Del Condominium Rentals

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Short-term Rentals vs. Long-term Rentals – What Are the Risks

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Short-term Rentals vs Long-term Rentals

Short-term Rentals vs Long-term Rentals

 

We often get asked about the differences when it comes to short-term rentals vs. long-term rentals. Many condo owners are attracted to the idea of short-term rentals, and the numbers don’t lie.

Short-term rentals have skyrocketed in popularity between 2012 and 2017, and continue to rise as we enter the final months of 2019. Airbnb and the gig economy are the main reason why this has happened, and people have quickly jumped on board.

But are they a good idea?

For renters, platforms like Airbnb offers the opportunity for homeowners to rent their property out for more money with less effort. The nightly rate is often higher for short-term rentals, and they have taken precedence over finding one party that wants to rent for two weeks or more.

While you can make more money through short-term rentals, they do come with increased risks. If you’re considering using Airbnb for your property, there are some things you need to consider when comparing short-term rentals vs. long-term rentals.

Short-term Rentals vs. Long-term Rentals—What’s the Difference?

Let’s start with a definition. What is a short-term rental? 

Ultra-short-term rentals are rentals of one to four nights. Before the 2010s, these types of rentals were scarce outside of hotels, motels, and private cottages. But now, property owners can rent their place out one night at a time.

Long-term rentals are anything longer than one month and also include when tenants rent a property for months at a time. For example, apartments for rent are considered long-term rentals.

However, there are grey-areas where you may rent an entire unit for a single month. These types of short-term rentals do exist, but are safer because the renter must commit for a longer period of time.

Why Have Short-Term Rentals Become So Popular?

Modern mobile phone technology and the gig economy have changed everything.

Airbnb was founded in 2008, and just ten years later, it’s a $31 billion company. They have 3 million property listings on their platform and are available in 191 countries.

In 2011, less than one million guests used Airbnb to find a place to stay. In 2017, that number is now 100 million people.

There are many reasons why people love Airbnb so much and prefer it over traditional hotels and motels:

  • Feels more like home when you rent someone’s apartment, condo, or house.
  • Many Airbnb properties offer a luxurious place to stay when on vacation.
  • Easy to book, easy to pay.
  • Hotel and motel prices have gone up as Airbnb became popular, making many Airbnb options cheaper.

People love using platforms like Uber, Skip the Dishes, and Airbnb that takes a modern look at traditional industries. Airbnb was one of the first platforms in this space and is still one of the most used, especially for short-term rentals.

These platforms might be convenient, but it doesn’t answer the question of what is better for a property owner: short-term rentals vs. long-term rentals.

What Have Short-Term Rentals Done to The Market?

Rental prices have skyrocketed, and the rise of short-term rentals has complicated things even for property owners. People looking for quality long-term leases are finding it difficult to find competitively-priced units in attractive locations.

Long-term rental options are now harder to find and higher-priced. Many cities are now stepping in and fighting back against the overuse of Airbnb. These cities have introduced new bylaws that have to be followed. 

This is no different in a city like Toronto, where a major housing crisis exists. Residents have pushed back, and they want their local governments to step in and regulate things. Airbnb is squeezing Toronto’s housing market, and the city’s residents are suffering because of it.

Big cities are not the only locations that are affected. Tourist destinations like Prince Edward Island also have a housing crisis of their own happening right now that has been brought on by short-term rentals.

Property owners have recognized that they can charge more per night for short-term rentals and are now prioritizing short-term rentals. 

But this model is far from sustainable, and short-term rentals are facing pressure from all directions. Beyond disrupting the rental market, homeowners face even more risks when it comes to short-term rentals.

What Are The Risks?

1. Increased Risk Of Having Your Property Rented for All the Wrong Reasons

Many short-term renters are typically renting a property on Airbnb for an event, a party, or something along those lines.

Some short-term renters may use your property for huge parties or as a place for illicit activities. There are many Airbnb horror stories that might make you reconsider listing your property on Airbnb.

Remember, a short-term renter has no attachment to your property beyond their stay. They are less likely to take care of your property while staying at it.

2. The Possibility of Major Damage

An ultra-short-term renter cares less about your property and the items inside. There is an increased risk of your property being damaged, things being stolen, and other issues.

