Looking to Buy a Vacation Condo in Toronto? Here Are a Few Things to Keep in Mind
Wednesday Nov 24th, 2021
With air travel, casual vacations, and summer activities out of the equation since the onset of the pandemic, most people are turning to their vacation homes for a bit of a respite. If you are working from home like most people, you might be considering investing in a vacation condo away from the hustle and bustle, and make a sound financial investment. However, it is prudent to know a few things before making a huge fiscal undertaking.
Does The Community Allow Short-Term Rentals?
If you are buying a condo as a vacation home, chances are it will be unoccupied for the better part of the year. Therefore, it makes financial sense to add the property to the short-term rental pool to help with the upkeep expenses and mortgage payments. However, it is prudent to check with the condo association if short-term rentals are on the table before closing a deal on your vacation condo. If so, must they be long-term periods of several months or can it be weekly? You will also need to factor in additional costs, such as potential damages and repairs, management costs, as well as periods when the property may sit idle. Furthermore, if you use the property for more than 14 days each, some of the expenses will not be tax deductible. If you manage to buy a vacation condo in popular destinations, your condo would transform into a serious money maker.
Have you Factored in the Costs of Maintenance?
Be prepared to meet a slew of overhead costs in addition to paying an arm and a leg for a second home. For instance, if you aren’t staying full-time in your vacation condo, you will have to pay more for home insurance. Absentee home insurance policies also charge a premium for condos that are located at some distance from fire and emergency services. Also, if you are planning to rent out your vacation condo, you will have to disclose this in front of the insurance company. Property maintenance costs may also weight heavy on your wallet. Random guests do not concern themselves with bills, the damage they cause or the furnishings they ruin. Be prepared to pay for condo maintenance tasks such as plumbing, appliances, electrical, HVAC maintenance, etc. You’ll likely also want to pay someone to check on your condo when you’re not there, particularly a property manager who will check in during each guest rental to keep an eye on how your vacation home asset is being used. Also, you may have to pay for electric and/or gas, water, trash pick-up, cable, and internet bills if they are not covered in your HOA fees.
Double-check Your Finances
Buying a second home when you have the down payment in hand may seem like too good a chance to pass up, but it is important to keep your finances in check and critically analyze your current as well as future finances. Is your primary home paid off? Are you ready to bear the operating costs? Not to mention, financing a vacation home can be difficult. Lenders charge higher interest rates and ask for higher down payments than you would normally expect for a primary home. Similarly, if you are taking out the equity on your primary home to make a down payment on the second property, be prepared to see your equity plummet if the market takes a downturn. You will hardly be able to enjoy your vacation property when you are racking up all that debt.
Think About the Must-Haves
Before hunting for a vacation condo in Toronto, think about all the must-haves that you are looking for in your second home. Think about how many bedrooms and bathrooms that you absolutely require, as well as the amenities that need to be included. Are you looking for a brand-new construction with shiny appliances or would an older building suffice? Are you looking for a renovated condo, or are you willing to take care of the renovations yourself? Don’t forget about the appliances that you would need during your stay or when you are renting out the condo, and if they are included in the price?