Market share is easier to attain when you’re the only game in town. That’s one factor RAM Development Group will be banking on when it launches a 60-unit cottage project in the heart of, well, Ontario's cottage country next month.

Although seemingly counterintuitive, the principal of RAM Development Group revealed the deliberation in master-planning Luna Bay, a resort-style cottage community spanning 53 acres, in Gravenhurst, a town in the Muskoka Region.

“(Muskoka is) somewhere you can pop up to in the summer or winter,” Russell Jacobson told RENX Homes. “We believe most of our buyers, if not all of our buyers, will come from the GTA (Greater Toronto Area) because they know what they’re getting is close to home and convenient.”

But RAM is also betting these buyers will be somewhat atypical.

Cottages are typically purchased by end users — whom Jacobson still anticipates will feature prominently among Luna Bay’s buyers. However, RAM also has its sights set on investors.

In-house rental, property management

To that end, RAM has upped the ante by including in-house rental management and a 24-hour maintenance team — a bundle that invariably attracts seasoned, if well-heeled, investors, but which the company is hoping will both intrigue and entice mature families looking to bolster their investment portfolios in a staid economy.

“Our profiled buyer is somebody who’s looking for a trouble-free, managed property; a property that’s’ going to stand the test of time and offer attractions that other properties don’t,” Jacobson said, adding delivery is scheduled for 2027.

The risk is ultimately attenuated by Luna Bay being a year-round destination drawing from the short-term rental pool and charging premium rents. 

“Buyers can choose a layout, which are all three or four bedrooms, and this was done purposely because we believe the demographic using these cottages will be families as opposed to individuals,” he said. 

While the investment aspect is important, Jacobson noted Luna Bay is not preponderantly a rental development and that owners can do as little, or as much, as they want to earn extra income.

“You might not want to go every week of winter, or every week of summer, so there’s the option of putting your unit into the rental pool and if it rents you make some money,” Jacobson said. “If not, you change your mind and shoot up there.”

Investors seeking options

The climate for these types of properties has changed; Toronto and Prince Edward County, for example, passed stringent measures governing short-term rentals in recent years. Moreover, standard condo leasing rates don’t carry investments in Toronto anymore.

According to Bobby Puim, director of operations at REC Canada, a real estate sales and consultancy brokerage affiliated with Royal LePage Signature Realty, Many Toronto-based investors have consequently sat on the sidelines the past couple of years. 

“In order for a condo to cash flow occupancy or registration, you’re going to need higher-than-market rents in most cases,” he said. 

Puim noted many cottage purchases in the past few years were overpayments, and while listings are up, sales remain soft. That could explain why, according to Royal LePage’s 2024 Spring Recreational Property Report, single-family waterfront properties in Ontario declined in price by 8.2 per cent between 2022 and 2023. 

Cottage purchases surged in 2021, as urbanites took advantage of rock-bottom mortgage rates and COVID-19-induced remote work policies. However, that heavy front-load of demand, in what was already a niche marketplace, drove prices up too quickly and too high. 

“The Bank of Canada at that time told us that money was going to be cheap and rates low, and that it wouldn’t go up for the foreseeable future, so people locked into things like very low-rate mortgages, but now they have to carry two properties because they’ve been mandated back to work,” Puim continued.

“(They), then, didn’t have the ability to carry many things all at once unless they were cash-flow positive.”

RAM's successful Grand Cayman project

With the conventional cottage market — in which private sales overwhelmingly constitute activity — in the doldrums, Luna Bay is essentially the only player in town. 

Because while many of those overeager cottage purchasers 2021 have buyers’ remorse due to the valuation decline, Jacobson insisted that, while over a million dollars, the price is offset by its income-earning potential. This, he said, bridges the gap with affordability.

Jacobson pointed to RAM Development Group’s track record with similar projects, like SeaDreams, which it built in Grand Cayman.

Designed with each unit exactly 1,450 square feet — a more simplified floor plan than those used at Luna Bay — the project closed in late 2022. Some of the units have been relisted for over 50 per cent more than their original cost, he said.

One reason for SeaDreams’ rapid appreciation is that it’s built along the Seven Mile beach, but it also offers the same rental and maintenance services as Luna Bay.

Waterfront drives additional value

The 35-year-old company is active in the residential, retail, office and recreational spaces, in addition to building master-planned communities.

But RAM has devised a formula in the vacation home space by gravitating toward waterfront properties, because that is an immense value booster.

“I’ve developed similar types of properties in the Caribbean where owners from Canada and the U.S. would buy luxury resort properties on the beach,” Jacobson said.  “And quite frankly, after spending the kind of money that you do on oceanfront properties, it made sense for these people to rent the units out.

"What we found is the owners really appreciate that because it becomes a holiday destination for them too, by not having the hassle associated with owning a holiday property.”