For example, this Toronto family went south for Christmas and decided to make some extra money by renting out their house on Airbnb. While they were away, they received messages telling them that their tenants had used their home for a party that had hundreds of guests.

What did that cost them? More than $35,000.

3. Tracking Revenue Becomes Tougher

Keeping track of revenue is hard when it’s flowing in from different sources and at an accelerated rate. If you need to track payment every two or three days, you’re going to waste even more time on bookkeeping.

You need to treat your rental like a business, and you need to provide adequate records to the CRA. This is a lot harder to keep track of with constant turnover.

4. Following Your Condominium Associations Rules

Your condominium might have a specific set of rules set up that you need to follow when renting out your property. Most condo associations keep a close eye on incoming traffic, and short-term rentals are now a hot button issue with associations in Toronto and across the Greater Toronto Area.

If you’re not breaking the rules set out by condo associations, you might be upsetting them, and that isn’t beneficial to you.

5. Upsetting Your Neighbours

Another common issue is the frequent complaints you may receive from neighbors and other residents in a building. A condo is a community, and you must be respectful of other people’s right to privacy and peace and quiet in their own home.

If your neighbors complain to the police or the condo association, you will have to face the repercussions. In extreme cases, you could get sued and even be forced to sell your property.

6. You Can’t Judge the Character of Short-term Renters

When you rent your property out long-term, there is an intricate screening process for the tenants—especially if you use a condominium management company.

But when you take in new tenants through Airbnb every few days, the screening process is ineffective. You have no idea who is renting your place, how many people will be there, and why they are renting it out.

Even by scrolling through someone’s Airbnb profile, you can’t be sure as to who will be staying at our home and sleeping in your bed.

You have to trust that a complete stranger is going to take care of your property. And in Toronto—that property is likely worth more than $500,000.

7. No Guarantee Of Income

Keeping your home occupied with renters is difficult when using Airbnb. Schedules don’t always line up, and your unit may sit unoccupied for long stretches. 

And remember—you’re losing money for every night that your unit isn’t occupied.

Long-term rentals practically guarantee occupancy, and that’s valuable in itself. You can always guarantee that you’ll collect a consistent rent check at the start of every month for as long as the lease is in place.

8. Insurance May Not Cover Short-Term Rentals

Not all insurance companies will cover short-term rentals, and you could be left stranded when you try to make a claim. If you’re looking into short-term rentals, you have to dive deep into what insurance companies cover and what they’ll do if something happens when renting to someone off of Airbnb.

There’s a risk involved that could leave you paying for damages made by tenants out of your pocket.

9. Short-term Rentals Are Not Allowed Everywhere

A lot of places around discourage or have outright outlawed Airbnb rentals.

If your city allows it right now, who knows what may happen in the near and distant future. Many locations are cracking down on short-term rentals because of what it’s doing to the rental market. 

While it may seem profitable now, one bad ruling could leave you with a vacant property.

10. Additional Services

There are many extra costs associated with renting your property out short-term because of the constant turnover.

You’ll have to look into having a cleaning service come in every few days, and this alone can eat into the profit margins for your rental property. When renting long-term, your tenant is expected to clean their own unit. Your property management company may perform inspections and light repairs, but the majority of the work falls on the tenant’s shoulders.

Along with all of the other things on top of additional cleaning services, these extra costs are just another reason that there are more things to think about for short-term rentals.

Have Questions About Renting Out Your Property Long-term?

You now know more about the difference between short-term rentals vs. long-term rentals. While you may be able to charge more per night, there are many risks associated with short-term rentals.

Long-term rentals are very hands-off, especially if you’re located in Toronto and can hire a great property management company like Del Condominium Rentals. 

We offer a variety of services that are designed to simplify the landlord experience. Our company will handle every detail of being a landlord, from rent collection, carrying out essential repairs, and possible evictions.

Don’t become another homeowner that was left unprotected because they decided to try ultra-short-term rentals. Let us show you why long-term rentals are the safest and best way to protect your investment.

Are you interested in learning more? Please contact us at 647-952-3644 or email sales@delrentals.com to get started on your long-term rental today.

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When Renting a Condo Makes Sense

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Renting a condo

Toronto real estate is having its hottest—and most reported on—spring and summer in approximately forever.  With the argument between purpose-built rental, private rental, and putting down that money to buy a place right this second raging in the papers, it’s harder to get a sense of when renting a condo—or buying—makes good sense for you.  So if you’re torn between hitting the real estate pages or the rental listings, here are some considerations to help you decide what’s best for you right now, right here.

