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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.

How to Detect—and Avoid—Rental Scams

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Rental Scams

Rental vacancy rates in Toronto are low—and even lower for Toronto condominiums, where just 1.2% of units are ready to be someone’s new home.  With the urge to jump on that excellent rental before someone else snags it away comes an unfortunate side effect: a rise in rental apartment and condominium scams.  Here’s how to sniff them out and not get taken in by those questionable folks who’d rather take your money and leave you hanging on moving day.

Know Your Average Rents

Any scam requires bait, and a rental rate that’s too good to be true is your first—and major—red flag.  There’s such thing as an absolute steal when it comes to renting in Toronto, but if someone’s offering a downtown one-bedroom for three-quarters the cost of every single one of its neighbours, unfortunately it’s more likely that something doesn’t add up.

Once you decide which neighbourhood you’re looking to settle into, look at a few sets of rental listings as well as news articles to get a sense of what the average condo in that area rents for.  It’ll not only help you pick your neighbourhood and budget well, but that’s the knowledge that can most easily keep you from getting drawn into a rental scam.

The Invisible Condominium Problem (or Landlord, or Lease)…

So you’re all set to see this condo unit, but there’s one problem: The landlord doesn’t live in town—the classic phrase is “I’m a business person who travels abroad”—and only wants to communicate by email.  There’s nobody local to show you the place.  Or your prospective landlord has met you outside for a showing—but doesn’t want to show you around inside.

All these flags?  They spell trouble.

Yes, they might have pictures.  But in a 2014 scam which hit renters from Toronto to Vancouver, in which the fake landlord sent pictures of the inside of a third-floor condominium unit—but the catch was, units at that address started on the fifth floor.  Photos of a unit can be lifted easily from real estate listings or plainly faked.  One quick way to check if those photos are legit is to run a Google image search to see if those photos show up anywhere they don’t belong—like on a real estate site, or rental listings for multiple other addresses.  If so, you’ve just found a scam artist, not a landlord.

On the whole, if the potential landlord gets a little too nervous about letting you inside the property, makes excuses to avoid it, or cancels viewings without explanation, it’s quite possible that the front of this building is exactly that, a front, and they don’t own this space at all.

Make sure, whenever you’re renting a unit, you physically see the inside of that unit—or if you’re renting a property from out of the city to move into for work or school, have a trusted friend or colleague check it out in person, or look into hiring a reputable rental agency to be your eyes on the ground and pre-clear any property before you consider it.

Lease First, Payments to the Back

Beware—strongly—of anyone who wants you to write a cheque—or especially wire or pay cash—for a first and last month’s rent without having signed a paper lease.  It’s never, ever a good idea to put down money for any upfront deposit before the lease is signed.

If you feel like your prospective landlord is pushing for money upfront, or if they say those magic words—”We don’t need a lease”—pick up and get right out of there.

Furthermore, if you’re being asked to wire money—which is less recoverable than cheques, especially when sending overseas—that’s a significant red flag.  While it’s true that many Toronto condominium rental units are owned by overseas investors, landlords who are business-minded enough to keep a rental condo in another country are also business-minded enough to hire a management or leasing company locally to manage it, and there should be a manager or agent available in the city.

Professionalism is key

It’s the inconsistencies that sometimes can mark someone who’s not so much renting a condominium but playing a part.  Does the email address that writes back to you match the name of the contact?  Do your contacts with this landlord come from multiple email addresses?

Likewise, while “I’m a travelling business person” is the standard for apartment scams, does this person act the part of who they claim to be?  Are they asking you for references, a credit check, letters of employment, and the other tools they could use to make sure you’re a good tenant?  If they’re a little too eager to skip the steps that protect a landlord from bad tenants, they might not be interested in having you as a tenant at all—just in your deposit.

Further, if a landlord solicits extra personal information—”Tell me about yourself, so I can decide if you’re the kind of person I want to rent to!”—but don’t want to give information back, be careful: that’s more a rhetorical tactic than a question, designed to create a situation where you’ll worry about being the kind of person who can get this condo unit—and not ask the hard questions of the prospective landlord.

Ask Questions.  Lots.

As always, when looking at a potential home, more questions—and more detailed questions—are your friend.  Ask about the landlord, their plans for the property, its history, the rent and utilities; anything you’d normally ask.

If anything about the process feels rushed, off, or gives you an uneasy feeling—wait.  And ask the landlord for an extra day or two.

