Even with a combined income of more than $200,000, a Toronto couple couldn’t afford a place in the city. So they bought a $900,000 cottage in Bracebridge instead

Who: Peter Machalek, 34, chief commercial officer at TREC Brands Inc., a cannabis company; Sara McAlpine, 31, brand manager at Hudson’s Bay

The history: Peter and Sara met in 2017 at an “elf crawl”—a holiday pub crawl for a children’s charity. They started dating a few months later.

In 2019, they moved into a two-storey, 1,000-square-foot rental in Harbord Village. It was a renovated coach house with a den, a bathroom and a large primary bedroom. They paid $2,900 a month.

The couple had their eye on homeownership. But what they wanted—a detached home in Little Italy, the Annex or Roncesvalles, with a big backyard and two or three bedrooms—would cost them upwards of $1.5 million. 

Even with their combined income of over $200,000, saving up for a down payment would be difficult and ultimately leave them house-poor. 

Over the next year, they held off, hoping there might be an adjustment or correction in home prices, and to keep saving up for a down payment. But the longer they waited, the more they worried about being priced out of the market.

When Covid hit, both Peter and Sara started working from home. They also had to cancel a two-week summer vacation to Italy and Switzerland because of flight restrictions. So instead, the couple found cottages to rent on Airbnb and VRBO. 

By the summer, lockdown restrictions had been lifted for visiting cottage country, so they stayed in Haliburton, Muskoka, Simcoe and Prince Edward County, usually for a week at a time. Sometimes, they’d pool their money with friends or family to rent a larger cottage. 

Peter would gripe about the kitchen having sub-par cookware and utensils, like dull knives or not enough pans to cook a meal for a group. The decor was often outdated and stuffy. So Sara and Peter started thinking about how they’d kit out a cottage rental if they had their own.

At the end of the summer, Peter connected with a friend who had recently bought a cottage in Huntsville. The friend said that demand for cottage rentals was so high, he was able to rent out his place during the summer and make enough money to pay the carrying costs on his primary residence for the whole year. 

Since Peter and Sara were both working from home for the foreseeable future, they figured they could buy a cottage up north and live in it for most of the year. During the summer, when the cottage was being rented out, they’d stay elsewhere with family and friends, keep a rental apartment in the city or Airbnb a place downtown. 

That way, the couple could get more space than they would in the city and pay way less. Plus, the pandemic had allowed them to stay in and save money, putting 80 per cent of their paycheques into savings for a down payment. Low interest rates made purchasing more affordable, too.

The hunt: Sara and Peter loved Muskoka, so they focused their search in the area. To make it an appealing rental, they wanted a waterfront cottage that could sleep 10 to 12 people.

There had to be a big kitchen, since Peter loves to cook, along with a big living and dining area, where multiple families with kids could hang out. They wanted to spend under $1,000,000, with a budget of $100,000 for any necessary renovations.

By late October, they had connected with a realtor in Muskoka. On November 1, they drove 600 kilometres in one day, touring eight cottages for sale. 

One of the properties they saw was a four-bed, two-bath cottage on the Muskoka River, priced at $950,000. It was just a few minutes away from downtown Bracebridge, where there were restaurants, cafes and shops. The property was on a double lot with a half-acre of land and plenty of trees, so it felt private and had a cottagey feel.

On the main floor, there were two bedrooms, an office, a bathroom and an open kitchen, dining room and living room with a gas fireplace and access to a wooden porch. 

The lower level had an entertainment room with another gas fireplace, two bedrooms, a bathroom and a laundry room with a walkout to the backyard. 

Just next to the main cottage, there was a detached bunkie that could fit a queen bed and a futon, and a detached garage. The backyard had a fire pit and there was a private dock right on the river. 

The place also had natural gas and municipal water and sewer hookups. Not worrying about maintaining a septic system during rental periods was another attractive feature.

On the downside, the place would require a ton of interior upgrades, like new washrooms, a new kitchen and new flooring on the lower level. The bunkie would also need winterizing. But the couple really liked the place and figured they could do the upgrades for approximately $90,000, which they had budgeted for. 

A few days after viewing the property, on November 3, Sara and Peter put in an offer for $850,000, based on comparable properties in the area. They went back and forth with negotiations. 

The couple wanted a late possession to get as close to the summer rental season as possible, and there were legal issues regarding ownership of the waterfront that needed to be sorted out by the seller. But by November 13, both parties settled on a price of $897,000, fitting tidily within Sara and Peter’s budget, with a closing date of February 26.

The outcome: Peter and Sara moved into the cottage right away to start renovations. To generate some income, they subletted their coach house rental. It was difficult to find a renter in the pandemic, so they rented it for less than what they paid—$2,200 a month until July 1, 2021, when they aimed to have their new cottage ready to list on Airbnb. 

From March to June, they planned to redo most of the main floor, convert an office into a bedroom, update the bathrooms, put in new flooring in the basement, repaint the entire house, convert the garage into a games room and renovate the bunkie into a winterized bedroom. To save money, they planned to do it all themselves, alongside their day jobs. 

Sara followed interior decor accounts on Instagram and Pinterest and created mood boards for the cottage. 

But in December, Peter broke his leg during a ski trip in D.C. They still managed to do the renovation mostly on their own by watching DIY videos on YouTube (Peter did demolitions and tiled the kitchen floor with one leg in an air cast) and getting help from family and friends, who came up on weekends. 

In June, as their target completion date was approaching, they brought in a contractor to take on the bunkie renovation. That pushed their total renovation cost to about $120,000.

While the couple was finishing up the last of their renovations, in mid-June, they listed the property on Airbnb as the Muskoka Paddle House, charging $950 a night during the peak summer season in July and August. They also created an Instagram account for the property, @muskokapaddlehouse. 

Within a few days, they were booked solid until mid-September. They’ve since started taking reservations via Instagram DM for 2022. This made them feel confident about their decision to buy. 

Once their first Airbnb rental starts on July 1, they’ll move back into their Harbord Village place. By the end of the summer, they’ll decide whether to give up their coach house rental for good, or to keep it as a home base in the city.

They plan to put the profits from Airbnb towards their mortgage and annual carrying costs. They’re also saving up for further improvements to make the property more attractive for winter rentals, like a hot tub and sauna. 

If the vacation rental market slows down, Sara and Peter can revert to living at their cottage full time. Peter would have to go back to the city a couple of days a month for meetings, while Sara could continue to work remotely. Long-term, they can picture themselves starting a family at the cottage, since there are good schools nearby. 

While they haven’t had a ton of time to appreciate cottage life in between renovations, Sara and Peter are enjoying their peaceful surroundings. 

They have their morning coffees on the dock or the patio, overlooking the water. Some days, after work, they’ll canoe or paddleboard down the river, or hop into the water to cool off. 

Their neighbours, who are a mix of retirees and people in their 30s and 40s, are friendly and will stop by to check in and find out if they need help with renovations. 

Just the other day, while Peter and Sara were canoeing on the Muskoka River, they met another young couple a few houses down the river. The couple was from Toronto, but a few weeks earlier, they had moved away from the city and bought a cottage. 

Do you have a story about buying or selling a property during the pandemic? We’d love to hear it: realestate@torontolife.com