Buying a Waterfront Property: You Mean a Cabin?
So you are thinking of buying a waterfront property? When you mention the expression: waterfront property, the archetypal connotation invoked is the imagery of a cabin or cottage. Boats, fire pits, s’mores, and a relaxing time. However, what many fail to realize — given their mental assimilation between the two — is that a waterfront house can and is more than just a cabin.
By definition a waterfront property either “has direct access to a natural or man-made waterway such as a lake, river, channel or canal” or “it is separated from the water by a right-of-way, private road or unopened road.”
What to Consider: Necessary Assessments
At YYC Real Estate Advisors headquarters in Calgary, there are various local neighbourhoods where you can find waterfront properties. Lake Bonavista, Mahogany, Coral Springs, Sundance, Mckenzie Towne, and various other communities have man-made or natural lakes allowing for not just a waterfront property but a home. This further disassociates waterfront properties from cabins given many residents of these communities reside in these properties calling them their waterfront homes.
When assessing a waterfront property it is essential to determine your usage intentions. Will it be your dream home that you retire and live in, a family home sustained for a long period of time, a temporary pleasure house, or recreational property? If your decision resides with the latter two options, consider price as a stronger determination. Since it is not your forever home, deal hunt. Shop around and compare prices rather than getting a fantasied dream estate. It is still important to factor in location and the physical building itself, but do not let these override your decision-making shrewdness. On the contrary, if your answer resided in the two former scenarios, hone in on the variables of property location and water quality access. These two variables operate conjointly and should be prioritized over the price. While we still encourage you to find and get a great deal, if a waterfront home comes up and it fulfills all your desires, do not let it slip away without an offer. Consequentially, vacation house or dream home you will always be constrained by your finances.
Budgeting for a waterfront house is mainly dependent on your intended uses. If this will be your aspirational home, expend more capital on it. It is more warranted to reach the upper limit of the recommended gross debt service (GDS) ratio (gross monthly income divided by monthly housing costs) which is considered no more than 32% as instituted by the Canadian Mortgage and Housing Corporation. For temporary and vacation waterfront properties, this percentage will be lower if it is a secondary residence. Taking into account your primary place of residence, you will be able to determine what percentage can be allotted to this recreational house. This can also be used as a guide to see if it is even feasible to finance another house. If your primary place of residence has dropped in overall GDS ratio through the years, you can take your primary residence’s GDS ratio and subtract it from the guided 32% to realize the means you have to work with. Either way, if you are fortunate enough to deploy a handsome amount of money, the aforementioned points in Intended Uses applying to temporary pleasure houses or recreational properties become insignificant. In this idealistic scenario, you can treat the property as if it were a dream home and prioritize location and waterfront access in comparison to price hunting; still abiding by an adequate GDS ratio. Even though this standard 32% GDS ratio is beneficial to follow, you may be able to stretch this rule given you are buying a waterfront property.
Waterfront Housing and Property Appreciation (Inflation)
Using CREA (Canadian Real Estate Association) housing statistics, we reveal lucrative information for potential waterfront buyers and owners. Typically, waterfront properties appreciate at a higher rate when compared to non-waterfront properties. For context, accounting for 2022, Q1 (first quarter) transactions, CREA found the median for residential non-waterfront properties appreciated merely over 26% year-to-date. This can be contrasted to waterfront properties which saw their values increase by nearly over 32% year-to-date. This almost 6% increase is a sufficient amount to consider when appraising a waterfront property. Accounting for this added property inflation, we believe you could justify spending 3% – 6% over the 32% recommendation. Given this added property inflation, even if finances do not go accordingly, you know that the property can be liquidated for a respectable return. However, although on-average waterfront properties appreciate more than their non-waterfront counterparts, it is vital to thoroughly investigate the property’s area before purchase.
Investigating the Area and Body of Water
While you may often hear about a lake, beach, or another body of water being touted as a great place, this is not always fully applicable. Some property locations might not be as vibrant in comparison to the other offerings surrounding the water. It is important to consider factors such as shoreline, sand erosion, sand-/beach-terrain, quality of the water, common water debris, and other idiosyncrasies not forecastable until further inquisition. Another notable variable pertaining to the land is if there are any easements. In particular, some properties may have an easement to allow for shared water access with other neighbouring properties. If seclusion is important, make sure to inquire to see if the property has an easement of this nature. Conversely, it may be beneficial to look for a property with this type of easement that is not directly on the waterfront. This would grant you access to water usage without having to pay the premium of being on the water. Upon acquisition of this information about your potential property candidates, you can more accurately determine which property will have better resale value and be more enjoyable in usage. Fire pits, boats, patios, and a personal beach are all factors that add to this enjoyability variable, however, you must weigh their costs.
In addition to customary housing expenses, waterfront properties can have extra costs that tend to be measly overlooked. The most overlooked expenses are in the form of added insurance policies. These can include wind insurance, water insurance, flooding insurance, and general hazard insurance. Further expenses to consider are the costs of a dock, boat, increased property tax, and increased water and sewage rates. Amalgamating these costs, you will be surprised at how quickly they add on to the totals of your monthly housing costs.
Your Decision: Summing Up the Categories
After reading this article, we hope it helped you make a more informative decision when you are ready to buy a waterfront property. These are unique property types that always amass a large interest. Their scarcity makes them appreciate generously and they provide a unique utility that non-waterfront properties cannot match. This uniqueness also makes them susceptible to eccentric factors and added costs. These variables should never go unchecked and we hope our illumination of these components will be of consideration for your waterfront property … or are you buying a cabin?