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Why Condo Investors Should Beware AirBnB-Type Rentals

Frank O'Brien
May 10, 2016

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Westcoast Condominium

We understand the allure of AirBnB (or similar, such as VRBO) rentals for Vancouver condominium owners and investors. The opportunity to gain more money renting per night or per week rather than with conventional monthly rent is tantalizing.

It is possible to rent a well-located Vancouver condominium for $170 to $200 per night, which can work out to more than twice as much as the typical monthly rent for a condominium.

There are other advantages: owners can increase the rent during peak seasons or even during major events; they can rent a single bedroom; they can use the condominium themselves if needed without bothering a long-term tenant. Also, most AirBnB hosts ignore BC’s Residential Tenancy Act, city bylaws and other bothersome regulations.

Is it Legal?

But it is ignoring these very regulations that help shape the dark side of the AirBnB experience. As profitable as an AirBnB rental may be, it requires owners to become such outlaws that it constitutes a very dubious business plan.

AirBnBs are illegal on many levels. It is only through the grace of non-enforcement and ignorance that they exist at all.

First, the vast majority of strata corporations restrict condominium rentals to long-term tenants (three months or more), but AirBnB hosts consistently rent out condos for one to seven nights. This has caused many angry strata corporations to crack down on AirBnBs, often with hefty fines.

Also, Vancouver bylaws and zoning sections 10.20.5 and 10.21.6 say that property owners cannot rent a “dwelling unit” or “housekeeping unit” for less than a month unless it is a part of a hotel or registered bed and breakfast (which means a business license, which few AirBnBs have.) There are similar rules in effect in most suburban communities.

What About Insurance?

There is another problem with AirBnB: insurance. If you are renting out all or part of your private home for short-term rentals, your home insurance could be void and your mortgage lender will be angry. Mortgage lenders require extra insurance on a principal residence that is rented, but there are very few insurers that offer coverage for short-term rentals.

US-based AirBnB does not offer homeowner insurance in Canada.

We found one Vancouver company that does offer short-term rental insurance, but it has some caveats. It will provide insurance, but not for a primary residence that is being used continuously for short-term tenants.

The company president explained in an email, “We’re able to offer coverage to individuals who use their primary residences to participate in occasional home exchange programs. We’re not able to offer coverage to individuals who use their rental properties exclusively to participate in a home exchange program.”

Also, the insurance company has a high $2,500 deductible for theft in a short-term rental, yet the insurance costs about 10 per cent more than basic home insurance.

Naturally, the majority of AirBnB operators – and there are more than 4,000 in Vancouver – also ignore insurance regulations.

It is tempting to become an AirBnB host, but ignoring strata regulations, angering your neighbours and your mortgage lender, skirting city bylaws, and potentially losing your home insurance coverage all add up to a very dark industry indeed.

Frank O'Brien
Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouverand a regular media commentator on real estate investment.