Real Estate Talk:
Renting your country home

The advantages, the disadvantages and is there a market?

By Joseph Marovitch

Updated March 29, 2023

Lately, I have been asked if I have lakeside and mountaintop country homes for rent this upcoming summer. Therefore, this article will be addressing the issue for those who wish to rent their second homes, as there is demand and now is the time to prepare.

You have that beautiful lakeside country home up north or in the townships, going to waste because you’re not using it. You’re too busy or you spend most of your vacation time down south.

The question is do you sell it or rent it? If you sell it and it is a secondary home, you must pay income tax on it, unless you place the property, as a primary residence, in the name of your spouse or child who is over 18 years of age, and preferably the person with the lowest income. If you do place the name of the owner of the second house as your wife or child, then there are implications that must be discussed with your accountant.

It used to take time to sell, as a second home was for leisure since it was not an absolute necessity. However, demand is much greater these days as buyers are searching for peace and quiet after the great pandemic. Therefore, it can take much less time today, if sold at the right price.

Renting, on the other hand, can be a great option. Is there a market for nice cottages by the lake? The answer is yes, there is a great demand for country cottage rentals.

To rent a country home there is an issue that must be verified first. Some municipalities do not allow short-term rentals of country homes, therefore, you must check with your municipality if there is a by-law restricting rentals. If there is no restriction, you must then apply and obtain a permit to operate a rental vacation property from both the local municipality and Tourism Quebec.

Renting… can be a great option. Is there a market for nice cottages by the lake? The answer is yes, there is a great demand for country cottage rentals…

Note that when you rent a home as a vacation property, a lease for a 12-month period or more falls under the jurisdiction of the Tribunal administratif du logement, therefore, you do not sign a lease for 12 months or more. Instead, you sign a contract agreement for 11 months or less. Country home rentals usually have periods of a weekend, a week, two or three weeks or a period less than 12 months.

There are several advantages and disadvantages to renting a country home.

Advantages:

• Rental income to pay utilities, taxes and upgrades
• You can enjoy the property part of the year
• All expenses are tax-deductible
• The property value continues to grow expense free

Disadvantages:

• Rental property is seasonal
• Risk of property damage
• Payment must be collected before occupancy
• You must collect and pay taxes
• Insurance can be expensive

Solutions to the disadvantages

Seasonal Rental
Since the demand for a vacation property is seasonal, the lessor can adjust the rent according to the seasons. Summer, Christmas/New Year’s, March break and other holidays are considered high season, therefore the rent should be higher. The rest of the season is considered low season since there is less demand, therefore, you reduce the rent to compensate and continue a cash flow.

‘Since the demand for a vacation property is seasonal, the lessor can adjust the rent according to the seasons.’

Risk of Property Damage
Insist on a refundable damage deposit large enough to cover unforeseen costs due to damage by the lessee. It should be stated clearly in the signed agreement that should the lessee damage the premises or content, the damage will be deducted from the damage deposit. As well, charge an additional amount to cover the cost of cleaning the property after the lessee departs the premises.

Payment
It is advisable to collect a deposit upon the reservation and the balance of payment one or two weeks before arrival. This way the lessor does not have to chase the lessee for the rent.

Collection and payment of taxes
All funds should be received before possession. The collected taxes should be put aside in a savings account until they are payable in the quarterly tax report/invoice.

Insurance
Ensure that the amount charged for the rental takes into account insurance costs and is therefore included in the rent.

There are several inexpensive websites to advertise the property on, including:

• monsieurchalets.com
• forrentbyowner.com
• canadastays.com
• flipkey.com
• homeaway.com
• vrbo.com
• quebeclocationdechalets.com

These sites charge varied amounts to advertise but they do not insist on a percentage of your income unlike Airbnb.com, homeaway.com and others.

‘When receiving an inquiry, vet the interested party as thoroughly as possible before agreeing to rent the property.’

Vacation homes are rented furnished. You can offer additional services such as firewood delivery, internet, TV and phone, and charge accordingly.

When receiving an inquiry, vet the interested party as thoroughly as possible before agreeing to rent the property. Families with children and responsible adults are usually not a problem. If the inquiry is from a group of student graduates or a group of men off for the weekend, be wary. You want the property to remain in good condition. If there is damage to the property that is beyond the security deposit amount, you do not want to chase the lessee for the money.

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 topic: Assessing the marketing campaign

State of the market

CPI today (inflation rate) 5.2%
Bank of Canada interest rate 4.5%

Last week, the Fed stated the Bank of Canada interest rate shall remain at 4.5% till the end of the year. The rate would remain in 2024 if inflation is reduced to 3% or less. A few days later, President Putin of Russia announced he would be placing nuclear missile sites in Belarus, bordering several NATO countries.

Announcements like these are what scare everyone and shock the supply chain. This type of issue is what drives inflation and interest rates up. Another issue at play is the U.S. presidential election. If some candidate like Trump or DeSantis is elected, they want to cut support to Ukraine. The fallout from such a decision could be catastrophic.

‘…there is a chance interest rates will rise in 2024, therefore, now is a good time to purchase while the rates are lower, and a good time to sell if you do not want to see your values decline, unless you can wait a year or two.’

This is why it is so difficult to determine where the market is going. As things stand now, there is a chance interest rate will rise in 2024, therefore, now is a good time to purchase while the rates are lower, and a good time to sell if you do not want to see your values decline unless you can wait a year or two. If world issues calm down, your purchase may increase in value sharply.

If world issues worsen and go nuclear, it just will not matter.

Pray for the best, plan for the worst, and just enjoy the present.

Have a great week.

Image: Lena via StockPholio.netRead also: other articles by Joseph Marovitch