Like many excellent chefs, Samin Nosrat is also a keen gardener. When she’s not recipe testing or cooking for friends or, as is often the case these days, traveling to promote her new cookbook Good Things, she can be found puttering around the courtyard garden that she shares with three other households in Oakland, CA. (I wrote about their unique communal living situation in the 2022 book Remodelista: The Low-Impact Home.) Every neighbor pitches in when it comes to gardening chores, “but I tend to drive the bus,” she admits.
“I’ve been gardening avidly for about 15 years now. My interest in it grew out of both my cooking career and my love of flowers and friendships with Sarah Ryhanen [of Saipua] and [floral designer] Nicolette Owen. And over the years, as I’ve spent more time in the garden, it’s occurred to me that many of my maternal ancestors were also extraordinary gardeners,” she shares.
“For many years I was hesitant to start gardening because I was a renter and felt like, ‘What’s the point? I’ll have to leave everything behind when I move!’ Then, a master gardener taught me that gardening’s real takeaway is the experience, and that even the best gardeners have tons and tons of failures. This has been a great gift to me, as a recovering production-oriented perfectionist. I love that gardening gives me a daily opportunity to slow down and pay attention, to get my hands dirty, and to learn how to look at my surroundings.”
Below, Samin takes us on a tour of her courtyard garden, a place for gathering together and growing things. (Curious about her home kitchen? Head over to Remodelista for a peek.)
Above: The courtyard is where the neighbors come together for shared meals. Above: “I don’t have much room in the front of my house and there is a lot of shade, too, so I took a maximalist approach and tried to pack in as much of a cottage garden here as I could,” she says.”Lots of moody oxalis, hellebores, and heuchera, as well as different types of ferns, including a beautiful bronze fern…. I’ve got chocolate akebia climbing the front, and added a clematis this year. There are a couple different abutilons, a few silver-leafed Japanese camellias, and some oak leaf hydrangea. I also always have Minoan lace and Dara Daucus planted, and then I add annuals throughout the year.”
All week, we’re revisiting the most popular stories of 2025, including this one from May.
A transportive garden can owe as much to a magical setting as to the plantings. At the garden of brothers and award-winning garden designers Harry and David Rich, the surrounding landscape ramps up those feelings before a visitor even sets foot in the garden. Nestled deep in Welsh woodland, this is a fairytale cottage fully immersed in nature—including roving herds of sheep—where access is possible only by bridge over a stream, a tributary of the River Wye.
The atmospheric garden is one of 18 featured in my new book Wonderlands: British Garden Designers at Home, in which I explore the private spaces of leading landscape designers, revealing how their own homes become testbeds for their professional projects; these are spaces for the slow evolution of ideas, schemes, and plant combinations, as well as private idylls where they can retreat from the world. Some are grand projects created over decades, but many, like Harry and David’s cottage garden, are hands-on gardens created with limited resources in the past few years.
Photography by Éva Németh.
Above: A run of pleached crabapple trees dissects the space and creates a link from the building to the garden.
Harry relocated from London to the secluded cottage just north of the Brecon Beacons in Wales, where he now lives with his wife, Sue, and their two children. But the garden has always been a shared project between the two brothers, who together became the youngest winners of a gold medal at the Chelsea Flower Show in 2012, when Harry had just formed his landscape architecture firm and David was still at university. They went on to create two more gardens at the show, winning another gold medal in 2014.
Above: Plantings are taken right up to the cottage walls, increasing the sense of full immersion in greenery.
You don’t need me to explain the personal perks of having a vacation home or a cottage. But to many people, a cottage is also an investment. There are costs and hopefully returns, especially if you decide to rent it out. If you hope to buy, find out what you need to pay beyond the listing price and how you might finance the purchase.
Is there a capital gains tax exemption for a cottage?
Sorry to be the bearer of bad news, but there isn’t. There was once a lifetime capital gains exemption of $100,000, but that no longer exists. It only applied in Canada from 1984 to 1994. There are other ways to minimize taxes on the sale of a cottage, though. What about selling to a family member: Can you avoid taxes that way? It depends on a few factors, such as the relationship, if the second property can be claimed as a principal residence, and more.
The short answer: It depends on your relationship to the person who owns it. Are you an extended family member? Their adult child? Or are you their spouse? Find out how inheriting a cottage can affect taxes for a spouse with children and the steps to take to minimize what’s owed.
