Many first-time buyers know that a property with a rental unit – or space that can affordably be converted into one – can provide additional funding to help cover mortgage payments and other living expenses. Traditionally, that meant posting a listing on a site like Kijiji or running an ad in the local paper looking for long-term renters. But today, some landlords are forgoing the steady income of long-term tenants for the potential to earn significantly more by renting out on a daily or weekly basis through websites such as Airbnb.
Shorter terms, bigger gains
Peter Smith (not his real name) is a Toronto-based real estate broker who owns four rental properties. A couple of years ago when two detached homes on adjacent properties became vacant, he decided that rather than looking for someone to sign up for a year-long lease as he usually did, he would “take a gamble” and trying renting out the properties on Airbnb. He has individual listings for each property plus a joint listing offering both properties at once. This is something that several families have taken advantage of to visit Toronto together but retreat to separate quarters at night.
Since then, he hasn’t gone more than a week without a short-term tenant in the property, paying a per-night or weekly rate that far exceeds the monthly rental rate he used to charge. If he’s able to fully book the property – something that is easy to do during prime summer months – he earns more than double what he did before. He also charges a flat fee for cleaning, regardless of length of stay. “It’s more work, but the rewards are higher,” says Smith.
He also points out added bonuses from the landlord’s perspective: for one, tourists visiting the city aren’t going to put as much wear-and-tear on the property and appliances since they will likely be out touring around most of the day and eating most of their meals at restaurants. It also gives him more frequent access to the property, allowing him to monitor for damage or neglect.
As with Uber, the popular taxi-alternative, the legality and insurance implications of Airbnb is still a bit murky. Quebec is looking to become the first province to regulate the site. In the meantime, landlords like Smith are happy to collect rent at a couple of hundred dollars at a time.
Of course there are horror stories, like a Calgary couple who thought they were renting out their home to four adults in town for a wedding. The renters were actually throwing a party and had invited busloads of guests. Walls were dented, glass shattered, toilets clogged, and alcohol and cigarette butts were spilled throughout the place. The homeowners were alerted about the situation when their neighbours texted them to say police were at their house.
“Over 35 million guests have stayed on Airbnb, and property damage is extremely rare,” says an Airbnb spokesman, who adds that the damage would be insured under the company’s Host Guarantee program that covers up to $1-million in damage. The policy, however, does have certain exclusions, including cash and pets, and limited protection for artwork and collectibles. Would-be renters are advised to store valuables offsite or in an inaccessible part of the property.
Smith once had a similar experience, though nowhere near as extreme. A guest told him they were renting the property for family members visiting from out of town. Instead, they used the house to host a party for 40 people who left a huge mess. When Smith showed up to check them out, he insisted they help with the cleanup.
He says ultimately, “it’s risk for reward.”