Many of my investment properties are furnished short-term rentals in Vancouver’s Fraser Valley and Kelowna, BC. I like short-term rentals as an investment strategy because I can charge ‘per night’ as opposed to ‘per month.’
For example, when I charge $100.00 to $125.00 per night for a two-bedroom condo, I can average about $3300 in income each month. If I were to rent that same furnished condo to a long-term tenant, I would only be able to charge a maximum of $1600.00 each month. Even if I throw in a 10% vacancy rate, hydro, cable and WIFI at $200/month into the per night calculation, I’m still on top.
With short-term rentals, prospective tenants compare your unit with a hotel, so $125.00 per night for a two-bedroom unit with two bathrooms and full working kitchen would be considered ‘cheap’.
As the name suggests, short-term rental means that you are renting out a space for a set amount of time, usually less than six months. It can be as short as 1 day, 1 week, 1 month, 6 months, or anything in between. The space that you’re renting out can be a bedroom in your house, a condo, or even a little guest house, assuming you have the space to do so. The tenants you attract will depend on what you’re offering and how you market your unit.
If you treat your rental property like a business, you will make a business income. But if you treat it like a hobby, you’ll get a hobby income.
If you’re like me and prefer a minimum 30-day rental period, you should use the BC Residential Tenancy Agreement that you can find online. Everything is stated on the contract including what is included with the rent, what is not, and most importantly, what the damage deposit is.
If you are renting for a shorter period than 30 days, it’s still a good idea to make sure that you have a professional contract similar to the BC Tenancy Agreement. Make sure you take a damage deposit, and list what is included with the rent and the dates of the tenancy.
With so much competition from others trying to capitalize on the phenomenon of short-term rentals in Vancouver and surrounding areas, having a well-written ad is essential. If you’re not a great writer, borrow bits and pieces from marketing brochures of new construction projects in the area or go online to find MLS listings.
Be sure to highlight things like area attractions, building amenities, proximity to transit, the Walkscore of the area (www.walkscore.com), and shopping centres, as well as what is included.
“You will find quality construction and high end finishing here including:
– Top quality stainless steel Frigidaire kitchen appliances
– In-suite stacking washer and dryer
– Modern bathroom with soaker tub, marble countertop, and rain shower head
– Smart TV & sound bar
– Luxurious hotel-quality bedding and linens”
Place your ad on Vancouver Craigslist, AirBnB, and/or VRBO (Vacation Rentals by Owner). If advertising on Craigslist, remember to renew your ad every few days or at least once a week.
Photos and Staging
As the saying goes, “a picture is worth a thousand words” and for any rental property, posting beautiful photos are a must. Whether if it’s short or long-term, decorate the unit tastefully and then take professional photos with good lighting. Oftentimes, people decide whether or not they want to rent from you within seconds of looking at the photos of the unit.
Ensure that your photos are realistic and represent what you are actually offering. Have you ever seen those cheap hotel photos that look amazing but when you arrive it’s actually a run-down property that smells just as bad? You don’t want to have your tenants disappointed.
Research what hotels and other short-term rentals in the area are charging per night. If you are close to a convention centre or stadium, see what conferences and events are going on, and price accordingly. You don’t want to charge too little or too much for your area.
If you follow what the hotels charge AND know what events are going on in your area, that’s where the big bucks can be made. You don’t want to be charging $100 per night when all the hotels are fully booked and charging $400 per night.
The short-term rental business can be seasonal and it’s common to charge higher nightly rates during Spring Break and Summer. You can also charge higher in the Winter if your investment property is close to the ski mountains. It’s important to capitalize on charging higher rents during high tourist seasons to cover vacancies during the low season.
If done correctly, short-term rentals can be quite lucrative with only a minimal amount of work. Once you get the property up and running, you will have enough experience under your belt to know how to market the property, write the contracts and recognize good tenants from the bad ones. Before you know it you have yourself a part-time business!
Good landlord-tenant relations are important for social media ‘reviews & testimonials’ and for referrals. This means that you have to be available for your current tenants by phone in case they have questions or issues with the suite. A partner of mine takes orders for a free case of cold beverage or fresh fruit platter upon the tenant’s check-in, and goes into the suite 15 minutes early to turn up the heat/air conditioning and have soft music playing in the background. It’s those unexpected special touches that will make you memorable.
My advice is to hire a professional (and thorough) cleaning company to help turn over the unit after each tenancy, or clean every other week for longer tenancy periods. Having cleaners in the suite every other week is a good way to make sure your tenants are not doing something they shouldn’t, like smoking, or damaging the unit, so you can address problems quickly. You can charge the tenants a cleaning fee in most cases or write off the expense against your rental income. So why bust your butt trying to do everything yourself to save a buck?
If you are planning to purchase a condo or strata property as your investment, be sure to read the property’s by-laws first for any rental restrictions. If you skip this step and the building does not allow short-term rentals (or even long-term rentals) then it’s not a good investment property. Hiring an investment-focused realtor will eliminate this issue as their job will be to ensure your business strategy is in-line with the types of properties they show you.
With the tips above as your guide, you’ll be able to achieve higher profits while avoiding costly mistakes in the highly competitive short-term rental market.
To your success! Teresa Leung