When you balk at the cost of real estate

It’s the big one: Article after article through 2014 and 2015 have laid out how expensive real estate is getting in Toronto, with bidding wars and skyrocketing prices talked over in excruciating detail.  Find a handy online mortgage calculator or talk to your financial advisor about what sort of mortgage terms you’re eligible for with your projected down payment, and if they’re worse than what you can pay for monthly rent—which skips the condo fees, repair bills, and more—it might be in your best interests to renew the lease rather than buy.

Likewise, look at the price point for units in your neighbourhood of choice.  As sellers have got wind that it’s their market in Toronto right now, real estate prices have gone opportunistically up.  If the cost to buy in your neighbourhood outstrips the cost to rent there, prudent investments might be a better destination for the cash you’ve saved.

When you don’t have concrete plans for permanence

You don’t know whether you’ll stay at your company in a few years—or if they’ll transfer you for a stint at an international office.  You don’t know if you’ll stay single, childless, or at your current family size forever.  You don’t know if this neighbourhood is where you want to plant your permanent roots.

That’s when it’s time to hold off on buying a home.

One of the primary benefits of renting a home is its flexibility: If you need to pick up and move to another city, a bigger space, or another neighbourhood, it’s as simple as giving your legal notice and hitting the rental sites.  Selling a home is a much more complicated endeavour, and if your life still hasn’t set in shape in certain ways, it’s a simpler and much less expensive proposition to settle down before you physically settle down.

When you haven’t budgeted for the fine print

Buying and selling houses isn’t a fee-free, tax-free transaction, unfortunately.  When one buys or sells a property, some of that money goes to land transfer taxes, your real estate agent, your lawyer, home inspectors, and more.  If those necessaries of doing real estate business aren’t in your budget, it’s best to hold off—and not get hit with a bad surprise.

If you’re not prepared for maintenance

One of the best things about owning a home is you can do pretty much whatever you want to it, as long as that’s within city building codes and you don’t make the house fall down on your head.  And one of the best things about renting one is that if something starts trickling down toward your head parts, it’s not your financial responsibility to fix.

Home maintenance is an ongoing, lifelong responsibility, and it’s the kind of thing you want to do right: hire qualified contractors, make long-term decisions, use the best materials.  If you aren’t financially or emotionally prepared to sink time, money, and effort into keeping that home in great shape, this can produce a whole lot of stress and grief, and considerable life disruption.

If the thought of hiring roofers gives you hives, it might be best to stick to a rental situation, where any repairs land straight on your landlord’s desk.

Property taxes and insurance

Home ownership also comes with the question of insurance and property taxes.  If the property values in your neighbourhood go up—and Toronto’s property values don’t seem to be inclined to go down—that shows up in your property tax bill, if, unfortunately, not your pocketbook.  If you’re unsure you can carry the year-to-year load of property taxes and insurance on top of your other responsibilities, it might not be the right time to buy a home.

—

As your stern grandpa would say: A home is a responsibility.  The tradeoff we make for permanence and equity is a whole lot of financial juggling and the burden of making sure everything is legal and works right.  There’s no stigma in not being up for fitting that into a busy life just yet—or, bluntly, ever.  Consider the factors, make the decisions that work for you, and don’t look back.

Best of luck!

Renting a Condo vs Apartment

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Quality condo appliances

The Condo Conundrum: What Renting a Condo Does for You (Renting a Condo vs Apartment)

More and more of Toronto’s rental housing is coming in the form of condominiums, for rent by private or corporate owners.  But aside from the name, what’s the difference between renting a condo vs apartment for your next move?

There are tangible differences between apartment rental and condominium rental to weigh when making your choice of applications.  Here are five factors to consider when asking whether a condominium rental is right for you.

  • Condominium buildings tend to be newer builds

Although with the new year—and UrbanCorp’s cancellation of two downtown condo projects in favour of building rental apartments—there’s been a decided shift back toward newly built apartment buildings, a Toronto condominium will generally be newer and built with more modern materials than an apartment building.