You mention that the cottage deed is in your name only right now. That suggests that it was either in your name all along or that the cottage was owned jointly with your husband with right of survivorship. I suspect it was held jointly with right of survivorship, meaning that it was transferred directly to you on your husband’s death. That means that it passed outside of his will regardless of his wishes contained therein.
Sometimes the ownership structure of an asset trumps a will, and this may be a case of that, Jill. When an asset passes to a surviving spouse on death, by default, it is transferred at its adjusted cost base for tax purposes, meaning no capital gains tax is payable at that time. The executor can elect to have some or all of the capital gain taxed on the final tax return of the deceased, if it’s advantageous to do so, but let’s assume this didn’t happen. This means that all the accumulated capital gains have been passed along to you and this is important as it relates to the next steps you take with the cottage.
Do you have to share an inherited cottage?
You may not have a legal obligation to include your three stepchildren in the ownership of the cottage, Jill, since the cottage passed outside the will due to joint ownership. If you are in doubt, you should seek legal advice. It sounds like there is at the very least a moral obligation to include your stepchildren in the ownership, but it will result in a gift to your husband’s children—and therefore has tax implications.
Beneficiary of taxes
Because the accumulated capital gains have all been passed along to you, if you gift three-quarters of the cottage to them, you will personally have a capital gains tax liability in the year of transfer. Some people think they can skirt the capital gains tax by making the gift for $1 or for a value equal to the cost, but that’s not the case in Canada. The transfer in ownership needs to happen at the fair market value, meaning the appraisal you suggested may be relevant, Jill. An appraisal is not mandatory when determining the fair market value for a transfer but may be advisable.
Assuming you have sufficient resources to pay the capital gains tax, you may not be worried. But the capital gains tax bill could be a big one if you’ve owned the cottage for a long time.
Keep in mind there are options. You could treat the cottage as your principal residence, with the transfer to your stepchildren, therefore being tax-free. But this would expose your house in the city to capital gains tax on the sale of it or upon your own death.
You need to weigh the pros and cons of paying tax today versus deferring it to determine, if this is advantageous to use the principal residence exemption for the cottage. You may also be limited in doing so if you had a previous principal residence that you sold during the time you have owned the cottage and you treated it as your principal residence, with no capital gains tax payable. This would negate the years you owned the cottage and claimed another principal residence exemption.
There are a number of expenses that can be claimed to reduce the capital gain on your cottage, Louise. Capital expenses are an example. The Canada Revenue Agency (CRA) defines a capital expense as an expense that:
Gives a lasting benefit or advantage;
improves the existing property;
is a separate asset; or
is considerable in relation to the value of the property.
Capital gain vs capital expense for the costs of owning and selling a cottage
There’s a distinction between a capital expense—which increases your cost base and reduces your capital gains tax on a property—and a current expense, which is a repair. Repairs are only tax deductible when a property is used for rental or business purposes against the income earned but have no impact on capital gains.
In your case, Louise, a good example of a capital expense would be your expense to change a shingle roof to a metal one. In particular, it provides a lasting benefit, is an improvement to the existing roof, and is considerable in value.
The windows and flooring also provide a lasting benefit. The stove is a separate asset, in its own right. So, these three expenses would also generally be capital expenses that would be added to the cost of the property for capital gains tax purposes.
What is a capital gain?
A capital gain is the increase in value on any asset or security since the time it was purchased, and it is “realized” when the asset or security is sold. (Similarly, a capital loss is realized when you sell an asset that has decreased in value since the time of purchase.) Capital gains (or losses) can happen on stocks, mutual funds and real estate.
The replacement of the old deck and stairs may not be a capital expense, Louise. In fact, the CRA gives a specific example on their website of an expense for wooden steps being a current expense. If you were to replace wooden steps with concrete steps, that would be a capital expense. If you were to repair wooden steps, it would not be a capital expense. It would be a current expense or repair as opposed to a renovation or improvement. So, whether the deck and stair expenses are capital or current would be a matter of fact depending on the exact nature of the work.
Note that the CRA does not give a specific list of capital expenses, but rather, guidelines for determining the nature of the expense.
Cottages for sale: What happens if you have a capital gain?
