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The New Nest Egg For Snowbirds

by Heather McDowell on 31 Jan 2023

A snowbird is a colloquial term to describe North Americans who flee cold winters for destinations of warmth and sunshine. These southbound citizens tend to have extended stays in the sun and sea by being gone months at a time. Popular destinations for these sojourns are the southern USA, countries like Greece and Portugal, and the fan favourite, Turks and Caicos Island.

An increasing trend is people purchasing property in sun-soaked locales as secondary homes in full-service residential resorts in place of a typical resort location vacation. The trend builds on people getting all the pleasure and sunshine of a resort vacation but they also get the equity of owning real estate.  There are several types of ownership: Traditional ownership, timeshare ownership, fractional ownership, and travel club.

Traditional ownership is the most costly of the options as the purchasers are responsible for the full purchase price of the property, but also enjoy the benefits of not having all one’s eggs in the same basket.  There are some financing options available, but they are not as plentiful and potentially not as competitive as traditional residential resale financing options. As mentioned above, this is the costliest option but it's also the most autonomous one. The traditional-ownership style allows people to govern their vacation property in the same manner that they do their primary residence home, but when you invest in a residential resort setting you also enjoy your vacation home away from home on a turnkey hassle-free basis where everything is taken care of. It’s like being on vacation in your vacation home where everything is taken care of for your turnkey hassle-free. 

Timeshare ownership is one in which several people share the ownership of a resort or vacation property according to a set week, season, or point system. The privilege exists at a specific home resort that they may visit annually, biannually, or biennially with the same unit type and amenities is granted to guests with a fixed week or season ownership. As a result, a timeshare is an excellent choice for families who prefer taking a typical vacation to their preferred destination.

Fractional ownership has become the epitome of luxury. The reason for this is that fractional ownership properties have a much higher cost and are usually only available at high-end resorts and residence clubs in world-renowned locations. What you are buying when you purchase fractional vacation ownership is a piece of real estate. These houses, also known as "fractional vacation home ownership," are opulent private homes that several individual owners jointly hold. As a result, fractional ownership properties maintain a high level of value within the real estate market.

For individuals seeking an inexpensive vacation, travel clubs present travellers with a fantastic option. Owners of travel clubs enjoy discounted access to a wide range of lodging options, tourist sites, services, and amenities. A travel club is, in a sense, a pre-paid travel business that offers vacation package bargains. Cheap travel insurance is another perk provided by travel clubs.

Canadian Real Estate Wealth reached out to Mr. Kelly Sullivan, Managing Director of the beautiful Kokomo Botanical Resort on the breathtaking Turks and Caicos Island to speak about what he attributes to the increase in travellers purchasing Caribbean properties. 

“In 2019 the year before Covid Turks and Caicos recorded over $450m in real estate sales. In 2021 sales volumes reached just over one billion in sales and last year $740 million. What we have all learned from the pandemic is that savvy investors and tourists alike yearn for a private safe haven for their families and their fortunes that is as easy as getting to any warm destination in the States but totally disconnected from human confusion, crime, and commercialism; the great escape. With one of the lowest covid death counts in the world, as Turks and Caicos was only closed for three months in 2020, Turks and Caicos have proven to be a naturally resilient store of health and wealth. More tourists are coming here now than at any time before the pandemic. Local real estate brokers report that there is already For 2023 there is already over $437 million on the books led by pre-construction sales.” 

A Great Option For Canadians

Aside from the replenishment of some much-needed vitamin D, purchasing a property down south makes a lot of sense for Canadians.  While they get to enjoy the sun, sand, and sea, fellow Canadians are building equity. Instead of a vacation just being a cost centre, the purchase of a vacation property is an investment with incredible earning potential. 

Depending on the ownership model chosen, purchasing a property in the Caribbean can also be used as a vacation rental. This, in turn, gives the owner another income stream. In reality, the property is earning in two ways; the land is likely appreciating and when combined with the rental income, you have double the dollars. This model results in an investment resilient to inflation that often generates enough revenue to cover the costs of ownership and management fees, with the freedom and benefit of vacationing in the Caribbean year-round on a low-cost or cost-free basis. 

