In the world of Canadian real estate, one question often nags at the minds of property owners and investors: Should you opt for short-term or long-term rentals? With its booming tourism industry and strong demand for housing, Canada provides unique opportunities (and challenges) for both options.
The choice between short-term and long-term rentals can have profound implications for your investment strategy, your day-to-day responsibilities, and, ultimately, your bottom line. This week, we examine the pros and cons of both, specifically tailored to the Canadian market, to help you decide which route is best suited for you.
Short-Term Rentals: The Airbnb Phenomenon
Platforms like Airbnb have made it easy for Canadian property owners to enter the short-term rental market, impacting the current housing crisis in the country. In fact, in 2018 alone, more than 31,000 homes nationwide were likely removed from the long-term rental supply because of Airbnb.
Why are so many people jumping on the short-term rental bandwagon? The top reason may be the lure of higher income with per-night and surge pricing, especially in cities like Toronto and Vancouver, which attract many tourists. Another benefit? Short-term rentals also allow you the flexibility to use the property for personal reasons when it's not rented out. This is particularly appealing for those with holiday homes.
However, renting short-term also presents some significant disadvantages. Some of the biggest cons include:
- Regulatory and Tax Hurdles. Following the lead of Quebec, which recently imposed stricter legislation on short-term rentals, Canadian cities are increasingly regulating, requiring permits, and imposing limitations on the number of days a property can be rented per year.
- Management Intensity. The frequent turnover of guests means you'll spend more time on property management tasks: cleaning, maintenance, and guest communication.
- Income Volatility. Unlike long-term rentals, where the income is relatively stable, short-term rentals can be subject to seasonal fluctuations. Even today, there are signs Airbnb is experiencing a downturn globally, impacting the host's income.
Long-Term Rentals: The Traditional Path
Unlike short-term rentals, long-term rentals are a tried and tested formula of the rental property world. The most significant advantage of long-term rentals is the stability of income. Unlike short-term, a year-long lease assures you of a consistent income stream. Lower management overhead is another reason many property investors opt to rent long-term. Once you've found a reliable tenant, the day-to-day management tasks are relatively minimal compared to the constant cleaning and maintenance of short-term management, freeing up your time for other investments or activities. Finally, renting long-term is better for your property investment. With fewer turnover, long-term rentals usually mean less wear and tear on the property, translating to lower maintenance costs.
Long-Term or Short-Term Rentals - Which Is Right for You?
Your choice between short-term and long-term rentals should depend on your investment goals, the time you can invest in managing the property, and your comfort with income volatility. Assess your priorities and your property's location to make the right choice for your Canadian rental property.
Making an informed choice between short-term and long-term rentals can set you on the path to financial success. So, weigh the pros and cons carefully and take the plunge!
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