The calculation of your cost base for tax purposes will then be equal to your original purchase price, closing costs on acquisition, and capital expenses over the years. The proceeds, less the selling costs, less your cost base gives you your capital gain. Half of your capital gain is taxable on your tax return in the year of sale, or two thirds if the capital gain in excess of $250,000 in a given year for a taxpayer. A large capital gain in a high income year could give rise to 25% tax or more depending on your province of residence, income sources, and the magnitude of your capital gains for the year.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.
Sometimes, emotions are the motivation for buying a vacation property. I like to evaluate a property purchase from a financial point of view as well—and here’s how.
The costs of buying a vacation property
Say, a property’s purchase price is $500,000. Whether you use cash, a mortgage/home equity line of credit, or a combination of the two, there are other costs to consider.
If you purchase with cash that you could otherwise invest for a 4.5% return (to use a conservative assumption), there is an opportunity cost of not investing that money or leaving it invested. If you borrow money, there may be an interest cost of 4.5%. So, to keep it simple, we will assume an opportunity cost or financing cost of 4.5%.
Property taxes, utilities, insurance, condo fees, and maintenance could easily add another 2% to 4% per year in costs. Those costs could be even higher for an older cottage or for a property with amenities and high fees, but we will assume 3% per year for discussion purposes.
So far, our costs are up to 7.5% per year on a $500,000 property, which works out to $37,500 per year for our notional vacation property.
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Expected returns on vacation properties
What about the financial return from owning the property? Canadian real estate prices have risen by about 6.3% per year for the 10 years, ending Dec. 31, 2023. Over the past 30 years, the increase is about 5.1%. Some cities have seen much higher growth rates, and others much lower. Prices have also cooled off significantly in the past couple of years. (Check out MoneySense’s guide on where to buy real estate in Canada.)
Over the long run, in the U.S., real estate prices have risen just slightly more than inflation. In fact, since 1890, U.S. real estate has increased by less than 0.6% per year above the rate of inflation. Given the Bank of Canada’s 2% inflation target, despite a recent spike in the cost of living, I would argue a more reasonable long-term growth rate for real estate is 2% to 3%.
So, we will assume the value of our notional $500,000 property grows at 3% per year; in the first year, that would be $15,000. That means the net cost in year one of owning the property is 7.5% (or $37,500) minus 3% (or $15,000), totalling 4.5% (or $22,500).
Buying versus renting a vacation home
If you are contemplating a $500,000 vacation property purchase, and you think my assumptions are reasonable, you need to ask yourself: Are you going to get $22,500 worth of use out of the property? Could you rent a comparable property for less than $22,500 per year, for the time you plan to use it? If you could, a vacation property purchase may not be the best financial choice.
First off, a transfer of assets between spouses is by default done on a tax-deferred basis at the original purchase price. So, whether the properties are held individually or jointly, either person can transfer their share of the ownership of a house and/or cottage to the other spouse without triggering an immediate tax implication.
They can elect for the transfer to occur at any value between the adjusted cost base and the fair market value. We will come back to this point.
Watch for spousal attribution
When married or common-law couples transfer assets between each other, there’s always the risk of spousal attribution. This may apply if one spouse owns an asset or contributes primarily or exclusively to its purchase and transfers the asset to the other spouse. If the receiving spouse then earns income from it or sells it for a profit, there may be attribution of the income back to the transferring spouse. The income, or capital gain, would be taxable to the transferor.
Spousal attribution does not apply after separation or divorce. So, you can transfer assets and not have to worry about future income being allocated to you down the road. However, there could be lingering tax implications for one or both individuals.
How the principal residence exemption applies in separation or divorce
A couple can only have one principal residence in any given tax year. Your principal residence is not necessarily the place where you primarily live. You can claim your cottage, for example, as your principal residence.
When a separation is amicable, the couple should determine together which property, when treated as the principal residence, would result in the least amount of tax. Specifically, they should consider the annual capital appreciation of each property, calculated as the total appreciation divided by the years of ownership.
Let’s say ex-spouses named Jo and Chris owned a cottage for a short period of time, and it appreciated significantly. They might agree to treat the cottage as their principal residence for the years they owned it. Jo could transfer full ownership to Chris, and they could jointly elect to have the transfer take place at the fair market value. Jo could claim the principal residence exemption to avoid tax in the year of transfer. Chris may be able to claim the cottage as their principal residence for all years of ownership given it will be the only property they own after the separation, and it will qualify for the principal residence exemption in subsequent years as well.
