Anyone else glad the kids are back to school? I know Cherry, and I are… well, sort of.
Cherry is in Florida for a girls’ trip, so my schedule is still messed up while solo parenting, lol.
I can’t believe the summer is already over, we went hard to enjoy our first normal summer in two years. My mom finally escaped China to stay with us until at least their quarantine rules, upon return, normalize.
The kids had a great summer that ended with a week at a cottage we rented. Thank goodness we got the friends and family price, as the normal price is $4,500 per week plus $300 for cleaning plus tax! 😳
Now that we are back to work, we are full-on preparing for the Wealth Hacker Conference. For example, I spoke to Canada’s youngest retiree (age 34), a six-time best-selling author, who successfully retired for almost 20 years with 8 kids.
He’s positive on his investments in 2022 when the overall stock market is down 17%, so I’ve asked Derek Foster to share how he did it and what he’s going to do with his over 50% cash position.
The next 6 – 18 months could be our once-in-a-generation opportunity to buy stocks (and real estate) for cheap.
It’s one of my greatest regrets not to have capitalized on the crashes of 2008 and 2020, but this time, I plan to be ready.
For my special pricing, CLICK HERE; if you want to continue on this journey of truth-seeking for the most efficient, safest path to financial security, but don’t delay; prices will only go up from now till the conference day on Nov 12th!!
Now, on to the subject of this week’s article…
The Greater Toronto Area is packed full of tourist opportunities, public events and business opportunities that can attract a variety of visitors to the region. As a result, many wise investors have turned towards short-term rentals in order to generate a strong cash flow from the demand for tourist accommodations.
Unlike hotels which offer a very structured feeling with limited amenities, short-term rental residences offer a home away from home feeling, with many hosts offering full apartments or entire houses to travellers for limited stays.
However, short-term rental investing also comes with many unique twists and turns that can make them difficult to navigate as a new investor, particularly in the GTA.
So, in order to help you kick off a career as a short-term real estate investor, here is everything you should be aware of in order to navigate the market.
Understanding Short-Term Rentals
Short-term rental properties – also referred to as STRs – are properties that are rented out for brief periods of time as opposed to on extended leases. These can be used as vacation rentals, travel accommodations or temporary residences for travelling professionals.
Many short-term rentals are advertised online through services such as Airbnb and VRBO in order to reach a wider group of potential tenants. These allow you to share photos and descriptions of the property while also categorizing it by all of its amenities and features in order to reach the most interested renters.
While some people offer space in their principal residence as a short-term rental, other investors will dedicate their time to building a portfolio of dedicated short-term rental properties in order to capitalize on neighbourhoods with a strong tourism industry.
Why Are Short-Term Rentals a Popular Investment
Short-term rentals are a popular investment in regions with a strong tourism industry, and for good reason. Many people do not enjoy staying in hotels and would rather rent all or part of somebody’s home in order to enjoy a more comfortable stay.
Well-placed STRs also have the potential to yield a higher cash flow than long-term rental properties occasionally.
For example, if a property made approximately $2200 per month in rent as a long-term rental property and had $1900 in expenses, that property would cash flow a total of $300 each month.
However, if this property were rented as a short-term rental at $200 per night and maintained the same expenses, it would earn the same cash flow in only 11 days. Ideally, you would want to maintain a higher occupancy rate than this to cover any additional costs associated with operating a short-term rental and earn a meaningful cash flow.
It is important to remember that slow seasons do exist for short-term rental properties, so you will want a property to earn enough cash flow that it can cover the slow months where it may not make as much or may even lose money.
Understanding the Costs of a Short-Term Rental
On top of the traditional expenses that come with owning real estate, there are some additional costs associated with operating a short-term rental.
One of the main costs you need to consider is the cost of hosting the website on platforms such as Airbnb and VRBO. These platforms take a percentage of the revenue from the short-term rental in order to cover the cost of hosting and advertising the property.
Then you need to factor in the cost of cleaning the property between stays, restocking supplies such as toiletries and kitchen supplies, and additional maintenance fees.
These can easily raise the number of expenses, making it slightly harder to start earning cash flow, but if the property is successful, it will pay off in the long run.
Short-Term Rental Restrictions and Regulations
In the GTA, there are a few key restrictions and regulations you will need to be aware of before you start investing in short-term rentals. Some notable restrictions are active in cities such as:
Not only does Toronto require all STR companies to obtain proper licensing in order to operate in the city of Toronto, as well as requiring short-term rental operators to pay a 4% remittance through the Municipal Accommodation Tax on all of their rentals, but these operators may only host a short-term rental in their primary residence within city limits.
These hosts are also not permitted to offer additional units on their property as short-term rentals and restrict that right to the tenants of those units.
Recently, Brampton has followed suit and has limited short-term rentals to the primary residence of the investor – instead, requiring all rental properties to be used as long-term rentals instead in order to combat housing shortages.
Mississauga’s licensing regulations come with some of the steepest upfront costs, with a $250 annual fee. As well the city does also limit these rentals to the owner’s primary residence.
This trend of requiring both licensing for short-term rentals and limiting these rentals to an individual’s primary residence is continuing to expand across the region, with municipalities such as Burlington, and Milton all adopting similar bylaws.
As a result, many GTA investors have been shifting to buying short-term rentals in cities without these restrictions or outside of the region altogether.
The Future of Short-Term Rentals
With cities adopting new restrictions and guidelines constantly, the future of short-term rental investing is not clear. However, one of the key benefits of short-term rental investing is the fact you always have the option to switch over to long-term rental investing if restrictions start to inhibit you or if the property is not succeeding as a short-term rental.
If you would like to pull together your investment planning and strategy into a single clear, integrated system like our 500+ investor clients, including 45 self-made real estate investor millionaires, our Vision Architect Program™ is right for you. Please email us at email@example.com to speak to one of our investor specialist Coaches at iWIN Real Estate, the FOUR-time Realtors of the Year to Investors in Ontario.
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Until Next Time,
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