[Ontario] The step-by-step guide of how I bought a cottage

I’ve learned so much from the various subreddits as a first-time home buyer, including from the r/PersonalFinanceCanada community. I wanted to share my experience of buying a cottage while living in downtown Toronto, in case there are others thinking about doing something similar. I currently rent, and decided in October to buy my first property. Last week, my offer was accepted and I close at the end of March.tl;dr The market in cottage country is just as hot as Toronto if you’re looking for a waterfront property. I viewed 8, and put offers on 4. There were 12 to 24 registered offers on each property I bid on, with basically everyone waiving conditions (bleh).How it played out:Property 1: Offered $50k over ask, with conditions. Sold $109k over ask. (Nov 2020)Property 2: Offered $142k over ask. Sold $277k over ask. (Jan 2021)Property 3: Offered $152k over ask. Sold $262k over ask. (Jan 2021)Property 4: Offered $207k over ask. Offer was accepted. (Feb 2021)Except for the first offer, I waived conditions on all and went with a 30 day close and 10% deposit (apparently standard is 5%, but could be as little as $5k if you’re buying in an extremely rural area). Ask your local realtor what is standard for the region.To be clear, buying my first home had been on my mind for several years, but the soaring price of Toronto real estate meant either settling for a cramped condo with weird layouts, or (preferably) kicking the can further down the road so I didn’t have to think about it. In the meantime, I continued to pay rent and invest any remaining funds in ETFs.I highly recommend making sure you’re on the last step of r/PersonalFinanceCanada’s ‘Money Steps’ guide before going down the path of buying a cottage. This guide was so incredibly helpful, and something I’ve referenced many times over the years.My financial setup, prior to buying:Paid under market rent in a downtown, rent-controlled apartment building (moved in 2014)Split the cost of rent with my partnerWalked or took public transit, did not own a vehicleBuilt up a sizeable emergency fund, maxed out my TFSA and RRSP accounts, and maxed out my employer match for ESPPInvested “leftover” funds in ETFs through TD Direct Investing (Canadian Couch Potato) and Wealthsimple on a monthly basisEmergency fund was stored at EQ Bank and SimpliiTracked my net worth and savings rates on a quarterly basis (I used The Measure of a Plan Budget Tracker)Focused on reducing unnecessary expenditures, and becoming more disciplined with grocery shopping and meal prepI am what you would consider fairly frugal and financially risk averse, and I lurk a lot on this subreddit. Other than splurging on travel several times a year, my day-to-day living expenses focused on the basics. I also want to acknowledge how fortunate I was to remain employed during the pandemic, which ended up accelerating my savings rate by a significant amount. Once I made the decision to buy a cottage, things moved relatively quickly. Here are the steps I followed:Step 1:I interviewed several realtors to gain an understanding of price range, market conditions and available inventory. From algae blooms to flood plains, I learned a lot about water quality from realtors who grew up in rural areas. I wasn’t entirely sure what area I wanted to buy in, so I used a combination of realtor referrals from friends and from GetKeys.ca (super helpful if your friend circle doesn’t have any realtor recommendations).Step 2:Next, I got a pre-approval through mortgauge.ca. I used a lot of their online tools to validate my thinking and ensure I was ready for the financial commitment.Step 3:I downloaded apps like Redfin.ca and HouseSigma.com to monitor sold prices in the areas I was interested in. At this point, I basically was looking at under 300 km from Toronto, or a max 3 hour drive (…let’s just pretend rush hour traffic on a Friday isn’t a thing).Step 4:Once I felt ready to start searching, I reviewed listings with my realtor to identify needs, wants and red flags. This stage was really important for learning what could be easily fixed (adding a heated water line) and what I wasn’t willing to deal with (structural foundation issues or replacing septic). Admittedly, as a self-described “city girl” who grew up in Toronto, my realtor was also able to point out things I hadn’t considered about living rurally, such as year-round road access, available cell service, internet, etc.Note: I reached out to any friends and family who I knew owned a cottage, grew up rurally, or had experience with septic tanks, drilled wells, lake intake water, wood stoves, etc. I used this informal network to review