We recently bought a waterfront cabin.
We had been looking for a waterfront vacation property for a few years. We consider ourselves very lucky to have found and bought the cabin we ended up with.
The structure is old, small and we knew full well that it was not in perfect condition. We hired an inspector who confirmed out suspicions but at the same time he confirmed that it was totally habitable and in good enough condition to last many years with good maintenance. For example, the roof and structure were in great shape. However, some of the deck supports and decking required repair. Win some and lose some.
The process took 5 weeks. Because it was boat access vacation property, it was a bit more complex than a regular residential home purchase.
Here are 15 things we learned that you should know when buying a cabin:
1. How long does it take to get to your vacation property?
Two years ago we nearly purchased a lakefront cabin that was a 6 hour drive from our house. It was a great location but we’re glad that purchase didn’t go through because we now realize we don’t want to have to drive six hours to a vacation house. That’s far too restrictive; it’s not feasible for weekends or even long weekends. It restricts our use to extended vacations.
The waterfront cabin we did end up getting is 40 minutes away, most of it by boat. We have a marina slip 10 minutes from our house and then it’s a 30-minute boat ride. We can easily go up Friday evening and return Sunday evening without having to spend half the weekend traveling.
On the balance, closer is good unless you have oodles of vacation days or are retired. I guess these days many folks work from home so working at a vacation property could work just fine. In fact, I too could work remotely but I really prefer working in my office.
The point is to be practical. A 2-hour drive is doable for a weekend getaway. A 6-hour drive isn’t. Either is fine depending on your desired use. It’s all well and good think you’ll want to drive 6 hours but that gets pretty old very fast.
2. Have you vacationed in the area before?
For every vacation property we nearly bought, we had vacationed in the area so we knew what we were getting into. The same is with the property we ended up buying. In fact, we kayaked and camped the area in the past. Moreover, it’s so close to our house we know it well.
It’s good to know what you’re getting into and that you actually like the area. It’s a shame to buy a vacation property that you don’t want to use.
3. Condition of the cabin (and any other structures on the property)
This is obvious and is usually easily solved by hiring a home inspector to inspect the building(s) before you buy. While it costs money, it’s worth it. Even if there are problems, at least you know about them; they aren’t a surprise.
In some cases, you might be able to negotiate the price down if there are major problems with the property (it depends on how desperate the sellers are to sell and how hot of a market it is).
In red hot real estate markets, you might have to forego the inspection just to get an offer accepted. After all, if you have competing bids to deal with and one of those bids doesn’t require an inspection, all else equal, the seller will accept the “no inspection” offer.
Yes, not getting an inspection is risky and should be avoided at all costs. While our real estate market was fairly active, we did get an inspection and are glad we did.
4. Off-Grid? Sufficient Power?
If the cabin is fully hooked up to utilities, this isn’t a consideration. However, if it’s off-grid, the energy situation might be tricky. It certainly is in our case. It’s mostly powered by propane but has two solar panels. The solar panels are inadequate. We’re not keen on continuing to rely on propane so we knew before making an offer that the energy situation would require some money.
For now it’s like camping in an RV. We know that. We also know that the energy situation can be greatly improved even though it’s off the grid with several off-grid energy options.
- Hot water?
- Working toilets? Outhouses?
- Heat / cooling sources and set up?
5. Is the water potable?
Again, if on the grid and getting municipal water, this is probably not an issue.
For us, our water source is a stream behind the cabin. We have a license to use the water and it’s literally a pipe from the stream to the cabin.
Since the water is directly from the stream, we had it tested to ensure it’s potable. Turns out it’s very clean and excellent drinking water.
6. Will the existing heating/cooling systems work for you?
If you plan to use it when it’s cold, does it warm up and stay warm. If you’re in a hot climate, how hot will it be? Do you need AC? We knew that our cabin would be primarily a summer spot so we weren’t all that concerned that it’s poorly insulated and in the event we do need to heat it up it’ll chug propane (we hope to get off-grid energy sources put in shortly).
7. If there’s a dock, does it require licensing? Is it licensed?
This concern will vary by jurisdiction. Turns out that where our vacation house is located that the municipality recently required all cabin owners with a dock to apply for a license. That meant we needed to ensure the application was submitted (it was). We’re optimistic we’ll be granted the license because it seems the primary purpose for this is to charge annual fees for the dock license.
If dock licensing is an issue in our jurisdiction, it could be in yours as well. A waterfront, boat access property is useless without a dock so you want to make sure it’s properly licensed if that’s required.
8. Improve or rebuild?
Initially, my thought was to rebuild the main cabin. However, the problem with that is it’s expensive and we probably couldn’t afford it for several years. That’s a problem because if that’s the plan we won’t bother making anything better with the current structure.
