How would you like to meet lots of interesting people and burn your mortgage years soon? Have you ever considered being an Airbnb host? In Vancouver, where the average price of a detached home goes for over $1 million, homeowners are increasingly turning to the sharing economy to help subsidize their mortgage. A recent study found more than half of Vancouver Airbnb hosts use the income they earn to pay their mortgage, making an average of $6,500 annually.
Short-Term vs. Long-Term Rental
Before deciding to rent your place on Airbnb, you’ll need to figure out whether you’re ready to be a landlord (I dedicate an entire chapter to this in my upcoming book, Burn Your Mortgage). You need to be comfortable charging “market rate” and doing research on what similar listings in your area and elsewhere are going for. Once you’ve decided to rent out your place, your next big decision will be renting it short-term versus long-term.
With a long-term rental you get stability. Most tenants will be more than happy to sign yearlong leases. By doing a good job of staging your rental unit and taking the time to properly screen, you’re more likely to find high-quality tenants and avoid the nightmare ones. If you’re lucky, you’ll find model tenants who take good care of your property, always pay their rent on time, and stay for the years to come.
The reason why some landlords are choosing to rent out their place short-term instead of long-term is the money. There are plenty of success stories about landlords doubling their rental income. If your place is in a desirable location in the downtown, Airbnb is worth considering.
While Airbnb can be a great way to earn higher rents, it comes with a lot of responsibilities. Having day-to-day guests is a lot more work. You’ll need to spend more time screening guests (you’ll want to make sure guests have clear headshots and positive reviews to avoid having your place trashed or robbed). Since guests may only stay a short while (sometimes only a night), you’ll need to spend time cleaning and prepping your place each time for the next guest, sometimes within only a few hours.
Being an Airbnb host also tends to come with higher startup costs. Most guests will expect your place to be fully furnished. You’ll need to spend money on everything you’d expect to find in a hotel: furniture, bedding and linen. You also really need to be committed. The key to Airbnb success is reviews. Similar to Uber, if you don’t get 5 stars then people will stop coming, so it can take some long-term effort and perseverance to make it work.
There’s also the issue of legality. In some cities like Toronto, renting out your place on Airbnb would be like operating a hotel. That would mean adhering to stricter regulations and having special permits and licenses, otherwise you’re running the risk of breaking the law.
If you’re not ready to operate a makeshift hotel, there’s nothing stopping you from renting out your place on occasion. For example, you could rent out your place for a week when you go away on vacation or rent out a spare bedroom when there’s a tourist event in town like the Toronto International Film Festival or the Pan Am Games.
Condos Cracking Down on Airbnb
Airbnb may be good for landlords and tourists, but it’s not so good for neighbours. Can Airbnb devalue your condo? I recently debated this very topic in a blog post for Zoocasa. Condo boards are dealing with a slew of complaints – everything from added wear-and-tear on common areas to higher utility bills.
Residents are up in arms about their condos being turned into hotels by short-term renters who don’t typically have the same pride of ownership as them. They’re worried that their maintenance fees will skyrocket and hurt their resale value. But are those fears justified? Maybe not. Airbnb may actually help the resale value of your condo. To attract decent guests, Airbnb hosts tend to use the latest style and décor, which could actually increase the unit’s value.
With Airbnb operating in a legal grey zone, many condo boards are putting their own rules in place in the meantime. Some condo boards don’t have any rules in place for short-term rentals, while others are cracking down, with some outright banning them.
Airbnb’s Impact on the Rental Market
With an increasing number of landlords choosing short-term over long-term rental, it’s leading to a shortage of rental units in big cities like Toronto and Vancouver, pushing rents higher.
Similar to Uber, cities are playing catch up with regulating the sharing economy. Toronto city council has taken the first steps to regulate Airbnb, looking at its impact and what kind of rules should be put in place for short-term rentals. Meanwhile, Vancouver, facing a rental crisis, is considering requiring business licenses for anyone who rents out homes for less than 30 days for properties that are not their principal residence. Anyone caught breaking the rules can face stiff fines.
It will be interesting to see how these two cities handle Airbnb. Will the rules that are eventually introduced be lenient or could we see an outright ban on short-term rentals? Only time will tell. In my personal opinion, there’s no point in fighting the sharing economy. It’s here to stay, but that shouldn’t mean it’s the Wild West. It’s important to find a balance between respecting the rights of surrounding homeowners and Airbnb hosts so everyone is happy.