Cottages in this industry are most often discussed in the language of a headache. Those headaches could be around the inheritance of a family cottage that the heirs don’t agree on a plan for, or its monthly tax and maintenance bills, or the potential capital gains tax implications for the sale of a cottage property. The decision to purchase a cottage property is more often driven by a love of nature, a need to escape, and its intangible value beyond financial worth. Cottages often sound more like a detractor from — rather than a contributor to — a wealth building strategy.
That may not always be the case. While the snarls, issues, and risks related to cottage properties are significant, there may be situations where the right property can serve a client’s financial plan. Through assessment of property type, a client’s goals, and the potential risks and rewards — both financial and emotional — that come from a property, advisors may be able to help a client turn a cottage into a positive contributor to their financial plan.
“Canadian families love their cottages, many of my clients have these generational cottages, and I think owning a cottage definitely can be a wealth building idea, but you should be using it and enjoying it as a vacation property first and foremost,” says Tina Tehranchian, Senior Wealth Advisor with Assante Capital Management Ltd. “Using it as an investment property and renting it out is a different story, but usually for cottages there’s a core element of enjoyment, of a family building memories. In the meantime, though, many cottages have appreciated significantly over decades.”