If your prospective landlord gets a little weird and evasive—or a lot weird and evasive—when you ask questions about leases or proper legal procedure, or if they can’t quite answer questions about the area, the property, or their plans in concrete detail, check out all the rest of the signs of a scam and see if they add up.  Most people aren’t actually built to lie happily or well (it’s science!) and the best-laid con game can fall apart because human beings, as always, are only human.

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So, if you’ve run into a rental scam, what to do?  Report, report, report.  Drop a line to the Canadian Anti-Fraud Centre, file a report, and help make sure nobody else gets caught in this particular trap.

Stay smart, and happy renting!

Self-Managing a Condominium Rental: Is It For You?

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Self-Managing a Condo

There’s a lot more information out there about what it’s like to be a good Toronto tenant than there is about being a good landlord.  Which explains why, when looking at renting out that investment property, it’s easy to assume that there can’t be much to it—and run into a lot of trouble.  So here are a few questions to judge whether self-managing your Toronto condominium rental is going to be right for you—before you take the plunge.

Do you have the time?

Being a landlord—especially in a condominium, which comes with its own set of rules, needs, and requirements—is a job, full stop.  What’s more, it’s a business, and even the most low-maintenance tenants will require time, attention, and dedication on your part.  Sourcing reliable and affordable contractors, making sure repairs get done as quickly as possible and mediating between property managers, the condo board, and tenant needs as necessary all take time—and they’re all your job.

Doing that job well without spending a pile of money usually means research.  While condominium buildings will sometimes have lists of approved or recommended contractors, it’s by no means guaranteed that they’ll be able to flip you a name for less common but still important issues, such as stove repair—and not every contractor will service every part of the city.  Putting the time into solid comparative research—just like being thorough when you check a potential tenant’s references—is one of the essentials of being a good landlord and getting repairs done right the first time.

If you’re juggling the kind of full-time job that goes in for late nights, raising young children, caring for an elderly relative, or putting the time after work into upgrading your degree, the instant response style that self-managing a condominium rental needs might not be a good fit—or might lead to more resentment than is necessary for the normal wear and tear of a property’s life.

Do you have the regulatory expertise?

When you’re self-managing a condominium, forgetting the small things can have serious legal consequences: For example, if sending that N1 or N2 form 90 days before a rent increase slips your mind, you’re not getting that rent increase this year.  And if you aren’t on-site to tell that contractor that yes, Monday’s a good day to start that sink repair—and didn’t send a notice of entry 24 hours before—they legally can’t start work, and you can’t legally be there.

It’s important to know the laws and regulations around renting—your rights and your responsibilities both—to make sure you’re taking care of yourself as a landlord, not contravening your condo board’s rules, or putting your tenants or any contractors you hire in positions where they can’t do what they need to do.  Not knowing the law makes good tenant and work relationships go toxic fast, and opens you, as a landlord, up to both legal repercussions from the Landlord and Tenant Board and being played by bad tenants.

Renting out your property is one of those situations where good fences—let’s face it, good boundaries—make for good neighbours, and so if you’re not great with low-grade legal language or the small but regular pieces of paperwork the job comes with, it’s worth the cost to get a professional and make sure the law gets what it requires.  It’ll save an intense amount of headache down the road and make sure you never even get a taste of how much paperwork an eviction requires (hint: lots).

Do you have the communication skills?

It’s not a skill set that you’ll usually hear as important for landlording, but just like any liberal arts major will enthusiastically tell you, it’s the soft skills that often make all the difference.  Becoming a landlord is all about communication: Writing and placing a comprehensive and appealing rental ad, getting your expectations across to potential tenants—and making sure you know what their needs are in return— and then acting as a switchboard between your condo’s property manager, contractors, occasionally the City, and the tenants who are paying your mortgage with their rent.

If you’re a great communicator, good at getting tone across in email and patiently building productive working relationships, you’ll sail through this with confidence.  But if communication and management isn’t your strength, then you might find yourself repeatedly running into misunderstandings that drag out everything involved with running your property and put a damper on the whole adventure.

Like any job, setting out to be a landlord is all about knowing your strengths, knowing your trouble spots, and working with them both to make the decisions that get the job done.  If you’re not natural landlord material, or aren’t sure there’s space for it in your already busy life, that’s not a defeat: Sometimes the best decision you can make, as a landlord, is to bring in a property management company, sit back, and know that everyone—you, your tenants, and your contractors—is going to have the smooth ride you all need.

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 416-296-7368 or email us at info@delrentals.com

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