Airbnb or Long-term Renting: Which is Best for You?
Airbnb was founded in 2008 and has grown exponentially over the last ten years. With over 150 million users in 191 countries, it is no wonder that many people are turning to Airbnb as a source of extra income. Airbnb is a platform that allows you to post properties or search for properties to rent for one night, up to a month. The website and app display prices, amenities, photos and location. After your stay, both the host and guest can leave a public and private review about the experience.
There is much debate over the use of Airbnb as a rental tool and whether it is better to rent short term to Airbnb travellers or to long term tenants.
What you need to know about the Airbnb Market:
There are 199 active listings on Airbnb in Sudbury, Ontario with the majority being entire homes. Airbnb offers options for private rooms with shared common areas as well as hotel rooms. The average rate in Sudbury is $88/night. The average occupancy rate is 58%.
With full occupancy, you’d be looking at an average income of $31,120/year however, with a 58% occupancy rate you are more likely to be receiving about $18,630/year.
The Airbnb market in Sudbury is surprisingly comparable to the Toronto Airbnb market minus the amount of inventory. In Toronto, there are over 19,000 listings. The average nightly rate is $104/night. The average occupancy is 64%.
But what about long-term rentals?
In Sudbury, the occupancy rate for long term rentals is 97.4%, vastly larger than short term renting through Airbnb. The average rental is $970/month equating to $11,640/year (CMHC), less than your potential income with Airbnb.
So, which is best?
The type of property you are going to purchase should be largely dependant on the type of investor you are. If you want flexible rental dates and flexible pricing, Airbnb is for you. Airbnb has a higher risk of vacancies, but the reward can be greater. Additionally, you must consider your availability. You will need to coordinate check in and check out, cleaning services and restock the unit frequently. You must also be available to communicate with guests. Consider purchasing a unique or luxury property in a vacation spot or a small unit in a business center for business travellers.
If you are looking for an investment that is stable and consistent, long term rentals are for you. These allow for you to collect the same rent over a 12-month period. Renting to long term tenants allows you to play a more passive role with less need for scheduling services and re-stocking items. Typically, there will be less need for communication from your tenants than with Airbnb guests.
A Note about Taxes:
Keep in mind that depending on how your Airbnb is operated, your income reported to the Canada Revenue Agency can be either from your property or from your business. Claiming income as from property means you will pay 50% of the net operating income to the government. Claiming income as from business means it will be added to your personal income and will be taxed within your tax bracket. You may be obligated to register and collect HST on your rentals if your income exceeds $30,000 per year.
Want to know whether your Airbnb or long-term renting is better for you? Set up a free consultation!