Once we got keys in hand, we went to the cabin and realized it’s in decent shape and will be fine as a summer vacation cabin. Therefore, we abandoned plans to rebuild and instead decided to improve it incrementally over the next five to ten years. There’s so much we can do, especially on the property but at the same time, it’s more or less turnkey so that we can start enjoying it come Summer.
it helps to know what your plan is right from the get-go. If it’s rebuild, avoid putting money into it. If it’s to hold onto it, then it’s worth investing in improvements.
9. Insurance issues?
We had a hard time finding insurance which was a surprise to us. Our broker told us 5 years ago, insurance for vacation properties was cheap and easy to get. Now there are few providers and it’s insanely expensive. The reason for that is the huge increase in forest fires in our region. While we’re on the water we are also on the edge of a large forest.
With dramatic weather happening in many places, insurance could be an issue elsewhere as well. Check it into as soon as you start looking for properties. Our insurance is 5x what I thought it would cost. Fortunately, we can cover it but it adds a lot to the monthly cost.
10. Permitting issues?
Many folks with cabins don’t bother getting permits for improvements and additional structures. You need to find this out as soon as you can. That’s not to say if it’s missing permits that you won’t buy it… but you should be aware of any permitting issues as soon as possible; preferably before you make an offer.
11. Is it leased land or some other unique land ownership model?
In our region there are a variety of land title options for vacation properties. There’s freehold which is your typical clear ownership (subject to governmental appropriation). And then there are long term land leases such as 99 year leases. The longer into the lease a property is, the less it costs. Leasehold properties are usually much cheaper for obvious reasons. You never know what’s going to happen when the lease expires.
Another set up are real estate corporations where several cabins are owned by a corporation and what you get when you buy are shares into the corporation. The land is commonly used. For example, there’s such a set up not too far from our cabin where all the owners share the large dock (which isn’t terrible) but it really is like communal living. Because of the restrictions these types of properties have, they usually don’t cost as much.
There could very well be other unique property ownership structures to look out for… think time shares, quarter shares, stratas, etc.
If the price is too good to be true, it usually is. We found that out… that’s how we learned about the long term leased land and corporate set ups. We saw properties that were low in price compared to other properties. We’d go take a look and then learn the bad news. For us it was freehold or nothing.
12. Financing can be more difficult for vacation properties (especially boat access)
Similar to the high cost of insurance, we were in for a rude awakening about financing a boat access vacation property. We thought a bank would require only a 20% down payment. Turned out the bank wanted a 35% down payment. That’s a sizeable difference. Fortunately, that was fine with us. I kind of like having more equity in the property and a lower monthly payment.
13. Can you afford it? Are you sure? The costs were more than I expected!
I have to admit this vacation property has cost a lot more than I expected. The down payment required was almost double what I expected. Insurance cost far more than I ever imagined. We needed a boat which I under-budgeted for by about 60%. We had to pay for some deck repairs immediately which I didn’t expect. The costs just added up out of the gates. I doubt our situation is unique. These things happen buying vacation properties (as well as any property really).
If you’re looking for a vacation property and are stretched to the limit on what you think it’ll cost, you might want to rethink it. Vacation properties aren’t always liquid (as in they can be very difficult to sell).
This is particularly the case if you’re counting on rental income to afford it. That can be extremely volatile. Forest fires, travel restrictions, recessions etc. can impact vacation rental income big time. While we are not renting our property out, if we were, I’d consider it gravy revenue.
14. How liquid is it?
It’s impossible to predict the real estate market in your area or any area in the future but it’s good to know whether you can quickly sell your vacation property if need be or whether it takes a long time. If it takes a long time should not necessarily be a dealbreaker but again, you should be aware of it.
Some vacation properties are so sought after they sell instantly. I suspect it’s like that in the Hamptons. It’s like that to an extent in Whistler (popular ski resort) which is 1.5 hours away from us. We believe in time our vacation property will prove an excellent investment (as well as years of fun) just because it’s waterfront very close to a major city but we also recognize that there is not a huge pool of buyers for boat access houses. Boat access properties obviously are more hassle and the boat expense is significant (boat, insurance, marina slip, repairs, etc.).
15. Will you and can you rent it on vacation rental websites?
If you plan on renting out your vacation property, be sure you can. Some jurisdictions might forbid it. If it’s a strata or some form of communal ownership arrangement, you might be forbidden as well. If it is some form of communal ownership ask whether there are fees payable to the communal entity to rent it out. An example would be if you buy a suite in a hotel (not uncommon in resort areas) where the hotel handles all the bookings but takes a good chunk of the revenue.
Renting out your vacation property when not using it can be a great revenue stream but be sure to do the proper due diligence. Your plan to rent can also impact insurance and the mortgage you get (as far as I know since both applications ask whether you plan to rent it).