While it's levelling off now, for the past few years the Canadian real estate market has been hot and led to overpricing. When you purchase in the Caribbean dollar for dollar your buck stretches further.

A Great Option For Seniors

A hot topic on everyone's lips right now is generational wealth. This is a result of the unfavourable market conditions Canadian buyers have experienced in the last few years. Generational wealth, in a nutshell, is acquiring an asset, in this case, real estate, to pass along to a family member for them to have equity upon which they build.

With increasing popularity, senior couples are purchasing property in the Caribbean and escaping to their Caribbean oasis. By the time they are both retired, most people are celebrating living mortgage free. The trend dictates that they are downsizing and, in turn, selling their Canadian home or handing it over to family members. This allows folks to get full equity at current market prices from their home.

They're using the equity from that sale, in part, to purchase a small Canadian home like a bungalow or condo or are simply renting a modest Canadian residence. Often, they're using that equity to help a family member get into the market by offering them some money towards their down payment. Due to the property's appreciation and being mortgage-free, there is more equity for seniors to work with. This, when combined with a pension, gives senior sellers the freedom to live the life that they wish to and spend as much time snow-free as possible down south.
 We asked Kelly to share his insights on why this solution works for seniors. Here are his thoughts:

“While I cannot speak of the rest of the Caribbean here in the Turks and Caicos Islands there is no death or inheritance taxes, or even property taxes for that matter. When the time comes, with the assistance of a qualified law firm like Griffiths & Partners, a mortgage-free real estate investment here can easily stress-free change hands from generation to generation without attracting Land Transfer Tax otherwise locally known as Stamp Duty. Best of all one does not have to wait until death to transfer such ownership to their child. It’s a gift that keeps on giving.” 

Not Just For Seniors

In an earlier piece, we spoke about the pandemic's facilitation of telecommuting. Since the onset of COVID-19, telecommuting has made technological progress by leaps and bounds and is more widely accepted than ever before. This means that people need not wait until they're retired and are on a 'fixed income'.  With more income fluidity while working, folks can purchase and take full advantage of their vacation location by working remotely or telecommuting for a period of time. It's the best of both worlds!

Mr.Sullivan shared his thoughts on why this is a great option for families.

“It’s abundantly clear that Millennials and Gen X’ers are much more health conscious and tend to lead a more active lifestyle focused on authentic eco-adventures and wellness experiences than older Freedom 55 generations that were more focused on lathering up their bodies with coconut oil and baking on the beach. Join the Wellness Revolution. Live the dream. No different than many as early as possible prefer to own than rent, the same applies to the costs associated with vacation accommodations. Rather than pay for vacations year after year or even invest in RRSPs, the earlier younger generations can find an island destination that conveniently suits their lifestyle the better. Rather than “rent” costly vacation accommodations year after year live in the now and invest into your own income-generating island home away from home for a lifetime of rent-free, hassle-free workcations that continually generate revenue when not in use that covers the costs of ownership. In this day and age, there are more and more younger people that come to Turk's and Caicos for active lifestyle island vacation experiences than ever before.” 

We thought we'd wrap up by providing you with a quickfire approach to where to begin when considering purchasing a vacation property so buckle up because here we go!

Do your research. If you want to purchase in Turks and Caicos, for example, make sure you know what the purchase process entails and the timeline for property appreciation. Google really is your best friend here.

Speak to your local agent to help you connect with a reputable REALTOR ® in the country that you're looking to purchase in.

Take a trip to the nation that you're considering buying in.  Assess the vibe, infrastructure, government influence, and climate. We highly recommend this rather than "buying blind". 

Ask your local REALTOR © for help finding an equally trustworthy local lawyer who can help you navigate the legal system. However, it's important to understand in broad strokes, what is required of you legally and to cost it out so that when you’re ready to buy, you can do so with eyes wide open.

Calculate the cost. This goes hand-in-hand with the one above. Create a document that highlights all of the costs associated with the purchase. Run it past your real estate salesperson and then your lawyer to ensure you can make a truly informed decision.

If you would like a virtual cup of coffee to explore options or are interested in visiting the breathtaking Kokomo Botanical Resort to experience some accessible luxury with well-curated island vacation experiences, you can connect with Mr. J Kelly Sullivan at [email protected]

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