Advice for Airbnb hosts during covid-19. Tips for Airbnb units
Friday May 15th, 2020
**CHECK OUT THE FULL TRANSCRIPT BELOW**
A number of Airbnb hosts and unit owners have taken a financial hit during covid-19, as most individuals who book Airbnb units are tourists and travel has been heavily restricted. Some investor clients who run Airbnb units and other similar short term rentals have asked us for advice at this time.
Watch the video for our advice and tips for Airbnb hosts. Thank you for watching!
Here are the timestamps in the video:
Full Video Transcript:
Hey guys, it's Karen from Toronto here.
Now some of our clients own investment properties choose to rent it out short-term on Airbnb and other similar short term rental websites. And here in Toronto, most of the people that rent out Airbnb units are tourists.
Lately, the challenge with covid-19 is that travel is heavily restricted. So a lot of these Airbnb units are sitting vacant right now. And unfortunately, a number of Airbnb owners are losing a significant amount of money.
Now I understand that Airbnb offered to fully refund any cancelled bookings up to May 31st. And at the same time Airbnb has offered financial relief for some of the Airbnb owners. That being said, a number of Airbnb owners are under financial stress and they've been asking questions such as:
"What should they do right now?"
"Should they sell their property?"
"Should they be looking for a long-term tenant?"
"Are there other better options for them to consider?"
So in today's video, we're going to address those questions.
First off, everyone's financial situation is different and there's not just one solution for everybody. So you will want to assess your specific financial situation. Depending on your location in the world and who your typical customers are on Airbnb, you'll want to be realistic about which month you think vacancy rates will start to significantly decrease. And from there you will want to assess whether you can comfortably pay all of the carrying costs until that month arrives.
If you feel that you can comfortably pay for all of the carrying costs until travel restrictions are lifted and until vacancy rates start to significantly decrease, then your best bet is to continue with your business plan the way that it is and ride this period of time out.
Now some individuals who are under a bit more financial stress, who require income sooner in order to cover their current carrying costs, they've been asking questions like "Should they consider selling their property now?" or "Should they secure a long-term tenant instead?"
My advice is if you can financially get by with market value rent, by renting out your property to a longer-term tenant, I would advise you to do that before selling the property. This is specifically advice for property owners in the Greater Toronto Area (GTA). And that's because Toronto real estate is a solid investment. If you can hold onto your properties long-term, my advice is to do it.
Now, if you're in another location in the world where real estate prices have been historically more volatile, I would advise you to speak to a trusted local real estate agent, to understand what type of real estate market you're in now and if it makes sense for you to financially cash out of your equity. Now coming back to Toronto, the vacancy rates for rent have been historically low, about 2% or less when it comes to vacancy. And for a long time, there's been a shortage of affordable rental housing in the city of Toronto. So in Toronto, if you market your property for rent, especially during the spring and summer months, you shouldn't have a problem securing a good tenant within one to two months. Especially if your place is well maintained and you're offering a competitive rental price.
Now here's one tip: if you decide to market your property for a longer-term tenant, let's say for the term of one year, you'll want to mention in your marketing that you are willing to unfurnish the property. The reason I say this is because Airbnb units come fully furnished and the vast majority of individuals who are looking to sign a traditional one year lease term, they have their own furniture and they would prefer to bring their own furniture with them when they move in and sign a new lease. This is especially the case in Toronto, where about 95% or more of the 1-year leases are all unfurnished rentals. Whenever our team has tried to secure a long-term tenant for a fully furnished unit, its been extremely challenging. And the biggest question that we get from prospective tenants is whether the property can be unfurnished. So check with your local rental market. If you notice that the vast majority of one-year rentals are all unfurnished, it's because the vast majority of tenants who want to sign a one-year lease, they have their own furniture and prefer to move in with their own belongings and furniture.
So my advice to landlords is to either pay for furniture storage if a good long-term tenant wants to have the place unfurnished. Or perhaps you can offer for the furniture to stay in the property at no additional cost. I know a lot of landlords want to increase the rent price if the property is fully furnished, but in this case if you're under financial hardship, your goal is to secure a good tenant as soon as possible.
So in other words, you don't want to turn down a good tenant because you don't want to pay for storage costs for your furniture or that you turn away a good tenant because you want to charge a premium in the rent to have the furniture stay in place. And trust me, I know a number of Airbnb owners who have made this mistake: they've turned down really good tenants because they didn't want to pay that extra fee to store the furniture away or they wanted to charge a premium in the rent if the furniture were to stay there in the property. And in the end, a lot of these landlords have lost out because their place remains vacant and they just cannot secure that long-term tenant that's willing to pay the premium on a furnished rental. And depending on your local landlord and tenant rules, perhaps you can negotiate a deposit to be paid for the furniture items. This way when the tenant vacates if there's any damage at all to the furniture items you can use the deposit to help pay for any repairs or replacements.
Now some of you may or may not know this, but in the city of Toronto, you're able to market a property for sale and for rent at the same time. So if you're in a financial situation where you either need to cash out your equity by selling the property or you need to secure a good tenant right away in order to get that rental income, then one option is to have your agent advertise the property For Sale and For Rent at the same time and see which offer comes in first and which you can negotiate to your favour.
Now if you have to market your investment property for sale during this time of covid-19, when the volume of buyer showings has significantly decreased, then you may want to check out this video right over here where we share the three most effective marketing strategies at this time.
So I'm curious if you guys have any questions or thoughts on the Airbnb industry at this time. Maybe you have additional advice for Airbnb owners. Let us know in the comments below what your thoughts are.
On another note, our team has been inserting additional legal clauses into our purchase agreements for clients in order to protect their best interest at this time during covid-19. If you're wondering what those additional legal clauses are, go ahead and click that "Like" and "Subscribe" button now because in an upcoming video, I'll be reviewing all of those additional legal clauses with you.
As always, in the meantime if you have any real estate questions or needs, give us a call.