In the ever-evolving landscape of real estate and property management, Toronto home owners face a significant decision: Should they opt for traditional long term rentals or venture into the world of short term (Airbnb, VRBO, etc.) hosting? Each option comes with its own set of advantages and drawbacks, and the choice depends on various factors. In this post, we’ll delve into the pros and cons of Airbnb hosting compared to traditional long term rentals for Toronto owners.
Short Term (Airbnb) Hosting: The Pros
1. Higher Earning Potential
One of the most compelling reasons home owners consider Airbnb hosting in Toronto is the potential for higher rental income. Airbnb properties often command premium rates, especially in sought-after neighborhoods and during peak tourist seasons. These rates can be as high as 3x – 5x more than you would receive from a traditional long term tenant. This means that, on a per-night basis, you can earn significantly more through short-term rentals compared to traditional long term leases.
2. Flexibility in Occupancy
Airbnb offers flexibility that traditional leases simply cannot match. You can choose when to make your property available for short-term rentals and when to block out dates for personal use or maintenance. This flexibility is particularly advantageous for those who want to use the property occasionally or want to conduct upgrades or minor renovations to the property.
3. Short Term Cash Flow
If you’re looking for immediate cash flow, Airbnb hosting can provide it. With guests checking in and out regularly, you receive payments quickly, making it easier to cover expenses such as mortgage payments, utilities, and property maintenance. Typically, Airbnb payments are made within 48 hours of the check-in date.
4. Tax Benefits
Home owners who operate Airbnb rentals may be eligible for certain tax benefits. In some cases, you can deduct expenses related to your Airbnb property, such as cleaning fees, utilities, and property management fees, which can reduce your overall tax liability.
5. Property Maintenance
Airbnb guests tend to treat properties with care since they’re often reviewed by previous hosts. This can lead to fewer instances of property damage or neglect compared to long term tenants, reducing maintenance costs.
Short Term (Airbnb) Hosting: The Cons
1. Fluctuating Occupancy
While the flexibility of Airbnb hosting is a pro, it can also be a con. Occupancy rates can fluctuate, and it may be challenging to maintain a consistent income if your property doesn’t attract guests year-round. Seasonal variations can impact your earnings as fewer people will travel in the winter months. While long term renting offers consitency as you know exactly how much you will earn each month, short term revenue will vary from month to month.
2. More Hands-On Management
Short term hosting requires active management. You need to handle guest inquiries, check-ins, cleanings, and maintenance. This can be time-consuming, especially if you manage multiple properties or have a full-time job.
3. Legal and Regulatory Challenges
Toronto has specific regulations governing short-term rentals. Hosts must register their property and comply with local bylaws, which can be complex to navigate. Non-compliance can result in fines and legal issues. Currently, to list on platforms like Airbnb, it must be your primary residence.
4. Wear and Tear
Frequent turnover of guests can result in more wear and tear on your property. Furniture, appliances, and fixtures may need to be replaced or repaired more often, increasing maintenance costs. With a short term rental property, your home will be fully furnished, whereas with long term, where your property is vacant.
Long Term Rentals: The Pros
1. Steady Rental Income
Traditional long term rentals offer stability in terms of rental income. You can rely on a consistent monthly rent payment, which can help with financial planning and covering mortgage payments.
2. Less Ongoing Management
With long term rentals, you generally have less day-to-day involvement compared to Airbnb hosting. Its more of a “set it and forget it” situation. While, tenant turnovers are less frequent, reducing the need for constant marketing, cleaning and up-keep.
3. Fewer Legal Complexities
Compliance with rental regulations is more straightforward for traditional rentals in Toronto. There’s less risk of running afoul of short-term rental bylaws and associated fines. Short term rentals must adhere to the many regulations set forth by the city of Toronto, including submitting quarterly returns and paying for an annual licence.
4. Reduced Furnishing Costs
Long term rental properties are usually unfurnished, which means lower initial costs for home owners. Tenants bring their furniture, reducing the expense of furnishing and maintaining the property.
Long Term Rentals: The Cons
1. Lower Earning Potential
While long term rentals provide stability, they often come with lower rental rates compared to short-term Airbnb rentals. Home owners might miss out on the potential for much higher income.
2. Limited Access for Personal Use
With a long term tenant in place, it can be more challenging to access and use your property for personal purposes. You must adhere to the terms of the lease agreement, limiting your flexibility.
3. Longer Vacancy Periods
In between tenants, there can be extended periods of vacancy. Finding new tenants, conducting background checks, and preparing the property for move-in can result in income gaps.
4. Wear and Tear
While long term tenants may cause less frequent turnover, they can still cause wear and tear on your property. Over time, this can lead to significant maintenance and repair costs.
Making the Decision: Short Term or Long Term Rental?
The choice between Airbnb hosting and traditional long term rentals in Toronto depends on your specific goals, circumstances, and preferences as a home owner. Consider the following factors when making your decision:
Financial Goals: If you’re primarily focused on maximizing rental income and can handle the additional management responsibilities of Airbnb hosting, short-term rentals may be the better choice.
Property Type: The type of property you own can influence your decision. Some properties are better suited for short-term rentals, while others may be more appealing to long term tenants.
Local Regulations: Be sure to familiarize yourself with Toronto’s regulations regarding short-term rentals. Ensure you’re willing and able to comply with these rules if you choose Airbnb hosting.
Personal Use: Consider how often you want to use your property for personal purposes. If you desire more flexibility in accessing your property, long term rentals may be a better fit.
Risk Tolerance: Assess your tolerance for risk and willingness to handle the potential ups and downs of short-term rental income.
Time Commitment: Airbnb hosting often requires more time and active management. Determine if you have the capacity for this level of involvement.
Property Location: The location of your property within Toronto can significantly impact its suitability for Airbnb hosting or traditional renting.
Choosing between Airbnb hosting and traditional long term rentals for your Toronto property is a decision that should align with your financial goals, lifestyle, and risk tolerance. Each option has its unique advantages and challenges, and there is no one-size-fits-all answer. It’s advisable to conduct thorough research, consider your property’s suitability, and weigh the pros and cons carefully before making your decision. Whether you opt for the consistent income of long term rentals or the potential for higher earnings through Airbnb hosting, Toronto’s dynamic real estate market offers opportunities for home owners seeking to maximize their investments.
