Here’s how to househack a retirement cottage early
- Urbanicity
- 24 Jul 2023
This article is sponsored by Resort HQ
Do you dream of one day having a retirement cottage for you and your family, or have you been inspired by the concept of hybrid living?
Perhaps you’re waiting until you retire, or when your kids graduate and leave the nest to finally purchase a tiny cottage.
If this sounds like you, then investing in your future cottage is easier than you may think. There are easy steps to fast-track your way into owning a retirement cottage. In fact, it may even be one of your best real estate investment options to maximize your hard-earned cash.
Purchasing your retirement cottage today is beneficial for two reasons: you can use it as a source of rental income in the interim to offset the costs, and you can save thousands of dollars in taxes.
By renting out your retirement cottage before you retire, you can use the net rental income to either pay down the loan on your unit, add to your savings or investment portfolio, or simply enjoy the additional cash flow for anything you need.
When you purchase a retirement cottage, it is subject to HST. However, if you decide to use the unit for business purposes (such as renting it out) for at least 50 percent of the time, you are able to claim back that HST.
Depending on the price of your retirement cottage, this can be as much as $25,000 in savings!
When you’re ready to retire, and you change the asset to personal use for more than 50 percent of the time, then there is what’s called a “deemed disposition” of the asset at fair market value.
In other words, you will be buying the retirement cottage from yourself and will have to pay 13% on whatever the unit is worth.
However, depending on the deemed disposition, the HST rebate you received when renting it out could cover this payment.
This doesn’t mean you can’t use the retirement cottage yourself during the time you’re renting it out. If you have a vacancy, or purposely block off days to keep it open, you can enjoy your cottage for as long as you want!
The only rule you have to remember is that you need to rent it out at least 50% of the time if you want to benefit from the HST savings.
If this sounds like something that works for you, and you like the idea of owning a cottage now before you’re ready to fully use it, then consider purchasing a retirement cottage with ResortHQ today!
For more information on ResortHQ and their offerings, you can check out their website here.
Comments 1
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Nancy
25.07.2023 12:38 amGreat idea!
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