Buying a cottage can be a time consuming and expensive project. This is true, until the moment you rent out your chalet and hand it over to a manager.
If the COVID-19 pandemic made you want to buy a cottage, you are not alone: according to the Professional Association of Real Estate Brokers of Quebec (APCIQ), 3.7% of Quebec households wish to do so. acquisition of a chalet by 2025.
In addition to allowing you to go out of town to breathe, buying a cottage can also be an opportunity to earn additional income, especially by renting it out when you are not there.
How much does a chalet cost?
In addition to the acquisition cost, there are purchase costs and recurring costs.
The purchase costs include, among other things, transfer taxes, renovations and moving. As for recurring costs, it is recommended to plan an annual amount of approximately 2% of the acquisition cost for maintenance, which represents $ 6,000 for a cottage of $ 300,000. To this must be added mortgage fees, municipal taxes, home insurance and other expenses, such as electricity, cable and internet.
In short, buying a cottage is like buying a second house, with the difference that you generally have to pay a minimum down payment of 20% of the purchase cost.
Hire a manager
In theory, renting out your cottage when you’re not there is a great way to cover purchase and recurring costs. But in practice, managing a rental chalet yourself can take a long time. You have to do marketing, manage reservations, welcome tenants, clean … In short, it can look like a second part-time job.
The solution is to hire a manager and delegate all these tasks to him. There are several companies specializing in this area and management fees vary depending on the services offered. In general, expect to pay 15% to 30% of gross rental income.
In my experience, a good management company that provides professional services can earn you more money than if you manage it yourself. However, these companies are rare and it is relevant to check their performance with customers who have already done business with them or on sites specializing in the field.
♦ Ghislain Larochelle is a professional registered with the Order of Engineers of Quebec and with the OACIQ.
Advice
- Watch out for the new regulations. Since May 2020, any chalet rented for 31 days or less for which you advertise its rental must be registered with the Corporation de l ‘industrie tourisme du Québec (CITQ).
- Keep in mind that chalet rentals may be subject to various taxes. Think in particular of the tax on lodging (3.5% of the price of the stay) as well as the GST and the QST.
- It is important to make good profitability calculations. The share of income allocated to the manager should not prevent you from being profitable.
- Adjust your insurance coverage, since residential contracts generally exclude short-term rentals.
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