In Parts 1 and 2 of this series, we’ve looked at the things you need to consider when buying a condominium for both personal use with income potential:
• Will you be renting it out seasonally or for short time periods under 30 days?
• Do you wish to be part of a managed rental pool or, are you going to self-manage your unit?
• If you are opting for a managed program, are you more comfortable with a rental pool or a rental program and, what are the rules and policies governing each?
• Will you have to invest extra to upgrade a unit in order to enter or stay in a rental program?
Next, let’s look at some of the costs connected to buying an income producing get-away. Of course, there is the over-all purchase price as negotiated in your offer but in addition to that, chances are that you will also need to add GST (HST after July 1st) to the price as well as Ontario land transfer tax. Since most condo-hotel style units in rental programs are zoned commercially and are used as such, GST/HST is applied to the full purchase price.
If you expect to gross over $30,000 a year in rental income, you are required to become a GST registrant. If your income will be under $30,000, you can still opt to become a registrant. If you are a registrant, you are able to claim input tax credits against the taxes collected so, you would in effect, get a return of the GST you paid upon purchasing your unit. If you are not a registrant, the rental program will still need to collect and remit GST/HST on your behalf.
Condominiums that are part of the Intrawest and Blue Mountain Resort properties as well as associate member developments such as Mountain Springs Lodge, may also be members of something called the Blue Mountain Village Association (BMVA). It is a not-for-profit organization that was formed to manage and maintain all facilities in the Village and to provide events, animation and other roles within the Village. While condo hotel units are taxed on a commercial rate basis (much higher than the residential rate), units that are enrolled in the BMVA are eligible to apply for a tax reduction to the residential rate. For this reason, most active rental units in these areas are indeed members of the Association.
When a unit is sold that is a BMVA member, an entry fee of 2% (1% in Mountain Springs Lodge) of the sale price must be paid to the association upon sale every time the unit is sold. In addition, royalties are payable on all of the rents earned by the unit in future. In addition to having the right to apply for reduced taxes, membership in the BMVA offers certain member privileges such as discounts in the Village and access to the very popular shuttle bus system. The work of the association also attracts tourism interest which in turn benefits owners wanting to rent out their properties.
When you purchase any condominium, your offer is almost always made conditionally upon you receiving and being satisfied with the contents of a status certificate for the condominium corporation. When you make an offer on a unit that is enrolled in the BMVA, you need to ensure that your offer is conditional upon receiving TWO status certificates – one for the corporation and one for the Association. These documents will provide you with full disclosure of by-laws, finances, annual reports and anything else you need to know about the two entities. A status certificate for a condo corporation is $100.00 and, for the BMVA, the fee to obtain the report is $30.00.
In Part 4 next week, we’ll look at some of the expenses associated with owning a managed condominium hotel in Blue Mountain.
Marg Scheben-Edey is a Broker with RE/MAX four seasons realty limited, Brokerage in beautiful Collingwood, ON. With three decades of experience, Marg is a leader in the local real estate marketplace and is ready to help guide both Buyers and Sellers in achieving their real estate goals. Email Marg