Buying a Second Home in Kelowna – what you need to know.

Buying a second home in Kelowna now seems to bring with it far more tax implications and costs to consider than since I first started selling Real Estate in 2005. I understand that this can cause confusion and can be somewhat off-putting.

This article is designed as a comprehensive guide to help you plan for the true costs and factors you need to consider.

So why are people Buying a Second Home in Kelowna?

For those of you not familiar with our area, Kelowna is a highly desirable place to live or spend part of the year. It offers a perfect mix of natural beauty and a vibrant lifestyle.

We know it as our ‘Four Seasons playground’, ideal for outdoor activities, from Skiing at Big White and Silver Star in Winter to enjoying our various scenic lakes in Summer. The area boasts world-class Wineries, Championship Golf courses and easy access to nature trails for Walking and Biking.

It has also been a place where Buyers have purchased investment properties, as our rental vacancy rates have traditionally been low.

1. Tax Considerations before buying a second home in Kelowna.

1. Speculation and Vacancy Tax: This tax was introduced to prevent vacant homes and ensure properties are being utilized.
   BC Residents: Pay a lower rate of 0.5% on the property’s assessed value.
   Non-BC Residents or Foreign Owners: Pay a higher rate of 2%.
   Exemptions: If your property is rented out for at least six months of the year (in periods of 30 consecutive days or more), you’re exempt from this tax. Here is the Government link to the exemptions
2. Capital Gains Tax: If your second home is not your primary residence, you may be subject to capital gains tax when you sell. The amount will depend on the increase in property value over time and your marginal tax rate. more details
3. Foreign Buyers Tax: Previously, foreign buyers purchasing in Kelowna were subject to a one-time 20% tax on the property’s fair market value more details However, there is currently a ban on Foreign Buyers, so non-residents from outside Canada are not permitted to buy property at this time. This ban is temporary and subject to review, so it’s worth checking for updates if you are a non-Canadian looking to invest.
4. Property Transfer Tax: This applies to all real estate purchases in BC. It’s calculated based on the purchase price. See also the Government Website
   – 1% on the first $200,000,
   – 2% on the portion between $200,001 and $2,000,000,
   – 3% on the portion over $2,000,000,
   – A further 2%** on the portion of a residential property over $3,000,000.
5. Municipal Property Taxes (Council Tax): These are ongoing and depend on the assessed value of the property. Kelowna’s property tax rates can vary each year (6.85% in 2024). NOTE: You will not be eligible for a Home Owner Grant on a second home. This grant is typically reserved for primary residences.

IMPORTANT: For specific Tax Advice it is important to consult with your lawyer and accountant before making a purchase, as each individual’s circumstances may differ. For example, if you are purchasing a property for immediate family use, such as a home for students attending UBCO it’s crucial to discuss the details with your lawyer and accountant upfront. They can help you plan the best way to structure this purchase and ensure you maximise any potential tax benefits.

2. Rental Rules and Considerations.

If you’re planning to rent your second home while you’re not in town, it’s essential to know the current rental regulations.

Short-Term Rentals: In Kelowna, short-term rentals are subject to strict regulations. You’ll need a business license, and only properties in certain zones can operate as short-term rentals. Also, your property must be your principal residence, limiting the opportunity for non-residents. See Government Short-Term Rental guidelines

Long-Term Rentals: Renting for more than 90 days at a time is more straightforward. If you rent your property for at least six months of the year, you’ll also avoid paying the Speculation and Vacancy Tax.

Note: The Government of BC defines short-term rental accommodation service as a period of time of less than 90 consecutive days.

Find information about starting a Residential Tenancy here

Be aware that rental income is subject to tax, so you’ll need to report this on your Canadian tax returns.

Hiring a property management company might help streamline the process of finding tenants and handling any issues that arise.

3. Ongoing Costs of buying a second home in Kelowna

Owning a second home comes with several ongoing expenses beyond taxes:

1. Property Insurance: Since a second home may remain vacant for extended periods, insurance can be more costly. Some policies require regular check-ins, so ensure you understand the terms of your coverage and whether you need a property manager to inspect the home regularly.
2. Utility Costs: Even if the home is unoccupied, utilities like electricity, heating, water, and internet can add up. You might want to consider smart systems to control energy use when you’re not there.
3. Strata Fees (for Condos and Townhomes): If you’re purchasing a condo or townhome, you will also need to factor in monthly strata fees. These fees cover building maintenance, common area upkeep, landscaping, and sometimes utilities like water or garbage collection. Depending on the amenities in your complex (e.g., pools, gyms), strata fees can range significantly.
4. Legal Costs: Don’t forget to budget for legal fees during the purchase process. Your lawyer will handle everything from title searches to ensuring the contract is sound, typically costing anywhere from $1,000 to $2,500 depending on the complexity of the transaction.
5. Mortgage Costs: If you are financing your second home with a mortgage, factor in the monthly payments as well as any associated costs like mortgage insurance, particularly if your down payment is less than 20%. It’s also wise to account for fluctuating interest rates, which may impact your payments over time.
6. Property Maintenance: You’ll need to plan for regular maintenance tasks, including:
   Snow Removal: During the winter months, Kelowna can get significant snowfall. If you’re not local, hiring a snow removal service is essential to comply with city regulations and avoid fines.
7. Landscaping: Regular yard care, including mowing the lawn in summer and maintaining trees or plants, will keep your property looking its best.
8. Alarm and Security Systems: Given the property may be unoccupied for long stretches, it’s wise to install an alarm system or cameras for added security. Some homeowners opt for remote monitoring services for peace of mind.
9. Property Manager or Caretaker: If you’re not planning to visit often, hiring someone to check in on the home can be a good idea, especially since some insurance companies require regular visits to maintain coverage.

Summary – buying a second home in Kelowna.

While the idea of owning a second home in Kelowna is exciting, there’s certainly a lot to think about. From taxes and rental rules to ongoing maintenance and insurance, so careful planning is key. However, if you do your homework and work closely with your Real Estate Agent and Financial Advisors you can navigate these considerations smoothly and avoid those unwelcome surprises. Whether you plan to rent it out, as an investment or use it as your personal getaway, being well-prepared will make your second home ownership experience both enjoyable and hassle-free.

If you’re considering purchasing a second home in Kelowna and want more information, feel free to reach out. I’d be happy to guide you through the process and help you find the perfect property to suit your needs!

For further assistance, please contact me, Trish Cenci, at 250-864-1707 or visit my Website