The DOs and DON'Ts of Owning a Vacation Property in Victoria
Posted by Ron Neal on Wednesday, August 9th, 2017 at 12:41pm.
Dreaming of buying an investment property in Victoria with the intention of turning it into a profitable short-term vacation rental? With recent boosts to Victoria's appeal, including this year's high profile visit for Royals William and Kate and our Number 7 ranking of the Top 25 Condé Nast's recent readers' poll of the “Best Cities to Visit”, Victoria is experiencing an record-breaking upsurge in tourism. In 2016, Victoria International Airport reported a record number of arrivals, and with the favourable differential in the US-CDN exchange rate for Americans, the future is looking very bright for our tourist economy.
Demand for Vacation Rentals in Victoria is on the Rise
According to Tourism Victoria, in 2016 the occupancy rate for accommodations increased by 4% from the previous year. Hotels are just one option for tourists. According to Airbnb data specialists alltherooms.com, many more visitors - like those craving a more "local" experience or those desiring more amenities like functional kitchens or extra rooms for family members - are seeking alternative accommodations on private short-term vacation rental sites like VRBO (Vacation Rentals By Owner) and AirBnB.
For real estate investors, purchasing a vacation property can be a lucrative opportunity. In busy tourist seasons, it may be possible to earn almost as much in a weekend what you would renting to a long-term tenant for a month. Multiply that by four weekends, and you've got yourself a hefty income generator!
But (you knew there was a but…) with the current rental occupancy rate at an all time low of 0.5% or even less, it is becoming extremely difficult for local residents to find suitable housing. With the recent surge in average property rents and prices, adding lack of affordability to the already challenging rental situation. Advocates for affordable housing are pressuring local city councils to alleviate this challenge. City councillors are also being lobbied by the hotel industry to create stricter guidelines for short-term vacation rentals (STVRs) so that property owners would be bound by similar taxes and industry regulations. As a result, city councillors in Victoria are proposing new regulations designed to urge investors to rent to long-term tenants instead of short-term visitors, as well as change current regulations to classify STVRs as businesses.
What You Need To Know Before Buying an Income Producing Property
What does this mean for you? If you are considering purchasing a condo or home as a vacation property (or you are considering converting a secondary suite in your home into a vacation suite), The Neal Estate Team has compiled a list of tips you will want to consider before making your investment.
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DO's |
DON’Ts |
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DO anticipate having to apply for a business licence and pay property tax as a business. If Victoria City Council approves their proposed regulations, this item is at the top of their agenda. |
DON'T forget to check with your insurance provider to verify their coverage for a vacation property. Some insurance brokerages will refuse to offer coverage for short-term rental properties, or will charge extremely high rates as vacation properties are deemed risky. |
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DO check with the municipality to find out what your property is (and isn't) zoned for. Most municipalities in the Capital Region prohibit short-term rentals for secondary suites. Areas that permit STVRs are referred to as "transient" zoning. The Neal Estate Team can help you find out about zoning in the area you are interested in. |
DON'T assume that the condo building you are interested in will permit short-term vacation rentals. Read the strata guidelines carefully. The Neal Estate Team can gain access to the strata regulations on your behalf. ***See the full list below of developments that do permit STVRs (*SUBJECT TO CHANGE WITHOUT NOTICE) |
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DO note that you will be required to report to the CRA any income earned from your vacation rental as a portion of your personal income. We recommend consulting with your accountant to inquire about any possible tax implications that might impact your capital gains. |
DON’T forget to claim any eligible expenses that you incur in the furnishing, upgrading and maintenance of your vacation property against your net income. This is the advantage of running your rental as a legitimate business.
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DO be aware that long-term occupants of condos (aka the neighbours) are often the most vocal in their opposition to vacation rentals, and will be more likely to launch complaints with strata council if they notice strata rules being violated. Visitors frequently coming in and out can cause more wear-and-tear, create a security risk, and are less respectful of noise and building rules. |
DON'T take for granted that your vacation property rental will cover off your mortgage every single month. There may be lulls, especially in the low season, during which your property might not be rented. In slower seasons, strategize lowering your nightly rate or offering incentives (ex. Book 2 nights and the 3rd is free) to attract visitors, and advertising in unexpected places (like university and college newspapers). You may even want to consider a longer-term tenant in the slower months. |
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DO weigh the pros and cons of renting to short-term visitors vs. long-term tenants. While you might make more money renting to visitors in the high season, consider whether you want to be responsible for the frequent cleaning and maintenance required. Some vacation property owners find this to be a hassle. A long-term tenant might earn you less money overall, but you have the security of a guaranteed monthly income, and less turnover can mean less maintenance. |
DON'T be afraid of spending a little extra to promote your property on sites like AirBnB or VRBO. Just as the Neal Estate Team does when selling a property, enlist a professional photographer to showcase your suite in the best light possible. Not only will this attract more eyeballs to your listing, but the more effort you put into furnishing and marketing your property, the more likely you will be to attract visitors who will take care of it. |
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DO remember that potential visitors who find you on sites like AirBnB and VRBO are reading the reviews from past guests thoroughly to find out what their experience will be like. If you want to continue to take in quality guests who post glowing reviews, give them an experience worthy of a recommendation. Make sure your description is accurate and the photos are up-to-date. Equip the property with everything they need to be comfortable. Be easily available to answer questions, and address concerns quickly. |
And finally…
DON'T hesitate to call on the Neal Estate Team to help you consider all the fine details of purchasing a vacation property. Our expert realtors share decades of experience navigating through the many rules and regulations of owning investment properties in Victoria. We will make sure you have all the information you need to make a smart decision. |
Best Investment Properties In Victoria Right Now
If you are considering purchasing a condo for short-term vacation rentals, here is a list of the developments in Victoria that currently allow for this type of rental:
- Leiser Loft - 524 Yates St.
- Bear Mountain - 1375 Bear Mountain Parkway
- The Caprice - 429 Linden Ave * Received notice from a strata member that they are proposing a vote to restrict short term rentals
- Duet - 649 Michigan St. (30-day min)
- The Falls - 707 Courtney St & 708 Burdett Ave
- Belvedere - 788 Humboldt St. (30-day min)
- The Union - 517 Fisgard
- The Era - 728 Yates St.
- Ocean Grove - 3233 Selleck Way (30-day min)
- Travino Condo - 742 Travino Lane & 740 Travino Lane (30-day min)
- The Janion - 1610 Store Street
- The Legato - 960 Yates Street - under construction
Call the Neal Estate Team today at 250.386.8181 to help you find the perfect investment property!
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The Neal Estate Group is your #1 source for all of your Victoria BC real estate needs. Get in touch with us online or by phone at (250) 386-8181 to speak with a Victoria real estate buying or selling expert today. With decades of experience as a top selling Victoria REALTOR® and ranked in top 1% globally with over 5,000 transactions and $1 Billion SOLD, Ron Neal & The Neal Estate Group have the industry experience and market knowledge to help you make smart and informed buying or selling decisions.