You've inherited a property in Kawartha Lakes region

[fluffytoast]

Sadly, both of my parents passed away in the last year, and I am the sole next of kin for a cottage in the Kawartha Lakes Region, and a cabin up in Bancroft/Marmora region. Both are paid off.

I live ~6 hour drive away and do not plan on moving to the area.

I am fairly young (33), married, both working with good income, significant student loan burden (~200K CAD). We are currently renting, with a baby on the way.

Sell? Hold on to it as investment? Not renting, we're too far away.

Edited to add: we are aggressively paying off our student loans and should be done in 3 years.

Was not expecting this level of engagement, thank you all for your valuable insights, definitely a wide range of opinions to consider.

A few more details/answers to questions brought up:

Cottage was a full time residence for the remaining living parent. It’s not luxurious by any means, but has a full kitchen, decent quality appliances, wood floors, big deck, and while not lakefront, has a nice lake view. However, winterizing and septic tank are in the maintenance. Agree that maintenance will be a PITA. Would need ~50 K investment to make it more comfortable/modern.

Cabin is quite bare bones, but decent size, on 4 acres of forest. An “unplug” location. This is more of an emotional attachment than financial one.

Partner and I do enjoy the outdoors, but given the drive and our schedules, I could see us using the properties for a maximum of two weeks out of the year. I am, however, trying to think long-term, when the kids are older, when we go part-time, retire, etc. No remote work options for us given the nature of our jobs.

Combined income is ~680 K CAD (pre-tax). This just started a year ago.

No high-interest debt.

Based on suggestions, we will talk to estate lawyer for the financial logistics of inheriting property, potentially a financial advisor. Will get properties appraised. Spend time at each property. Will also look into property management for renting the properties out. Will let emotions settle, and decide on selling.

Thank you kindly for the advice, condolences, and congratulations.

P.S: To the user who suggested the endowment theory read, that was interesting and helpful. Thanks for that.

 

[txbutterfly]

@fluffytoast Maintaining a cottage is a lot of work. More work than most people realize. If you're not willing to drive 6 hrs to enjoy the cottage, you will not be enthused by having to do the upkeep while sinking more money into it. I suggest you sell.

 

[misscatholica]

@txbutterfly Ya cabins are great in July when its warm and sunny, but when you have to drive up to Bancroft in October to close it up, there could be snow, it won't be warm and cleaning/winterizing is not fun work.

 

[davis32123]

@misscatholica Don't forget opening it in April/May when the blackflies are bad enough to carry you into the woods.

 

[nick_a]

@davis32123 The trick is to open before the bugs arrive in mid-late April.

 

[davidstephen]

@misscatholica Depending on the style/ slop of the roof one may have to go in the winter time too and clear off snow from the roof to help maintain the structural integrity. I have todo that at my families cottage, luckily we have snowmobiles to get there that time of year.

 

[resjudicata]

@txbutterfly Man. It’s funny the view on this post.

I grew up in Calgary and driving 6-8 hours into BC for the lakes was worth every drive. Memories you’ll never replace. We had a place out there and it was amazing. I’d drive ten hours for lakefront cabin.

 

[txbutterfly]

@resjudicata Story of my life, brother... how do you put a price on it

 

[resjudicata]

@txbutterfly Can’t put a price on it my man. At all.

 

[elias512]

@txbutterfly What if you own a cottage that is winterized and recently renovated and not on a septic system? Is it still a lot of work and in what way?

 

[thatgirlsusan]

@elias512 Septic system requires almost zero maintenance. Depending on number of users, it gets pumped out on a set timeline. Mine is full time family of five and I pump it out every three years. I’ve gone as many as five years but don’t like that risk.

My in-laws cottage is seldom used, and it has not been pumped out in the 30 years I’ve been going there.

 

[txbutterfly]

@elias512 Owning a cottage requires at least as much maintenance as a house but will require more depending on where it is located.

Canadians spend an average of $12k per year on home maintenance. Pretty much anything that requires maintenance for a primary residence can apply to a cottage as well. As buildings age, things tend to need to be repaired. There's always something that needs to be fixed. Think of roofs, plumbing, electricity, appliances, etc. A second dwelling requires an emergency fund twice the size.

If a cottage is on the water, the dock will need to be put out for the summer and brought in for the winter. A cottage will typically get pests. There is tree maintenance. Grass maintenance. Cottages passed down through families are often not built to code which creates problems that snowball.

Then there is the weird stuff like "oh otters are shitting everywhere unexpectedly" and now you have to clean otter shit regularly. You want them to stop shitting everywhere but how do you do that without hurting them? Now you must become an otter expert as you otter proof the place.

 

[shetel]

@fluffytoast Understand and get past this first https://en.wikipedia.org/wiki/Endowment_effect

If you suddenly had the equivalent amount of money instead, would you rush out to buy a cabin 6 hours away, for the income? Likely not.

Sell. With cash in hand, execute on the money steps (see sidebar). Pay your debts, invest, line the proverbial nest, however it makes sense to in the framework of your unique situation and priorities. Congrats on the baby, don't fall victim to a group RESP plan, plenty on this sub about those.

 

[martinhero]

@shetel I was going to say "definitely sell" until I saw OP's household income.

With that kind of money, they can afford to keep a property for sentimental reasons. Hire somebody to do the maintenance and winterization.

It makes zero financial sense, but OP is in a position where they don't have to worry about what makes financial sense. If it's worth it to them, it's worth it.

 

[shetel]

@martinhero Wow yeah, originally the post just said "good incomes". That was an understatement... 680K annually changes the picture! I also intentionally left out the "sentimental" angle as I figured, if they knew they wanted the cabin, they'd already have decided to keep it (or at least mentioned that aspect). But yes you are 100% right, if they have the means and if there's a sentimental attachment, the cold logical approach doesn't really work.

 

[cheapacoustic]

@shetel But wouldn’t he have to pay capital gains on the sale?
That would factor into that equation as it’s basically getting an opportunity to buy the condo for a heavy discount.

Or do you not pay capital gains on the sale of things you inherit? I’ve seen people say what you said here and I’ve always wondered.

 

[m_khamiss]

@cheapacoustic They would only pay capital gains from the time they inherited it to when they sold it, so in many cases this may not be a significant amount if you sell fairly soon. Any other capital gains (if any) would have been paid by the estate of the parents.

 

[topten20082008]

@m_khamiss Thanks for sharing, I did not know this

 

[kadfdhdhka]

@cheapacoustic No. The estate pays capital gains before the property is transferred.

 

[james111]

@kadfdhdhka Shouldn't be any since OP says it was the primary residence of his last living parent.