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9 Things to Consider Before Investing in a Rental Cottage

By: Elite Legacy Education, June 26, 2017

Cottages have become iconic when thinking about summer weekend getaways with friends and family. There’s nothing more relaxing than the peace and quiet of the outdoors, while the sun shines bright. Given that cottages have become so popular it’s no surprise that real estate investors ask the question – are cottages worthwhile investment properties?


Before we go any further, decide whether the property is for personal or investment purposes?


Before getting started, it’s important for you to decide the purpose behind purchasing a cottage. If it’s for personal use, then some of the following points may not be as applicable to you. However, if you are considering purchasing a cottage for investment purposes, you’ll want to follow along closely. Typically, your reason for purchasing a cottage will help you decide whether to place more emphasis on the emotional benefits of the investment or its financial benefits. Of course if it's a personal investment, you will likely be more concerned about the emotional benefits that owning a cottage has to offer. On the other hand, if it’s purely for investment purposes then you will definitely need to consider the financial aspects of the property.


Here’s what you should keep in mind if you’re considering a cottage for investment purposes.


  1. Mortgages can be more expensive. In general, mortgages to fund cottage purchases tend to be more expensive as compared to primary residences.


  1. May require more time to sell in the future. In most cases, cottages are second properties for most people so it can take longer to sell them. Buyers will be more concerned with finding the right deal in terms of price, property and location, rather than wanting to purchase quickly.


  1. Property values tend to hold longer. Since cottages are considered a luxury, they tend to hold their value longer and even appreciate at above average rates. Location also has a significant influence on the price of cottages, which contributes to the sustained property value. This is especially true for popular regions known as “cottage country” destinations. In other cases, very remote cottages can sustain low property values, since they will probably always be somewhat inaccessible.


  1. Maintenance is required to hold its value. Like all properties, you cannot expect a cottage to maintain itself. It will require some work to get the property into a suitable condition before you can rent it to guests. Keep in mind that this is ongoing too. Be sure to consider this when deciding if you will do the maintenance work yourself or have someone else do it for you.


  1. Location is important. There are many reasons for considering the location of the cottage. First, it will contribute to its overall value as some locations are more popular than others. Second, you must consider where it is in relation to your primary place of residence during the warmer months. If you aren’t in the area to maintain the property and greet guests, then you’ll have to pay someone else to do this work for you. This is also important in terms of being available to handle your guest’s inquires and complaints. In the case of an emergency, someone will need to be available to respond to these needs.


  1. Cleaning and setup activities with each new each guest. As each new guest arrives, they will be expecting the property to be in a reasonable condition. This might include making the beds, having fresh towels and blankets available, as well as the overall cleanliness of the property.


  1. Local taxation rules. As always, you need to be aware that this is a short-term rental property and local tax regulations may apply. In some areas, your rental income may be subject to certain tax rates since it is a short-term rental property. Taxes should also be considered at the time of purchase – specifically property taxes.


  1. Accessibility of the property. As it turns out, some cottages are less accessible to the public. For example, some have boat access only. You need to be aware of these elements when it comes to renting your property to guests. Of course, an ideal rental cottage is one that is accessible by major roads. Otherwise, you may significantly limit your audience of potential guests.


  1. Advertising of the property. Although you may not need to determine this prior to purchasing a cottage, it is helpful to think about it. Consider the location and community that surrounds the property as it may be useful when attracting potential guests. We encourage you to look into various cottage rental websites based on the location of your property and even consider listing it on Airbnb.


Be sure to take all of these factors into consideration when determining if a rental cottage property is the right investment choice for you. Today's market is filled with many opportunities for the savvy investor. Our Elite Legacy Education trainers will introduce you to proven strategies that can help you launch your career as a successful real estate investor.

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