Condo owners have been quick to adapt to the Airbnb trend. With the price of condos on a steady increase, investing in and then renting out a unit as a short-term rental to cover mortgage payments is an attractive proposition. But, a condo unit used as anAirbnb does present a few problems for the investor-owner.
Some local councils have tightened regulations for short-term rentals that only allow you to rent out the property if it is your primary residence. Other restrictions include imposing taxation, certification and limits on how frequently you can rent out the space. Short-term rentals are further regulated within the frame-work of the condo rules, individual condo boards have guidelines or even outright bans for owners and tenants in their buildings.
“Airbnb short-term rentals face a higher level of scrutiny by lenders than typical one-year lease agreement renters,” says Laura Martin, director of Private Lending Hub. “The asset could become damaged, given the revolving door of short-term tenants. One quiet professional that rents for 10 days could be followed by a rock band that trashes the place the next weekend. When you
have so many people going in and out, it’s going to make lenders nervous,” she adds.
It’s easier to obtain a mortgage if you actually live in the condo, but if you’re buying one as a short-term rental investment, you may have to turn to commercial lenders, where financing is more expensive. Kim Gibbons, a Mortgage Intelligence broker, says that only a few A lenders – such as banks and credit unions – in Toronto are willing to provide funds for Airbnbs. The only way some lenders will take a short-term rental is if you can provide a two-
year average of short-term rental income.
“Lenders like the security of a person living in a home because it’s the best possible security,” explains Butler, an independent mortgage broker. “Lenders are confident that if someone is living in the home full time, then there is a really good chance that they’ll want to keep a roof over their heads, and that means they’ll make their mortgage payments. It’s why ‘owner-occupied’ is often part of the mortgage contract.”
