Real Estate Talk:
Purchasing a country home

Thoughts and process when buying a second residence

By Joseph Marovitch

June 20, 2024

If you have not had the chance to take a drive to the Laurentians or Townships lately, do so now, and take the country roads, not the highway. Our countryside in summer is so spectacular it can be life-changing as one experiences a new perspective. The majestic green mountains and fragrances of the country, as well as crystal lakes that look like glass, melt away all the pressures of the city.

So many people don’t know that the earth is not covered in pavement, bricks, and mortar. If one lives in a city long enough and never strays beyond, one can forget what it means to be human and how natural it is to stare at a bonfire and stars, swim in clean lakes, view mountain vistas, and smell the morning mist.

We were not meant to live in huge groups in big cities. The concept of cities is the concept of planetary consumption, overpopulation, and lack of emotional touch with other humans. Is it not interesting that people observe that the more surrounded we are, the lonelier we can be? Yet, in small country towns and hamlets, everyone knows everyone intimately.

When considering a country home to purchase, there are factors that come into play that would not otherwise, if you were purchasing in the city.

The following are thoughts and the process to purchase a second residence in the countryside by the lake or up in the mountains. I started with country homes in my career as a realtor. I lived and worked up north for many years and have sold countless properties by lakes and on mountains.

A second residence in the mountains and/or by the lake is a dream retreat for many. It is a sanctuary away from the hustle and bustle of city life. It is an escape from work and the daily grind, a change of scenery, a place to rest and gather one’s thoughts or think of nothing. It can also be fun and exciting. A mountain retreat can provide hiking trails, swimming, sailing, waterskiing, alpine skiing, bonfires at night and stars, lots of stars.

The process of purchasing a country home

When considering a “country home” to purchase, there are factors that come into play that would not otherwise if you were purchasing in the city. Most country homes are not in or near a town, therefore the house must have its own well for water and a septic tank for septic situations.

If the property you are searching for has a waterfront, many more factors come into play such as:

• Is the lake navigable or non-navigable (motorboats allowed or not)?
• Does the lake have an entrance and an exit, or is it sedimentary, (meaning not enough oxygen enters the lake to make it liveable and drinkable)?

When searching for a country home, these are the questions that must be answered:

1. How far do you want to drive from the city?
2. Do you want a lakefront?
3. Proximity to your neighbours? Most buyers of second homes want privacy as this is their getaway home.
4. If lakefront, do you want motorboats or no motorboats?
5. Proximity to ski hills and towns?
6. Number of bedrooms and bathrooms?

Once you have found that perfect home, the items to inspect and consider are:

1. Condition of the house via a regular inspection
2. When was the chimney last cleaned and inspected?
3. Water test to ensure the well is clean and the water is potable (drinkable)
4. Lake water test to ensure the lake water is bacteria-safe for swimming
5. Ensure the septic tank is the right size, based on the number of bedrooms in the house.
6. Ensure the septic tank has been emptied. Most municipalities require the septic tank to be emptied every four years if the house is a second residence and every two years if it is a permanent residence.
7. Ensure that nothing is built on designated wetlands. Wetlands are areas near a lake or river that we are not allowed to build on as it destroys the environment.
8. Does the house have a working sump pump? A sump pump is a device placed in the basement of the house, below the floor. When the water table rises in the spring, the sump pump automatically pumps the rising water out and away from the house to keep it dry. A sump pump is usually required for homes by a lake.

Finally, the tax implication. In Canada a primary residence upon selling is tax-free. A second residence is considered a luxury item and is therefore not tax-free. Upon selling a second residence, any gain is considered a capital gain and is taxed on 50% of the gain.

‘In Canada a primary residence upon selling is tax-free. A second residence is considered a luxury item and is therefore not tax-free.’

If you paid $100,000 for the country home and later sold the property for $150,000, you would be taxed on 50% of the gain or on $25,000. The tax you must pay is dependent upon your income, therefore, it is always a good idea to purchase a second home by placing it in the name of the person in your household who has the least income, to pay less tax.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: The summer market and best strategy to buy or sell

State of the market

According to economist Shaun Cathcart of the Canadian Real Estate Association (CREA), the recent rate cut will have a significant psychological impact on potential buyers, which appears to be the case as demand is increasing. There also appear to be more sellers, especially those who purchased property during the pandemic at extremely low rates, such as 2.1%, and are now being hit with 4.9% for five years. Basically, the recent rate cut, with the expectation of more cuts, is energizing the market.

‘… the recent rate cut, with the expectation of more cuts, is energizing the market.’

There is no guarantee of more cuts since the decision to cut rates is very much affected by world events and, for Canada, the U.S. election. If the conflict in the Middle East or Europe escalates, we will see slower supply chains and increased gas prices, causing inflation around the globe, which would increase interest rates. Now is a good time to purchase and sell as future rates are uncertain.

However, should another rate cut occur soon, there may very well be a boom in the real estate market. Exciting huh!

Note on country homes

I was recently asked about the second residence or country home market. During the pandemic, country homes were a hot market. Everyone was escaping the city to be safe. Buyers were purchasing what would have been second homes for primary residences at low interest rates.

‘Now that inflation is lower and mortgage rates are reducing, there is renewed interest in second homes…’

However, now that we are several months past the pandemic, there appears to be a movement back to the city. The second home market has been quiet for the past year. Now that inflation is lower and mortgage rates are reducing, there is renewed interest in second homes as second homes and those who purchased during the pandemic are considering selling to reduce their expense. For those selling, there is a renewed market, and for those buying, there is opportunity.

Have a great week.

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Image: Francesca Tosolini – Unsplash

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