Investing in a rental chalet, is it a good idea?

Investing in a rental cottage, is it a good idea? < /p> UPDATE DAY

Since the arrival of the pandemic, more and more people have dreamed of going away from home for a few days or buying a second home, to refresh their ideas and breathe a breath of fresh air. little. 

In 2016, according to a survey conducted by RE/MAX, 74% of Quebecers said they had spent time in a cottage in the past five years. According to another survey conducted in 2022, this time by Royal LePage, 400,000 baby boomers wanted to relocate to the countryside or to a recreational area in the next few years.  

We can therefore see that the craze for chalets is not only due to the pandemic and that Quebecers have been dreaming of a chalet for a long time. Is it risky to buy a chalet with the increase in interest rates?

There are 3 types of possible scenarios when buying a chalet:

1) You sell your residence

Part of the money from the sale of your house will be used to pay for your new chalet. &nbsp ;

The risk is low, despite the increase in interest rates, because your residence will probably cost less in the countryside. 

2) You buy a chalet and rent it part-time

We will analyze a scenario: let's say that before the increase in interest rates, you had the possibility of having a rate of 2.5% and that now we are at 4.5%. For a $400,000 mortgage, this represents a monthly increase of $420 (from $1790 to $2210). If you rent your chalet at $500 per night, that's only 1 night more rental in the month, if it's $250/night, only 2 nights.  

So the impact on the profitability of a chalet rented part-time is without too much risk. 

3) You keep your house < /p>

You want to enjoy the cottage as a second home without renting it out, so make sure your budget allows for the expense of a cottage.  

Of course, to be able to successfully acquire a chalet, it is necessary to implement and apply certain tips… But first, let's see some advantages of taking the leap and investing in another property.&nbsp ;

The main advantages of a chalet

Investing in a chalet or a country house has its share of advantages, that's for sure ! 

Indeed, such an acquisition offers above all the possibility of enjoying a new environment to relax and avoid the hubbub of the city. 

Also, the chalet can also become a good source of income, in the sense that it is often possible to rent it on the short term (less than 31 days). 

Mission: Search for funds

The purchase of a secondary residence, owner-occupant, requires a down payment of at least 5%. 

When the residence is rented in the short term, the down payment is a minimum of 20%.  

A good way to proceed when it comes to obtaining funds for the purchase of a second home is to use principal residence equity as leverage for financing. 

TIPS

  • If you want to own a cottage with no money out out of your pockets monthly, consider renting it. So you will benefit too at the same time.  
  • Check if the zoning allows you to rent short term.
  • Remember that rental income must be reported on your tax return.