That means Jo will have to pay tax for some years of house ownership, because the cottage was claimed as the couple’s principal residence during the years it was owned. Jo may have some years of ownership before the cottage purchase, as well as more years after the separation, where the house can be their principal residence. But they will have to pay some capital gains tax eventually when they sell the house. It will be based on the total appreciation when they sell it, or die, and the pro-rated years where the couple claimed the cottage relative to the total years of ownership.
There’s no one-size-fits-all solution. “Planning has a lot of moving pieces, and it’s very important to get it right, and it’s very easy to get wrong,” says Peter Lillico, partner at Lillico Bazuk Galloway Halka Law firm in Peterborough, Ont. He is also a speaker at the Cottage Life shows. “Every family is unique, every cottage is unique, and every cottage succession is unique.” Here, he breaks down the common misconceptions Canadians have about estate planning around the family cottage.
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Myths around cottage succession
Identifying any potential issues is the first step in navigating how to transition the family cottage effectively. Let’s look at some common misconceptions and the solutions that work.
1. Assuming everybody will get along
Many parents assume that their children and other family members will agree on how to use and maintain the cottage. This is a mistake because it overlooks the potential for conflicts and differing expectations.
For example, take a family with two adult children, one living in Alberta and the other in Ontario. The one who lives close to the cottage in Ontario may use the property quite often. However, if the expenses are split 50/50 between both, this can lead to arguments. Lillico says: “There are cottage sharing agreements that can, and should, be worked out beforehand.” Parents (and/or their adult children, frankly) can create agreements that outline rules around care and expenses, and whether they should be shared equally or allocated in proportion to usage, or whatever the family wants.
A cottage sharing agreement is a binding document that passes the ownership and control from one generation to the next. It doesn’t just include estate planning details, but also future rules around the cottage. It contains structured instructions for financial responsibilities, sharing usage concerns, division of ongoing labour and maintenance, and even dispute resolution. Lillico explains a real estate lawyer can help with the cottage sharing agreement, as well as “a worksheet that helps [parents] to consider how well suited the kids are for cottage ownership.”
2. Underestimating capital gains tax
Some Canadian cottage owners may believe that succession of the property will leave their children with a valuable asset, but many underestimate the costs of capital gains tax and unforeseen maintenance expenses.
As real estate prices increased over the years, the family cottage may have risen in value significantly, especially if it was purchased decades ago. This leaves owners facing capital gains tax when they sell the property. Capital gains tax is levied on the profit of the cottage, which is considered a capital asset.
Capital gains and losses are calculated based on the difference between the selling price and the original purchase price, adjusted for certain eligible expenses like renovations and improvements. (So, keep those receipts to lower the gain!)
A loss can be used to reduce owed taxes on a personal income tax return. A gain, however, is taxed, but not all of it. The taxable portion of a gain is divided in half, and that amount is added to the individual’s overall income and taxed according to their income tax bracket.
Demand for rental housing is rising as the cost of ownership has risen.
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In his movie “Annie Hall,” Woody Allen recounts an old joke in which one woman asks another about a restaurant, and the other woman says “nobody goes there anymore; it’s too crowded.” In a similar way, some real estate investors are pausing their built-for-rent (”BFR” or “BTR”) projects, because they fear that it is about to become too crowded. This concern is justified in certain submarkets around the country, such as an area west of Phoenix, where there are seven built-f0r-rent cottage developments along a single 1.5 mile stretch of road. In most parts of the country, however, new supply is still falling far short of the demand for these kinds of rentals. Now it looks like some of the sidelined capital is about to resume investment activity in this space.
We define built-for-rent single-family housing as including the following purpose-built rental types: single-family homes built on individual lots, townhomes, duplexes and quads, and cottages developed on a single plat of land (sometimes called “horizontal apartments”).
When considering the outlook for this segment, which is universally regarded as one of the strongest segments of real estate, it is important to look both short-term and long-term. Here we look at both horizons.
Short-Term (Year 2023)
In our research today, we are seeing a sharp slowdown of rent growth, going negative in some places, but we see this as being limited to the current year (2023), after which rent growth will be decidedly positive.
It only stands to reason that rent growth had to slow down from the 15%-18% annual growth rates of the last couple of years. There is some confusion as to how much of a rent slowdown has already occurred.
The reader should beware of articles stating that rent growth is still in the range of 8%-10% today. Those statistics are looking at year-over-year percent-change instead of month-over-month. Year-over-year statistics have the advantage of eliminating seasonality, but they also obscure turning points.