“Purpose-built apartment construction has been almost non-existent the last few decades across the GTA,” says the Toronto Star, and Shaun Hildebrand, vice-president of Urbanation, a research group specifically focused on the condominium industry, backs that up, saying that privately owned rental condos have soared to take up 99% of Toronto’s new rental supply.

What that means for you?  Rental condominiums are less likely to have the issues associated with building age: Wear and tear in common areas, occasional pest issues, water pipe corrosion, disruptive noise due to ongoing heavy maintenance, less efficient heating and ventilation systems, and more.

However, newer rental condominiums can lack some of the features of older trends in building design: The insulating brick and plaster of Toronto’s oldest rental stock provides less natural light than current glass-walled condominiums, but keeps the cold out—and heat in—like magic and ensures low hydro bills.

As well, there’s a sweet spot for condominium rental: It takes a new condo a few years to work the kinks out, construction-wise.  A condominium unit that’s less than three years old may be still discovering its maintenance problems, while slightly older units can usually be relied upon for the minimum of maintenance trouble.

  • Condominium rentals can bundle your utility bills

As discussed in previous posts here, one of the major draws of condominium living is that you can bundle your utility bills into easy-to-pay, easy-to-budget-for condo fees, set by the condo board to a fixed monthly rate.

While the words “utilities included” used to be standard in Toronto rental listings, with the advent of the provincial government’s smart meter legislation in 2007, rental apartments that pick up the hydro bill have all but vanished.  Instead, they’ve been replaced by individual unit meters that gauge your hydro usage individually.

If you’re a renter who’s dedicated to conserving hydro, the apartment option may be for you.  But if not—or if you worry about paying winter heating bills on a rental apartment you can’t personally reinsulate—the pooled resource of monthly condo fees, rolled into your rent, can be a great source for peace of mind.

  • Security matters

While apartment buildings with a security desk and weekend patrols are not uncommon, on the whole, condominium buildings have a consistently stronger game when it comes to security and front desk coverage.

The reasons are simple: Rental buildings, especially those owned as investment properties, won’t have the same stake in a good security presence that a condominium board made up of—and funded by—people who own units and live in the building will.  Condominium boards allow residents to set the security budget, and have a stronger motivation to allot the security presence that’s necessary for the neighbourhood they call home.

As well, an active and engaged security presence can be a massive help for in-building disputes.  A noisy party next door can be calmed down with one call to the front desk, rather than late-night hunting for a superintendent’s phone number—who may live offsite—or going directly to the police.

  • Building for ownership means quality appliances

While condominiums owned by investors make up a significant portion of the rental stock in downtown Toronto, they’re not built to rent—which means a higher quality, overall, of appliances.

Condominium kitchens are overwhelmingly more likely to come with new, energy-efficient, organized fridges; easy-to-clean glasstop stoves; and compact dishwashers, which don’t appear in any but the most luxurious apartment rentals.  This extends into the bathroom, where low-flow toilets and adjustable showerheads are increasingly common features.  As well as using less energy and water, newer appliances will perform better, cook more evenly, clean more easily, and give you infinitely fewer maintenance problems from day-to-day use.

Architectural design geared for ownership also means another vital perk: the majority of rental condos will provide ensuite laundry rooms.  There’s a significant savings in not having to hoard your quarters—or fill a chip card—to do laundry in a common laundry room or outside laundromat, and the convenience of a washer and dryer that’s always available, no matter what hour of the night, can turn an early-morning-meeting wardrobe emergency into a minor before-bed fix.

  • Maintenance with the pride of ownership

The most intangible—and most important—bonus to renting in a condominium building is the attention that pride of ownership brings.  A condominium building is maintained by its owners, rather than a third-party management company or REIT, and owners take more consistent care of their common areas—and in the case of your landlord, of your unit in particular.

While common maintenance tasks can fall behind in a rental apartment building—unpainted walls, unreplaced carpets, sidewalks going unsalted in the winter—maintenance standards are often higher in a condominium building.

Ultimately, renting in a condominium building can be rental with the advantage of an ownership ethic: clean, bright, and with neighbours who will appreciate the common areas like it’s their home—because it is.

About Del Condominium Rentals

Del Condominium Rentals (DCR) is a full service rental management company. For more information about our program and how to have your suite professionally managed, please contact our Head Office at 647-952-3644 or email us at sales@delrentals.com

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