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Summer is quickly approaching, and that means many families are looking to take a well-earned vacation. However, that does not mean they want the classic hotel experience.
In recent years travellers have grown tired on the impersonal feel of boxy hotel rooms. Instead, they have been flocking towards the comfortable home feel offered by many properties listed on apps such as Airbnb and VRBO. This has created an excellent opportunity for real estate investors looking to find new sources of cash flow in markets with a strong tourism industry.
With the majority of travel restrictions associated with the Covid-19 pandemic lifted, the local tourism industries across Canada have begun preparations for a surge in travellers once again. So, the question is, how can short-term rental properties help you prepare for this influx of income potential?
What are Short-Term Rental Properties?
In short, a short-term rental is a residential property that is rented for less than six months.
These properties are frequently available to rent by the day as an alternative to hotel stays, or for more extended periods as a vacation home or temporary residence for a travelling professional.
These rentals can range from private rooms within the owner’s primary residence, to sublet apartments, to entire homes for the renter to occupy.
Are Short-Term Rentals a Profitable Investment?
One of the primary benefits of a short-term rental property is the increased potential to profit from the property – provided there is a demand for short-term rentals in the area.
In 2021, short-term rental properties listed on Airbnb had an average cost of $208 per night to rent. With average monthly mortgage payments frequently ranging between $1200 and $1400, it is not hard to see the potential to profit off of these investments. If you estimated your monthly expenses on the property to total approximately $1600, you would begin to turn a profit after only eight days with the unit occupied.
The average monthly rental price for a three-bedroom house in Canada is roughly $2000. However, if you rented that same property on Airbnb for the average cost, you would surpass your expected rental income for that property in 10 days.
The Risks of Short-Term Rentals
However, this high potential to profit off short-term rentals is not without risk. Unfortunately, the tourism industry is not always consistent year-round, leading to the potential of slower off-seasons where the property may struggle to find any tenants at all. As well, some cities and towns see very minimal tourism and the property may not find tenants at any time of the year.
So, you need to be careful when deciding which markets, you should buy into as a short-term real estate investor. When you are planning to buy with the intention to use the property as a short-term rental you need to do your research and make sure the demand is present.
Discover How To Buy Unlimited Rental Properties With This Step By Step Guide
Converting You Current Properties into Short-Term Rentals
For investors looking to take the dive into the short-term rental market but are not currently looking to purchase new properties. There are two primary solutions available to you.
Renting Extra Space in Your Home
If you have a spare bedroom or a basement suite in your home that is currently empty, you have everything you need to get started as a short-term real estate investor. By listing your extra space as a short-term rental, you may attract travelers or visiting professionals who need a place to stay and will gladly pay you for the accommodations. Naturally, you will want to ensure that any private information or belongings are safely secured when you are using your house to generate rental income, but overall, this is a highly profitable option that can help reduce your own cost of living by allowing the rental income to subsidise your mortgage payments.
Alternatively, if you know you will be going away on vacation, you can offer your entire home as a short-term rental and generate even more passive income while you are away.
Offering Vacant Properties as Short-Term Rentals
If you are an investor who currently has an unoccupied investment property, you can use it as an opportunity to begin investing in short-term real estate. Instead of struggling to find new tenants to move into your units, you can instead offer the property for brief stays and gauge the interest in short-term rentals locally without buying any new real estate.
If you find the market has a demand for the property you can continue using the property as a short-term rental. However, if you find the demand is not present you always have the option of relisting the property as a long-term rental as you initially intended. This can help to minimize the overall risk of first-time short-term investing.
Marketing Your Properties
When you are looking to market your short-term rental units, you have a variety of options. First, you have the popular options such as Airbnb and VRBO which not only allow you to find tenants, but they also provide additional protections for both their hosts and renters in exchange for their service charges and fees.
Otherwise, you do have the option of listing your short-term rentals through more traditional means as you would a long-term investment, however you do lose out on many of the benefits and assurances offered by the other services.
Regulations and Restrictions
Finally, before you begin investing in short-term rental properties it is crucial that you look at any local laws and regulations pertaining to these forms of investments. Many regions have restrictions on the types of properties you can offer as a short-term rental and where they can be located.
Additionally, some municipalities require that investors license their short-term investments prior to listing them.
If you are interested in entering the world of short-term real estate investing, or you have more questions, contact us at LendCity. Our team will gladly help you get started with the best financing options available. You can give us a call at 519-960-0370 or you can visit us online at LendCity.ca