How a Cottage Can Be a Cash Cow
A cozy cabin in the mountains or along the lake is a popular destination for many Canadians taking a holiday. Those fortunate enough to purchase one of these cabins shouldn’t solely use it for personal purposes. Instead, they can maximize their investment by turning it into a cash cow. Keep reading to find out how owning a cottage can help generate a stream of passive income.
Turn Cottage Property Into a Business
Many cottage owners only spend a few weeks a year enjoying their investment. Rather than simply letting the property sit dormant all the other weeks of the year, an owner can rent their property out to generate income. Owners can use this income to offset mortgage and maintenance costs or to make additional investments.
Understand All Expenses Involved
To maximize the income potential of a cottage property, an owner must treat the property as a business. It’s important they understand the details involved in renting a property, such as needing additional insurance coverage, frequent cleaning, and marketing. Investors must also understand all the expenses involved in managing a cottage rental, such as mortgage payments, property taxes, utilities, and repairs, to set rental fees high enough to cover these costs and provide some passive income.
Cottage Rentals Are a Seasonal Investment
Cottage rentals are in the highest demand during the spring and summer months. Investors using their cottage to generate rental income should realize that this is a seasonal investment. This factor means that the cottage may go unrented for several weeks during the winter and late fall. Investors must understand this seasonal effect when setting rental fees and planning how to utilize their cottage investment best.
Make Use of Equity in Cottage Property
Investors can also leverage the equity in their cottage property to make more investments. In as little as 3 to 5 years, the market value of a cottage is likely to increase, making it possible to refinance. In fact, many lenders allow owners to borrow up to 80% of the cottage’s new property value. Investors can use this extra money to make new investments, such as purchasing stocks and bonds or more real estate.