Are you thinking about purchasing a vacation home?
Maybe you’re tired of high rental prices, or have always wanted a relaxing location to bring your family together? Whatever the case may be, vacation properties are attractive to many people.
One of the many perks of living in BC is its abundance of beauty. With a short road trip or ferry ride, you can find a plethora of vacation potential . But, there is more that goes into purchasing a rental home than one may realize. Buying any property is a major financial decision, and so it is important to understand the benefits and drawbacks.
Let’s start with the benefits
If you are a regular vacationer, you may save money by purchasing a second home. Over time, you’re building equity and not giving your money to someone else.
Similarly, investing in property helps you build wealth as market value increases.
Your home could serve as supplementary income if rented out when you aren’t there.
If your vacation home isn’t rented out, you may be eligible for tax breaks on mortgage interest and property tax.
Now for the drawbacks...
Vacation homes can be expensive! Two mortgages, property tax, utilities, and other expenses can easily add up. And lenders charge higher interest rates than they would for a comparable primary home.
Here is a list of Tax you can expect to pay
- Provincial Property Transfer Tax that is charged whether you buy undeveloped land, a second home, a strata property, or fractional ownership. Even if you’ve never before owned a home, you won’t qualify for the First-time Home Buyers’ Exemption program because the home isn’t your principal residence.
- A BC Speculation and Vacancy Tax applies in taxable regions including Metro Vancouver, the Capital Regional District, Abbotsford, Mission, Chilliwack, Kelowna, Nanaimo, and Lantzville.
- As the property owner, you must pay Capital Gains Tax on a second property (non-principal residence) when the property is sold or transferred.
- If you plan to rent your vacation property, make sure rentals are indeed permitted. Stratas may not allow rentals. Some municipal bylaws also restrict rentals and impose specific conditions. For example, Whistler has Temporary Tourist Accommodation Regulations.
Maintaining your second property can also be a lot of work. Make sure you are well prepared for the added responsibility. The tax rate varies depending on: the owner’s tax residency; and whether the owner is a Canadian citizen or permanent resident of Canada, or a member of a satellite family.
So now that you’re more educated on what owning a vacation property entails, where should you buy?
The location you choose for your vacation escape will largely depend on your lifestyle and personality, but I wanted to highlight one area in BC that I feel is a fantastic choice for a second home.
Squamish - Squamish is a great option for vacation property for a number of reasons. For one, location. As it’s only about an hour from West Vancouver, minor transportation time gives you more time to enjoy your time away. And importantly, Squamish is in the wake of a massive new oceanfront development known as SEA AND SKY. This development will include over 900 two- and three- bedroom townhomes and apartments, and be a community where adventure meets access. This area has grown tremendously over the last few years, and property values could increase when the development is complete. If you would like to read more about this new development, click here