Sarah Townsend’s new vacation property checks off all the boxes.
Getting there takes just over an hour of driving from Winnipeg. The property was move-in ready and right on Lac Du Bonnet, providing easy access for the family’s boat. And the building is winterized — perfect for snowmobiling weekends in the cold season.
Best of all, though, Townsend’s happy place does not break the bank.
That’s because she and her husband did not buy on their own. The purchase, which was finalized in May, was split 50-50 with her brother-in-law.
And co-ownership comes with other significant perks for Townsend.
Both couples have young children, which provides for endless entertainment whenever the families’ stays overlap.
“With other kids out there, they play for hours,” Townsend said.
The other plus is being able to split chores like cutting the grass and shovelling snow.
“One weekend we’ll do it, when we can, the next weekend my brother-in-law will do it,” she said.
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A growing trend among millennials
Split ownership of vacation homes — call them cottages, cabins or camps — is not new. But the arrangement is becoming very popular with millennials, who are often facing both sky-high home prices in the city and an increasingly expensive recreational real estate market.
As of last spring, the average price of a vacation home in Canada was $411,000, up five per cent over the previous year. Pushing up the national average is high demand in Ontario and Quebec, in particular, where “young families are competing with baby boomers” for homes in popular regions, according to Royal LePage.
But recreational property has appreciated across Canada, said Romana King, director of content at Zolo Realty.
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Teaming up with friends or relatives is a way to slash costs. Some are pooling their cash to be able to buy better properties or gain a toehold in coveted spots, said Maureen Reid, branch manager at Meridian Credit Union in Penetanguishene, Ont., which lies on the shores of Georgian Bay.
Some are buying up empty lots with plans to build properties later on — possibly with a rental unit that can bring in extra income, she said. And even many of those who are inheriting vacation homes from their parents are often splitting the property to lower maintenance and other ownership costs, Reid said.
Sometimes, young buyers are opting for ownership in cottage country even while renting in the city, she added.
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“If you can afford to live downtown and don’t have to commute during the week, you have more energy to drive for an hour during the weekend,” Reid said.
The pros
The benefits of co-ownership may go beyond splitting up costs and chores, according to King.
Your very own timeshare
Privately purchasing a property to share can be a bit like signing up for a timeshare but with more freedom and flexibility, King said. You’ll get to use the home on certain dates, while the other buyers will access it at different times.
But when you’re splitting up a calendar with friends and family, you have more leeway to figure out what would work best for everybody, according to King.
“If the third week of August doesn’t work for you every year, you can negotiate something different,” she said.
Being able to leave some of your stuff behind at the cottage is often another advantage of co-ownership arrangements over timeshares.
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That small village feel
For some people, though, the best part of co-owning is company, according to King.
“One of the biggest pros to owning vacation properties with family and friends is replicating that extended family feel that I don’t think a lot of North Americans get anymore,” King said.
“Kids really seem to benefit in this environment. They seem to understand listening, sharing, pitching in a lot better.”
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The cons
Sharing your home away from home with others can have some significant drawbacks as well, King warned.
More upfront planning and higher legal costs
Co-ownership usually means a bigger down payment, smaller mortgage and, potentially, cheaper rates. But if every co-owner has to qualify for the mortgage, securing financing can turn into a “quagmire,” King said.
Often, different families will have different incomes and liabilities, which makes things complicated for lenders.
“You can easily get around this by saying one person will own the property and qualify for the mortgage, and everyone will give that person the money for a down payment as a gift,” King said.
But then you need to bring in the lawyers.
In general, even if you can easily get a mortgage, it’s a good idea to draw up a legal contract that lays out how ownership sharing is going to work all the way down to the minutiae of what happens if the dishwasher breaks and who pays for toilet paper, King said.
It seems tedious, she said, but for the sake of preserving family relationships and friendships, it must be done.
“I can’t stress this enough,” she said. “The biggest strain I’ve heard over and over again is the day-to-day costs.”
You’ll need to set out some ground rules for handling upkeep and repairs as well, Reid said. Critters and harsh winters — not to mention the fact that you’re not going to be using the property on a daily basis year-round — usually means maintenance will be relatively more expensive on your vacation property than your primary home, she noted.
Reid suggested setting up a shared fund just for that, with regular payments mandatory for all co-owners. That minimizes the chance that someone will be caught short on cash when a major repair comes up, she added.
The planning should also include “exit strategies” for all parties involved, Reid said.
What happens if someone gets tired of the cottage and wants to sell? And what if someone loses their job and can’t afford a second home anymore?
A legal contract should map out all of that, along with how the property will be divided among the descendants of the current owners, King said.
“Bringing in the legal experts is going to cost you more,” she said. “But in the long run, spending a couple of thousand dollars more on a property that’s a couple hundred thousand dollars makes sense.”
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Not a money-maker
Something else to keep in mind: no matter how you split it and how often you rent it out, a vacation home is unlikely to be a money-maker.
Turning your vacation home into an income generator is not “outside the realm of possibilities,” King said. “But certainly it needs to be done with temperate expectations.”
In general, although it may appreciate in value, your home away from home shouldn’t be seen as an investment, King added.
“If you have a downturn in the market, we all know that secondary properties — particularly cottages — are the ones that are impacted first,” she said. “And they take much longer to rebound.”
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