Rent vs. Buy: What’s the best deal for a summer cottage?

There are few better ways to enjoy a summer vacation time than at a cottage by a lake. While there's plenty of ways to score a weekend at a friend or family member's cottage, if you're looking for a place of your own to enjoy long-term you have two options: renting or buying.

"The first thing I tell people is before you buy, you want the cottage experience — renting is a really good way to get that experience and gives you a chance to stay on the actual lake you're looking at, explore the town, and see what works for you," said Cottage Country Director Mark Bordo. "One of the biggest advantages of renting is it gives you a chance to experience cottage life and areas before making the commitment of buying."

Ownership of a cottage comes with a lot of responsibilities, both personal and financial. "Renting allows you to have the best of both worlds," said Bordo.

However, a cottage can be a worthwhile investment, especially if there is an additional guest cottage you could rent out or if it's located in an up-and-coming area and will increase in value over the years. But best of all, you'll have a summer vacation home to use whenever you want, whether for just a weekend or for an entire month. This can be a huge draw for some, especially given how quickly summer rental bookings fill up.

"If you want the best selection of [rental] cottages, you should start looking in the fall or winter prior to the summer you want to rent for," said Bordo, "the hotter it gets, the more our site traffic and requests go up."

Much of the decision whether to buy or rent comes down to finances, and which option better fits your lifestyle and budget.

To rent this two-bedroom cottage in the Muskoka region, you'll spend $1,000 per week. By comparison, this two-bedroom cottage in the same region is $299,900 to purchase outright. According to the RateHub mortgage payment calculator with a 25-year amortization period, a 5-year fixed mortgage rate, and 10% down payment, your monthly payments would work out to be $1,166.

Just north of Toronto on Lake Simcoe, this three-bedroom Fox Island cottage is listed at $134,900; whereas this similar three-bedroom Georgina Island rental is asking for $1,000 per week during high season. Using the same parameters above, your monthly mortgage payments will be $525.

If your ideal summer vacation has you lounging in the picturesque Kawarthas, this five-bedroom rental is $1,500 - $1,800 during the summer season. To purchase this one-bedroom plus sleeping cabin Kawarthas vacation destination, you're looking at a purchase price of $419,000, or a monthly mortgage payment of $1,629 with those same parameters.

Let's assume you have two weeks of vacation every summer, and want to spend your time lounging in cottage country. Here's a look at the two-week cost of both buying and renting a cottage.

	Muskoka	Lake Simcoe	Kawarthas
Two week rental	$2,000	$2,000	$3,600
Bi-weekly mortgage payment*	$604*	$271*	$843*

*All mortgage payments for cottage purchases calculated using a 25 year amortization period, 5-year fixed rate, and 10% down payment

Of course, purchasing a cottage means you're making the above bi-weekly payments on a regular basis as opposed to a one-time rental fee, so it is more costly long-term.

Renting a cottage comes with the bonus of having everything you need at your fingertips, while not having to worry about maintenance, repairs, or long-term costs and financing. This can be a great option for a young professional, a group, or family looking to get away for a short period of time. However, you're subject to the owners schedule and calendar, and you might not always be able to find your ideal cottage available at your ideal time.

Additionally, the rental cost is not always the only cost associated with your vacation: some rentals don't include the HST in their prices, and some have extra fees such as a cleaning fee or a charge to bring your pets along.

While renting is certainly the cheapest option short-term, it's not an investment beyond your weeklong urban escape.

According to Armin and Annemarie Grigaitis of Re/Max Baywatch Ltd., if you're consistently renting in the same area, or renting on an annual basis, it might be time to consider purchasing your own piece of summer paradise.

"Owning a cottage or recreational property — particularly if it's a waterfront property — has proven to be been a very sound investment. In our area of East Georgian Bay and Muskoka, the property value tends to double every seven to ten years," said Broker of Record Armin Grigaitis.

Much like buying a house, there are a number of things to think about when purchasing a cottage. If you're not planning hefty renovations, a home inspection is important, especially since repairs and maintenance in a remote area can be costly. Additionally, you'll want to ensure the well or lake water is potable — a bank won't grant you a mortgage if it's not — and find out if the shore road allowance, which lies between the cottage and water, is owned or can be purchased — otherwise you may not be able to build a dock or other waterfront amenities.

"It's so important to use a local realtor and lawyer," said Sales Representative Annemarie Grigaitis, "because they will understand the area, the local bylaws, and the lay of the land. You could run into problems if you're using someone unfamiliar with the area."

You also have to consider financing when purchasing a cottage. Renting is easy — you save the money, make your payment, sit back, and relax dockside with a drink in your hand.

If you're not buying outright, you'll need a down payment and a mortgage. Assuming you're already a homeowner, you could consider using a Home Equity Line of Credit[11] to make your down payment. As you pay off your mortgage, you can borrow up to 80% of your home's equity less your outstanding mortgage amount, which can give you the extra cash for a down payment from an asset you already have.

Purchasing a cottage is often an emotional investment — maybe you want a place the whole family can enjoy, or you plan to spend your retirement years in cottage country. On the other hand, you can still indulge in the cottage lifestyle without making such a large investment by renting. In the end, though, it comes down to two key factors: which is the best option for you financially, and which fits your personal vision for the future.

- Alyssa Richard is the founder and chief strategizer for Ratehub

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