What You Should Know Before Renting Your Home on Airbnb
How to Turn Your Rental into an Income Stream on Airbnb
With the "gig economy" on the rise and the ever-increasing presence of online platforms that bring buyers and sellers together, there has never been a better time to create a second source of income. More and more Canadians are joining the ranks of the self-employed, either on a full-time basis or on the side to generate some extra cash.
One popular way of creating an income stream is to become a "host" on an online vacation rental service such as Airbnb. Basically, homeowners (or renters) sign up with Airbnb to rent their homes to travelers. Airbnb's online platform affords them the ability to advertise their home as a rental to thousands of tourists in search of reasonably priced and high-quality accommodation.
If you travel frequently or own a second home that is under-utilized, renting it out to travelers might be something to consider, as it's a great way to earn a side income while doing little work. Read on to learn what you need to know before you list your property as a vacation rental.
Are you allowed to list your property as a vacation rental?
If you're renting your home, it's important to speak with your landlord or condo board to obtain approval to list your space on Airbnb. Clarifying the rules in the lease or condo agreement could save you from potential legal hassles, so ensure you fully understand what is permitted and what is prohibited.
Rules and regulations on sub-leasing vary from province to province. In certain parts of Canada, sub-leasing may be illegal, so don't skimp on the legal research.
Act like you're running a business
While a vacation rental doesn't entail the same level of responsibility as a five-star hotel, you should be mindful of your duties and tasks. To succeed, you must treat this as a business. If not, you'll earn little money and accumulate negative reviews from guests.
To attract customers and elicit positive references, you should invest time to keeping your home clean and tidy, provide basic amenities (such as soap, shampoo, and toothpaste), and constantly tinker with how to make your listing appear attractive to customers.
Solid communication and trust are paramount, so strive to respond to guests' inquiries as soon as possible. Guests that don't feel your interaction with them was pleasant could give you a negative rating - not good if you're just starting out.
When starting out, don't charge a high price per night. See what the average market price is and set a lower price, to attract first-time guests. Take quality photos of your home to show off on your listing and provide accurate details of what your guests can expect.
Review your insurance policy
Letting in stranger after stranger into your home opens you up to serious financial risk - you never know what kind of accidents can happen. Therefore, obtaining the right insurance coverage is key.
Be sure to speak to your insurance advisor to thoroughly understand the nature of your insurance contract and its limitations - never assume you're fully covered. Vacation rental services also offer their own home insurance policies, so take the time to examine those as well.
Become familiar with tax laws
Getting acquainted with the tax laws governing vacation rental income may not be the most exciting aspect of the business, but it's essential. Any income you earn from renting your home must be reported to the Canada Revenue Agency (CRA).
In most cases, the money you earn will be classified as rental income on your tax return rather than business income, since you will only be offering basic services to your guests such as heat, parking, and laundry. If you offer more services - such as cleaning and meals - you'll likely be operating a business from the perspective of the CRA and will have to report your income as such.
You may also have to charge GST/HST on your rental income. If your revenues exceed $30,000 over a 12-month period, you will have to register for a GST/HST number and collect the tax on this income. Depending on where you are operating your vacation rental, you may also be required to pay PST and other local levies and taxes.
You can deduct ongoing-period expenses, such as utilities and insurance, against the income you earn. The cost of one-time major repairs and renovations, however, cannot be expensed at once and instead must be deducted over a multi-year period.
Transforming your home into a vacation rental should be treated as a business. You must have a plan on how to acquire guests, provide exceptional service, and ensure you're fully compliant with all pertinent laws and regulations. If you put in the time the effort to do it right, you can bring in that extra cash you've always wanted.
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