and possibly go back up again. And, now they’re starting to become a little more realistic about the fact that maybe this isn't going to happen,” she says. “We might be looking at a longer cycle—it might be another five to eight years before markets shift.”

Don’t sleep on untapped and undervalued areas

Most cottagers look for a spot that’s about a two-hour drive from major cities—mostly because we know rush hour traffic will extend that by at least an hour. “The further you are from the city, you definitely get a better value,” says Coleman.

In Ontario, the Peterborough-Kawarthas area tends to have better deals than Muskoka. Clements’ favourite underrated area is the Trent-Severn Waterway because it gives you access to multiple lakes even if you never go through one of the locks.

As for the big three Muskoka lakes: Sure, it would be fun to hang with known cottager and ’90s supermodel Cindy Crawford on Lake Joseph, but you’ll find better value on smaller, less-popular lakes. “These are still great lakes, still great cottages, still great places for people to be as families, they just don’t have the same cachet,” says Coleman. “Sometimes it's just perception, and there's no reality to it, and you'll get better value.”

According to Remax, some of the best value areas to look for in B.C include Penticton, Osoyoos and Summerland. As for Alberta, while the price of cottages are up an estimated 3.3% and Banff and Canmore remain sellers’ markets, you can still find opportunities in Edmonton Lakes.

Plan for the worst-case scenario: You can’t always count on rental income 

Many cottagers smartly supplement their mortgage payments by renting out their property when they aren’t there. However, more and more municipalities and provinces like Nova Scotia and British Columbia have introduced short-term rental restrictions, which could play a factor in what property you can afford. The township of Muskoka Lakes, for example, now requires people hoping to rent their cottages pay a licensing fee of $500 to $1,000 as well as halt rentals one week a month in peak months. Do your research before you buy.

Budget, budget, track, track

This should be a no-brainer, but budget out every expense of your cottage to help you fully understand if you can afford it. According to the Government of Canada, your total debt should be no more than 44% of your monthly income. And, when you’re buying a vacation property, these costs add up. Think: home inspection fees, legal fees, property tax adjustments and title insurance, which could total up to 4% of the cost of your cottage.

Then there are land-transfer fees, which typically range from 0.5% to 2% and aren’t included in the purchase price. First-time buyers may receive rebates or exemptions and should also keep an eye out for ways to maximize their budget, including government programs such as the Home Buyers’ Plan (HBP), which allows you to withdraw up to $60,000 from your registered retirement savings plan (RRSP) tax free for a downpayment. As well, the first-home savings account (FHSA) allows you to save up to $40,000 tax free if you contribute $8,000 a year. In 2024, the federal government also expanded access to 30-year amortization on some mortgages. 

Do the work and a cottage purchase can be a source of happiness—both as an investment and an opportunity to hear your own Rosanov call you and say “I’m coming to the cottage.”

Carli Whitwell is an award-winning Toronto-based lifestyle journalist. She’s written for EE72, Refinery29, ELLE Canada, The Toronto Star and others. Her hobbies include going out for dinner and sleeping in.

Read more from this issue of The Get:

1. MVP: Game Stop: The money lessons Canadian athletes learn
2. When travelling, should I pay in Canadian dollars on my credit card?
3. Here’s one way to reduce your grocery bill
4. True or false: Buy Now, Pay Later costs nothing

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