“Sell in May and Go Away” & Investing in a Beach House in Ontario

In this guide we will cover how to buy an investment property in Ontario, how to obtain an investment property mortgage, and whether or not we are in a favorable market for beach house rentals.

Understanding Ontario’s Beach Property Markets

Ontario's beach property markets offer a diverse range of opportunities and experiences for both residents and visitors. With its vast coastline along the Great Lakes, including Lake Ontario, Lake Erie, and Lake Huron, Ontario boasts numerous gorgeous beaches that draw many to their shores.

Furthermore, Ontario's beach property markets offer a range of real estate options to suit various preferences and budgets. From luxurious waterfront estates and cottages to cozy beachfront bungalows and condominiums, there is something for everyone. The diversity in property types allows buyers to find their ideal home or investment property, whether they are seeking a year-round residence or a seasonal getaway. Here are a few of the most common areas to invest in:

• Lake Ontario Region: The Lake Ontario region encompasses cities like Toronto, Hamilton, and Niagara-on-the-Lake. This area is known for its vibrant urban beach communities, offering a blend of city amenities and waterfront living. The beaches along Lake Ontario's shores provide stunning views, recreational activities, and access to cultural attractions such as museums, theaters, and restaurants.
• Prince Edward County: Located on the northeastern shores of Lake Ontario, Prince Edward County has gained popularity for its charming small towns, vineyards, and sandy beaches. The area offers a thriving wine and culinary scene, making it a sought-after destination for both residents and tourists looking for a relaxed beachfront experience.
• Lake Erie Region: Stretching along Ontario's southwestern border, the Lake Erie region offers a mix of serene coastal communities and lively beach towns. Locations such as Port Dover and Port Stanley are known for their sandy beaches, boating opportunities, and vibrant waterfront festivals. The area attracts both year-round residents and summer vacationers.
• Georgian Bay Region: Situated in Central Ontario, the Georgian Bay region is renowned for its breathtaking scenery and pristine freshwater beaches. Areas like Wasaga Beach, Sauble Beach, and the islands of Georgian Bay are popular destinations for their expansive shorelines, recreational activities, and proximity to natural wonders such as the Bruce Peninsula and the Georgian Bay Islands National Park.
• Lake Huron Region: The Lake Huron region encompasses areas like Grand Bend, Bayfield, and Goderich, offering picturesque coastal towns with sandy beaches and a relaxed atmosphere. These communities are known for their cottage country appeal, waterfront festivals, and scenic beauty, attracting both vacationers and those seeking year-round beachfront living.

Of course, each region will come with its own real estate market dynamics, based on fluctuations in population, climate, and seasonal demand.

Risks + Rewards of Investing in Ontario Beach Property

Before deciding whether to invest in a beach property, it is important to understand the potential risks and rewards involved. While we encourage you to conduct your own research based on the condition, location, and financial feasibility of your desired property, here are a few general risks to consider:

• Maintenance costs: the proximity of beach properties to water puts them at risk of greater damage from the elements. While Ontario beach properties do not have to worry about exposure to saltwater, they are still at risk of greater wind exposure and the surrounding land may be subject to coastal erosion or occasional flooding. These factors often result in increased maintenance costs, which will need to be factored into your financial feasibility calculations.
• Seasonal demand: if your investment property is a condominium in downtown Toronto, for instance, you can expect that demand from tenants will be relatively stable throughout the year. In addition to this, you can also often find longer-term tenants who may sign leases that renew annually. This is unfortunately not the case with Ontario beach properties. If your goal is to generate rental income from external tenants, you will need to factor in the seasonality of beach-house demand. Ontario’s climate will likely limit demand for at least six months of each calendar year—which may limit the total income you can generate.

While investing in a beach property is inherently accompanied by some risk factors, there are also a few potential rewards to consider:

• Property Value Appreciation: regardless of whether you generate rental income, you may still be able to profit from a second property. Properties in Ontario typically appreciate in value over time. Beach-front properties will likely appreciate at an even greater rate since land near Ontario beaches is an incredibly finite resource. Selling your home at an opportune time can generate an incredible return on investment.
• Rental Income: while demand for beach house rentals is often seasonal, tenants are often willing to pay a much higher premium than residential tenants. A vacation rental home can charge rates similar to hotel and other lodging services as opposed to market rental rates. One important thing to note is that certain regions have very strict regulations regarding the allowable uses of a property. In order to operate your home as an AirBnB or otherwise, you should first check with your local government and zoning board to ensure compliance.

The Importance of Determining Your Financial Goals

In most cases, being proactive with your goals will greatly increase your odds of achieving them. The first step is to identify your personal goals and desired outcomes. When it comes to investing in a summer home, most Canadians do so with one of the following goals in mind:

1. Investing in a beach house or cottage for personal use. Whether you are looking to save on vacations, build a home away from home, or find a nice cottage town to retire in, investing in a second property can be a great way to do so. Most Canadians with this goal are looking to invest in a cottage as a second property—which can be pricey—but there are luckily a few different financing options available. You can co-sign the deed with family, friends, or even a group of strangers to limit the financial burden incurred. Of course, if you are looking to eventually retire in your summer home, you may not want to split the equity with other investors.
2. Investing in a beach house or cottage to generate rental income. More and more Canadian cottage owners have been taking advantage of the rental market—in part thanks to the rise of 3rd-party rental platforms such as AirBnB. Depending on the location, size, and features of your property, you may be able to charge more in rent than you will owe in mortgage payments.
3. Investing in a beach house as a primary residence. Some homebuyers are drawn by the lifestyle of a beach-front community and aim to purchase a property in these regions to live in full-time. The increased prevalence of hybrid or work-from home employment models has made this option more and more feasible.
4. Investing in a beach house as a long-term investment. For many Canadians, real estate is a relatively stable long-term investment that does not require as much personal risk as investing in the stock market. By purchasing a property that will inevitably appreciate in value over time, homebuyers not only hedge their savings against inflation, but can even generate a premium upon sale.