listings I was considering, or to look over septic permits or inspection documents. It’s so helpful to have someone on your side who doesn’t stand to financially gain from your purchase!Step 5:Next up, I went to multiple viewings with my realtor to validate those learnings. I wasn’t asked to sign a Buyer’s Representation Agreement (BRA) until I was ready to make my first offer. While in Toronto, you might sign a BRA for a specific address or suburb, in cottage country I found BRAs covered much larger areas (although you can negotiate this). For example, I signed a BRA for Muskoka, Haliburton, and Kawarthas with the same realtor. I also had realtors lined up across southern Ontario, such as Tobermory, Peterborough, north of Kingston, Ottawa, etc. In all cases, I made it very clear what areas I had signed a BRA for.The offer paperwork was all signed remotely with DocuSign, which made it pretty convenient. As a first time buyer, I found it helpful to look up a standard Agreement of Purchase and Sale document online so I could familiarize myself before submitting any offers.If you use an online bank like Tangerine, EQ Bank, or Simplii, make sure you transfer your deposit amount into a standard Big 5 bank prior to making any offers. In the event your offer is accepted, you’ll have 24 hours to get the deposit to the listing brokerage so make sure your money isn’t on hold somewhere. Online banks can take a few days to get a bank draft made, whereas Big 5 banks can do it on the spot – just walk into any bank branch and show some ID.Step 6:After facing the reality of a hot seller’s market, I reviewed my finances again to understand how high I could comfortably go. The mortgage broker was super helpful in teaching me about Type A vs. Type B cottages, owner occupied vs. non-owner occupied, and understanding the impact of fixed vs. variable rates. If you take away nothing else from this post, make sure you know the difference between Type A (year-round) and Type B (seasonal) cottages. Type B cottages need a minimum 10% down payment and the max loan amount is $350,000. Also, wood stoves do not count as a permanent heat source! Make sure to keep your broker in the loop if you’re not sure how a cottage might be classified. This saved me from making a potentially very expensive mistake.Step 7:As I mentioned earlier in this post, I ended up viewing 8 properties and made 4 offers. Just like you would research status certificates and builder reputation on a condo in Toronto, you’ll need to look at municipality sites, water testing results, flood plain maps, etc. Assuming you have a well established local realtor, make sure to have them try and find out the spread of offers. This gives you an idea of how many people have higher budgets than you, or if you’ve been priced out of the area and need to look elsewhere.Step 8:Constantly review your list of needs vs. wants and comparable solds to get a feel for where the market is going. I ended up compromising on location and going just north of Muskoka. I also had to waive conditions to remain competitive, but made sure to mitigate the risks of doing so.Step 9:Once my offer was accepted, I started calling around to get quotes for a real estate lawyer. After speaking to several Toronto lawyers, they all recommended I go with a local option due to the intricacies of buying in a rural area. I asked my realtor for recommendations, and got quotes from 4 local lawyers. When shopping around, make sure to ask for a detailed cost breakdown of the legal fee (flat or hourly), disbursements, title insurance, etc.The broker already had a bunch of documents from my pre-approval, so it was a relatively straightforward matter to re-upload and refresh some of the key items (letter of employment, account statements showing funds in the account for 90 days). He went through the details of the mortgage commitment letter, answered any questions I had, and then I signed it remotely through DocuSign.Step 10:The final bits:Appraisal – The broker booked the appraisal and gave me the estimated costs so I knew ahead of time to prepare for it. Given I’m buying in a rural area, it’s probably a bit more expensive than in the city since there’s less competition. I’m waiting to confirm, but it sounds like it will be between $350 to $550.Insurance – I’m in the process of shopping around now, but I used my realtor and some local Facebook groups (for the town, or cottage association) for recommendations.As I mentioned, I’m closing at the end of March so this is as far as I’ve gotten in the process. But hopefully some of you find this helpful!(cross-posted from r/TorontoRealEstate) via /r/PersonalFinanceCanada https://ift.tt/3u2rOah