Important Advice for Buying Investment Properties in The Blue Mountains
Making a Good Investment
Whether you are a seasoned real estate investor or getting ready to dip your toes into the investment property market with your first real estate purchase, there are a few key points that should not be overlooked. Investment properties can be an excellent source of passive income through rental income, and Collingwood and The Blue Mountains are great places to invest. As an expert in this area of real estate, I’ve put together my top 6 pieces of advice for investors.
1. Work with a Local Realtor
Buying or selling can be overwhelming especially with all the information that is available online. You may even ask yourself why you need an agent at all. And it’s true, there is much to gain from online resources – however, no amount of resources can replace the professional expertise of a qualified agent. This will never be more true than when you are buying or selling income property.Â
The benefits to a local agent will be invaluable during this process. Their expertise in the nuances and the types of real estate options in The Blue Mountains and Collingwood area are extensive. The market is constantly evolving as is the amount of information that becomes available. The truth is no one knows the area like a local, who lives here, works here and is invested in the community.
Their knowledge of the local real estate market, historical home values, what areas short-term rentals are permitted, and in-depth knowledge of local by-laws and zoning will make your journey as seamless as possible. You can’t find this kind of real estate wisdom and know-how from a Google search.
2. Financing
Just like there are many benefits to using a local real estate agent, there are benefits to seeking financing locally as well.  At times, it can be tricky to secure financing for real estate investing. Some banks don’t invest without fully understanding the quality and potential of your investment. It’s important to find a local mortgage lender who is knowledgeable in the area that you are considering buying in. The more informed they are about the area, the types of properties, potential for rental income and the long-term return on your investment, the more likely they will recognize the unique opportunity of property you are considering. Brokers and lenders from outside of the area may not see the same potential.
An experienced lender will be able to guide you through the process, helping you create an investment strategy to meet your financial goals, and understand your mortgage loans, down payment, mortgage interest rates as well as cash flow.
3. Understand the Local Bylaws and Zoning.
Every town or city has their own unique local bylaws regarding short-term and long-term rentals and it’s important that you educate yourself when considering investing in the rental market. Rental property owners should be aware of these by-laws and how they pertain to the operations of their commercial real estate rentals as there is a good deal of them.
For more detailed information on The Blue Mountains Ontario Short Term Accommodation by-laws – click here.
For more detailed information on Collingwood Ontario Short Term Accommodation by-laws – click here
4. Understand How HST Should be Handled
Since any STA properties that are rented out are operating as businesses, HST comes into play. In the Agreement of Purchase and Sale you will find a “HST in addition to” clause. You will typically see a statement about this in the property listing as well.
What this means is that if the property has operated as a rental, and you intend to continue renting the property out (even with some personal use), you must provide an HST number to both lawyers prior to closing. Then the HST is deferred and you don’t have to physically pay it.Â
If an owner/seller has just used the property for personal use and has never rented it out, then the HST will be included in the amount due at closing. Managing HST for rental properties can be tricky and I always encourage you to consult your accountant for more details.
5. Be Aware of the Blue Mountain Village Association (BMVA) Fees
The BMVA is a not-for-profit association that was formed to help grow and support vacation rental owners in and around the Blue Mountain Resort. The fees that you pay for this come with many benefits to help you yield a high return on your investment. Some services included in your membership are a strong member community, discounts to local dining and shopping, resort shuttles, a robust social activity calendar, marketing for your rental property and property tax classification. You get access to the Blue Mountain Private Beach and some discounts for the Plunge Aquatic Center (pool in the village).
Many of the properties around the Village are associated with the BMVA and when looking for potential vacation homes you will see this in the property listing information. It will say BMVA 1% Fee applicable upon closing.
When purchasing any of these properties, 1% of the total purchase price is due to the association upon closing. Example: You purchase a property for $1M and then you have to write a cheque on closing to the BMVA for $10k. There is no way around it since BVMA membership is shown on the title. Once an owner joins then the property is grandfathered into the program, and it is not easy to separate agreement of membership.
For a more detailed outline – click here
6. Know if You are Buying a Commercial Resort Unit (CRU)
Commercial Resort Units (CRU) is a term that identifies properties, often part of larger condominium complexes, that require you to use a property management company, maintenance cannot be done by the owner. Â
Being designated as a CRU helps protect the larger property complex from damaged or neglect from unit owners not taking care of their property well. All in all, it is not a bad thing, as it means that neighbouring properties will be well cared for too. However, some buyers may shy away from CRUs as there is a cost to property management services. Non-CRU units are more flexible. You can choose to employ a company to manage your property or you may choose to self-manage. In the Collingwood and The Blue Mountains area, both types of CRUs exist, so it is a good idea to ask when looking into a new property.
Buying an investment property doesn’t have to be complicated, but it is important to understand the nuances of the local rental real estate market. If you are looking for an investment property in Collingwood and The Blue Mountains reach out with your questions.Â