The fact that often gets missed is that month-over-month, rents are flat or down.
One of my favorite data sets to watch is the CoreLogic SFRI (Single-Family Rent Index), which get quite granular at the local-market level. Again, it is valuable right now to look at month-over-month data in order to spot possible inflection points. This graph illustrates that even though most markets are still up compared with twelve months ago, many are flat or down as of the last couple of months.
Austin’s single-family rents peaked in the Fall of 2022, and Miami single-family rents have been … [+] going sideways since last Summer. Orlando continued to see strong rent growth until the latest two months of data.
CoreLogic Single-Family Rent Index through October 2022, Analyzed by Hunter Housing Economics
Why did demand soften all of a sudden, starting last summer/fall? That is when people started to become fearful of a recession (and therefore, their income prospects). This caused people who were living with friends, roommates, or relatives, to defer plans to make the leap and get a rental of their own. Looking at the consumer confidence numbers, however, we see that confidence has started to come back up again.
We can expect household formations to improve, boosting rental housing demand, once consumer confidence rallies further. People who survive the layoffs that seem likely to arise later this year (most people will) will eventually decide to “get on with life,” particularly if they recently had a child and feel the strong need to have a home of their own with some private outdoor space. Based upon this outlook, the weakness that is just starting to show up in single-family rents will be relatively short-lived. Demand fundamentals are still strong. The graph below shows the recent actual trend in single-family rents, which has declined on a month-over basis for the past three months, but is expected to start to regain its footing in 2024 and 2025. Forecasts are subject to significant error, of course, particularly during times of volatility, but this suggests a path forward that is consistent with what we are seeing in the market, the pipeline that is coming to market, and the demographic and economic forces that are at work.
The historical data in this graph are from the Corlogic SFRI (single-family rent index), with … [+] October 2023 being the latest actual number. The forecast portion is from Hunter Housing Economics.
Hunter Housing Economics January 2023 BFR Forecast
Longer-Term: The BFR Outlook for 2024 and Beyond
Whereas prior generations had children while they were in their mid-20s, many millennials have deferred childbirth to their 30s, and some studies suggest that they are going to start families in larger numbers over the next several years. With a newborn or a toddler in an apartment, these young families would typically prefer a house with a yard, and more space in general than they might have in an apartment. That is the key to the growth in demand that we expect for built-f0r-rent single-family homes. The demographics show that as the “bulge” of millennials moves up in age over the next four to five years, demand for family-friendly housing will increase.
Combine that with the fact that millennials are moving up rapidly in their careers. Granted, their income growth will likely slow in 2023 as the economy softens, but the economy is likely to begin the next recovery cycle in 2024 and 2025, bringing strong percentage increases in incomes. Income growth is not going to stay at 11%-12% in 2023/2024 perhaps, but 8%-10% earnings growth is not unreasonable for people in their 30s to expect. That will support rent growth at single-family rental communities. A recent analysis by RealPage showed that market-rate renters are currently only spending 23% of their income on rent, which is well below the 30-33% that is considered a ceiling. There seems to be room to run, at least after the economy gets past this slump and demand starts roaring again.
The forecast for BFR volume is shown below.
This graph captures all types of built-for-rent communities, from single-family to cottages, and … [+] townhomes and duplexes, triplexes, and quads. The forecast calls for slower growth in 2023, accelerating again in 2024.
Hunter Housing Economics January 2023 BFR Forecast
This ramp-up over the next five years, tapering off by 2027, is consistent with the view that monthly-payment challenges will continue to divert single-family demand toward rental homes, and with the evolving needs of the 83 million members of the millennial generation, who are now outgrowing apartment living. The total number of units being built for rent came to roughly 120,000 last year, and will edge higher this year, followed by a significant uptick in 2024.
With the current concerns about the economy, many have observed that certain capital providers are on the sidelines. I have spoken with several institutional investors who say they are now in a holding pattern, given the recent changes in financing rates and housing demand, but also with many others who are still ready to invest in the immediate term in BFR. And, sooner or later the capital that is on the sidelines will re-enter the market, sending this sector to the high levels we’re showing on the bar chart. Our research suggests that (with the exception of Phoenix), the country is far away from being “too crowded” with BFR single-family projects. Once we get past this current slump, supply is expected to be chasing demand well into this decade.
