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Why Keep All Your Eggs in One Basket: Buying Vacation Property For Diversification

by Corben Grant on 30 Aug 2022

With the Canadian real estate market beginning to see a pullback in many areas as interest rates continue to rise, many investors are beginning to grow concerned about where their money is best put to use. For those looking to diversify and maybe even relieve some stress in the process, the answer may lie outside of Canada entirely, with a vacation property investment.

Investing in a vacation home outside of Canada can come with great financial benefits, with the added bonus of having a place to get away from it all. While it may seem difficult, it turns out it may be easier than you think to buy your home under the sun. To learn more about such opportunities, we spoke to Kelly Sullivan, a Canadian who has settled on the sunny shores of the Caribbean in Turks and Caicos Islands where he operates Alive and Well Resorts and Hotels, including their newly developed Kokomo Botanical Resort.

According to Sullivan’s view of the market today, it's a question of  “not having all your eggs in one basket.” As prices rise in Canada, those eggs become even larger and larger, and you expose yourself to undue risk by not diversifying. 

At the same time, with inflation still so high, many may be forced to cut back on spending. One of the first things to go may be your yearly vacation that, while dearly needed and beloved, might not make sense in the current environment.

Kelly argues, that investors can have both – a safe investment that protects your equity, and an inflation-proof way to get away with the family. In addition, a vacation property can not only earn you some extra rental income but also serve as a cherished family asset to pass down for generations.

“There’s definitely some volatility being seen in the Canadian market right now,” reasoned Sullivan, “It may be wise for investors to hedge their bets and have a bit of equity out of the system. When you buy stocks, you don’t just buy one company. Instead, you choose a basket of stocks with different risk levels, in different industries or even different markets.”

“You could diversify in real estate through something like a REIT, but I'm not aware of any REITs where you can invest your money and still have the lifestyle benefits that you get from a real estate investment here in Turks and Caicos. The decision may come down to the fact that you only have one life to live and no U-haul behind a hearse, why not make an investment for the sake of your family and lifestyle?”

For some, the idea of purchasing in a faraway country may seem a bit intimidating. Many would prefer to remain comfortable inside our domestic market. However, as the Canadian market becomes more and more hostile to buyers and investors even more are joining the already thousands of Canadians who invest overseas.

On Turks and Caicos, the island nation Sullivan calls home, there is not only property available to buy, but many benefits that can make it easier than you may think to complete a real estate purchase. There is no restriction on foreign ownership, and they have a similar banking and real estate system to what you may be familiar with in Canada. To top it off, they have very little tax when compared to Canada, and the whole purchase process can be completed in mere days.

Another benefit is the prevalence of existing resorts such as Kokomo. For an investor who seeks to buy and develop their own land, they are going to face numerous challenges, increase their risk, and wait potentially years before their vacation home is ready.

“You get people who think they are just going to buy a lot down here and start living the dream until they see all the challenges that are actually involved in putting up a house. Because you're on an island, you’ve got a different set of logistics to deal with, a more limited labour pool to work with, and our construction market here is so on fire right now that if you want something built, you will most likely be waiting well over a year.”

“Very quickly they're not living a dream and it turns into a nightmare. Costs are going up and they're spending all this money that they're not getting any intrinsic benefit for.”

Residential Resorts on the other hand present the total package. Land development, building, landscaping, amenities, concierge services and everything else are all complete for you, with the added benefit of an existing management system in place to maintain your property from afar.

“When you’re on vacation, you don’t want to be working, and that's the problem with cottages and cottage country,” said Sullivan. “Maintaining a cottage can be time-consuming and expensive: opening it up at the beginning of the season, winterizing at the end of the summer, protecting against bust pipes and all those things that come along with owning real estate It's hard enough to manage those things when you own a property in Canada, let alone overseas.”

Effective management means not only peace of mind and security for your investment but it can also open you up to year-round rental opportunities. On an island like Turks and Caicos, which features one of the world's most highly rated beaches at Grace Bay, you won’t be at the whims of a local rental market or massive seasonal fluctuations. With year-round warm weather and an international tourist base, demand for rentals on the island is high and consistent.

While you may not make record cash flow renting your property, you can at least cover the costs of the property, as well as your vacation expenses when you choose to visit. It’s the best of both worlds – reduced vacation costs, a home under the sun, and a steady investment that protects you from inflation, rising rates, and a lack of diversity.

Alive and Well Resorts and Hotels’ new private gated residential resort development Kokomo Botanical Resort & Spa, centrally located on Providenciales, is now offering units to investors looking for a place to invest while enjoying the benefits of their money. Kokomo features 38 private cottages nestled into a botanical garden property. The resort features a freshwater oasis pool, a Balinese spa pavilion, a private dining restaurant, and a kilometre of nature trails. It’s all located just a short trip away from Turks and Caicos’ famous Grace Bay Beach, one of the top-rated beaches in the world where the resort has its own private beach club. Visit Alive and Well Resorts for more information about the Kokomo Botanical resort and how you can buy today.

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