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Best of Both Worlds

Alex Frazer-Harrison, Calgary Herald  July 16, 2006

From Canmore condos to idyllic islands, the recreation property industry in Western Canada continues to boom.

And Albertans are chomping at the bit to get their hands on that second home.

Depending on your budget, there really is no limit to the options available. You can choose to fully purchase a property or, if the option is available, you can take fractional ownership, which allows you to purchase a 1/4 or even a 1/12 share in a property.

Although Albertans are buying properties around the world, British Columbia is by far the most popular out-of-province destination, since many locations are within either a few hours' drive or an hour's flight from Calgary, making them ideal spots for weekend getaways.

Landcor Data Corp recently completed a sales survey for B.C. that revealed that Albertans spent $1.1. billion on residential properties there in 2005, more than four times the amount spent by, for example, purchasers from California.

"These are Albertans who are buying property in B.C. and they're not moving there (full-time)," says Landcor president Rudy Nielsen. "I always think of British Columbia as the playground for Alberta. We're the only province where you can go salmon fishing in the morning, skiing in the afternoon, and golf in the evening."

Nielsen says the growth in Albertans buying recreational property in B.C. can be tied directly to the province's economic success and the rising price of oil.

And that means more people are taking advantage of the opportunity to expand their financial portfolios by purchasing recreational properties, not only for personal use now, but also as investments and, in many cases, future retirement homes.

Anticipating further increases in real estate costs, some have decided to hedge their bet by purchasing retirement property now, years in advance of their actual retirement. In the meantime, the property is used for those weekend and holiday time escapes and can be rented out privately or through a rental pool during the weeks and months when the property isn't being used by the owner.

"This has some tax advantages," says John Newton of High Country Properties, which rents out privately owned homes in the Columbia Valley. Newton likens the practice to having "a vacation home RRSP."

Paying for a second home can be a daunting prospect at  first glance, but there are options.

"With our healthy economy, people are buying (second) homes," says Mary Ann Krahulic, regional manager of business development with Canada Mortgage and Housing Corp. "With the increase in housing costs, affordability does come into play. Alberta's smoking hot, but not everywhere else is."

CMHC offers the Second Home Program that allows qualified consumers to obtain mortgages for second residences- including recreational property- for as little as five per cent down (compared to the usual requirement of paying 25 per cent down).

There are some limitations to this, however.

"It must be owner-occupied, which means no rental agreements in place," says Krahulic (this includes rental pools)."(And) it must be accessible year round."

Although some forms of recreational property are ineligible for this program, and are generally more challenging to obtain mortgages for- such as fractional ownership- there are other options. For example, it is possible to use the equity on your current home, refinancing it to pay for the second residence.

Alternately, one might even be able to secure a personal loan to pay for some of the fractional ownership options out there; consider that 1/12th fraction of a $400,000 property is a little more than $33,000- often less than a price of a SUV.

Doug Thompson with Rogers Associate Financial Partners says it's tough for the average individual to keep up to date on all the new financing products on the market.

"Twenty years ago, most people walked into a bank and the bank said, 'here's your mortgage- here's what we'll give you and here's what it's going to cost.' You didn't have choices," he says.

These days, customers often walk out of Thompson's office with a better deal than they had expected.

"There are so many new products coming out, like new loans," he says.

It's important to do your homework when buying an out-of-town property. Rules, regulations, and by-laws differ from province to province and from country to country. Much of this information may be available on the Internet, but consumers should also contact local experts such as real estate experts such as real estate agents or mortgage brokers to learn the lay of the land.

For more information on the CMHC's Second Home Program, visit