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With the pandemic seemingly in the rearview mirror and summer heating up, new and experienced landlords nationwide can look forward to a potentially lucrative year.
According to the June 2022 Rent Report produced by Rentals.ca, the average rent for all properties listed on its site was $1,888 per month in May, representing a 10.5% increase year-over-year. That indicates the rental market is returning to the pre-pandemic high of $1,953 per month in May 2019. Zeroing in on Western Canada and the average rent in 2022 for a one-bedroom dwelling, the report lists Vancouver as having the highest monthly rental rate at $2,377 per month and Saskatoon having the lowest at $975 per month.
There’s little doubt being a landlord can be rewarding and result in earning a handsome income, but it comes with a lot of responsibility, challenges, and hard work. Regardless of which municipality or province your property is located in, all landlords face a broad range of risks. That highlights the need for a comprehensive rental property insurance policy to protect your property and finances from third-party bodily injury or property damage claims.
Scaling Up Your Vacation and Short-Term Rental Business
Whereas providing a traditional long-term rental property may provide more security, delving into the short-term vacation market as an Airbnb landlord offers flexibility, and may prove profitable. But how much you can earn depends on the location.
For instance, Airbnb Canada says a typical host earns $3,900 annually for renting their primary residence three to four times per month. But if your primary residence is in a resort town such as Whistler, BC, estimates peg the annual income of Airbnb hosts at more than $52,000.
Nevertheless, being a short-term vacation rental property landlord also comes with significant risk. It may involve higher upfront costs and ongoing expenses, given the high rate of guest turnover.
While Airbnb does provide a Host Protection Insurance program, it may be limited in scope. Furthermore, once you start listing your primary or secondary property on Airbnb, VRBO, or other short-term rental sites, insurance companies view it as a business property, meaning a residential home or condo insurance policy may not afford you the coverage you need. Enhancing your protection with an Airbnb insurance policy can provide peace of mind and financial support to deal with an insurable loss or damage.
If you’re leaning toward running a short-term rental business, keep the following in mind:
- Bylaws and regulations. Check with your municipality. There may be bylaws or rules for Airbnb hosts in your region. You may be required to register with your city and purchase a short-term rental license. Many municipalities are cracking down on Airbnb hosts who don’t abide by the rules due to an ongoing housing shortage crisis. For instance, the City of Victoria is actively investigating hundreds of properties that may not be compliant with its bylaws.
- Cleaning measures. The COVID-19 pandemic has taught us the value of adhering to hygiene best practices. In the short-term rental arena, that’s especially true. Therefore, allow time between reservations to thoroughly clean your dwelling and do necessary maintenance work.
- Add up the expenses. Hosting guests means there’s likely to be an increase in your utility bills (electricity and water), so be committed to accurate bookkeeping by regularly tracking your expenses. Doing so will also help when filing your annual tax return.
6 Steps to Take Before Becoming a Landlord
On the surface, being a landlord appears to be straightforward. You have a living space to rent or lease, advertise it on applicable websites and in the local newspaper, and wait for potential tenants to apply. Then it’s a matter of choosing the tenant you feel is the best choice, right? Not quite.
You should take several preparatory steps to ensure the experience is pleasant and seamless for you and your future tenant. Here are six things you should do before diving into the short- or long-term rental game and becoming a landlord:
1. Approach renting in a businesslike fashion
Treat your rental property as a business—draft a plan that accounts for all ongoing expenses and your projected income. If you’re a new landlord, consider joining your province’s landlords association to learn from more experienced property managers who can guide you in handling any issues that arise, such as what to do if your tenant is late paying their rent.
2. Abide by provincial rental rules
Laws governing landlords vary by province. Know your rights and obligations as a landlord in your jurisdiction. For instance, you may wonder if you’re entitled to ask new tenants to put up a damage deposit before moving into your unit or home. Some provinces, like Alberta, allow landlords to charge a damage deposit that doesn’t exceed one month’s rent. Other provinces may not permit you to do so.
3. Thoroughly vet potential tenants
You want to find great tenants and not take chances. That means screening potential tenants by conducting criminal record checks through the RCMP and credit score checks through Canada’s two major credit reporting bureaus, Equifax and TransUnion. Also, ask potential tenants for employer and previous landlord references. Take the time to make sure nothing’s amiss.
4. Provide world-class customer service
Once you find a great tenant, keep them happy by cultivating the relationship. That means being responsive to their concerns as they arise and letting them know you appreciate them by doing something as simple as buying them a gift card during the holiday season.
5. Be proactive in managing your property
Bear in mind your landlord insurance policy is not a maintenance contract. In other words, proactively manage your property by conducting regular maintenance inside the house or unit and the exterior property. If you’re not a handyperson who can fix almost anything at home, then build a network with local professionals such as plumbers or electricians who can come to the rescue if necessary.
It’s also worthwhile to insist your tenants purchase renters’ or tenants’ insurance to protect their possessions. Your landlord insurance coverage does not include coverage for your tenant’s possessions if damaged or destroyed by fire or flood or stolen by a burglar.
6. Be competitive with your rates
Don’t make an educated guess on how much you should charge for rent. Do the research and compare what other landlords charge for comparable properties or units in your municipality. Some provinces may provide publicly available rental registries with pricing information to peruse.
About the Author
Matt Jardine is a licensed insurance broker and Team Lead, Property & Hospitality, at Zensurance, Canada’s leading digital business insurance brokerage.