How this works
Both paths spend the same money. One buys the cottage. The other invests the down payment and land transfer tax, then invests whatever the cottage would have cost each year.
The chart follows net worth on each path. The cottage side is its value minus the mortgage left.
A worked example
A $650,000 cottage with $130,000 down, $14,000 a year in running costs, 3% yearly growth, against a 5% investment return: after 20 years investing ends about $955,543 ahead. Small changes to either guess swing the answer.
What the numbers assume
- Example rate 4.50%, editable. Canadian fixed rates compound twice a year, and the math does too.
- Growth and investment return are your guesses. Nothing here predicts them.
- Running costs and rent stay flat each year.
- Before tax, selling costs and additional closing fees. The mortgage assumes conventional financing and excludes mortgage-default insurance.
- Leaves out the time at the lake, which is the reason most people buy.
Common questions
Is a cottage a good investment?
It can be, but most families buy for the time together, not the return. Running costs are high, and growth depends on the lake and the years you hold it.
Is it better to rent a cottage or buy one?
Renting a week or two a year usually costs less. Buying makes more sense when you will use it often and keep it a long time. Rent or buy a cottage walks through it.
What growth should I assume?
Try a range, including no growth and a decline. Neither the property-growth assumption nor the investment return is a forecast. Compare the result after changing both.
Does this include capital gains tax?
No. A cottage sale can trigger capital gains tax, and so can selling investments. Try the capital gains estimator.
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Talk to Jeff and Emily
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Or call or text 416-628-9682