parallax background
Choosing the right colour paint to when selling your home
November 1, 2017
Tips for Buyers in a Sellers Market
November 1, 2017

Real Estate Investment: Short term Rentals the New Craze – The impact of Airbnb

Investing in real estate has long been recognized as one of the ways to build wealth. It is often the single most expensive investment an individual will make in their lifetime. Individuals are however looking at real estate investment not only as a means of shelter and providing a home for their families but as an income generating asset. In the words of Thomas Shapiro of Brandeis University, “it is by far the single most important way families accumulate wealth”.


In 2007, Brian Chesky and Joe Gebbia had to rent out a spare bedroom in order to meet the rent. After the guests had left they decided to make short – term rental a business and Airbnb was born. Airbnb is a short term rental platform, which has changed the way real estate is traditionally rented all over the world. Airbnb has arguably become one of the world’s most frequented online accommodation sites, and allows landlords to self-manage the tenancy process.

This has created a new craze and millions of home owners have taken notice and began to enter this short term rental market. Individuals have seen the benefits of renting out their property in whole or in part to vacationers. For homeowners, services like Airbnb, or like sites such as VRBO (Vacation Rentals by Owner) and others offer travellers a chance to find less expensive alternatives to pricey hotel rooms. For property owners, companies like Airbnb create additional options to increase return on investment. This has created options for homeowners to monetize an underutilized asset such as a spare bedroom or even a tent in a back yard.  Yes I have seen a tent under the stars in someone’s back yard rent for USD$25 per night. Vacation rentals by owners has created a huge, new industry.

This is undoubtedly appealing and creates an attractive income generating alternative for short term rentals. Home owners and professional investors have been enticed by the prospect of building wealth through property rentals. Spin off businesses such as concierge services have also been started and added to the complimentary suite of services offered by home owners, fuelling the growth of new enterprises.

Does this craze replace the stability of a long term rental opportunity? Are Short-term rentals through these peer-peer platforms the new normal?

While Airbnb does provide financial opportunities within the short-term rental market, it’s not for everyone. Some persons are able to successfully make the transition to short-term rental while others have had a different experience.

Take for example, John (not his real name), a 39 year old professional who recently started to explore the option of renting out his apartment on Airbnb. His one bedroom apartment is located in an upscale neighbourhood of new Kingston. In order to stand out on the site he hired a professional photographer to take photos and an interior designer to put on the finishing touches. Excited about the prospects of earning USD$100 nightly, John uploaded his photos.  He soon realized that apartments within the same area were posted at a price of USD$70 per night. John however got renters intermittently but realized that the business of short term rental involved way more maintenance than traditional rental arrangements. He realized that hosting involved taking care of the guests every whim and request. He was also not able to vet the individuals prior to giving them the keys to his investment as all he knew about the guest prior to arrival was what the individual posted on their profile.

In order to get renters John had to significantly reduce his rental price to compete with the inventory on the site. After about two months on the site John sought the services of a professional realtor to get his property rented. He was able to get information about his tenant prior to the rental and draft a lease agreement that not only set out the rules of tenancy but also sought to protect him from liability. As short- term rentals may be subject to the same laws relating to tenancy as long term agreements.

Property owners need to seek the advice of a competent real estate professional prior to taking the leap into short-term rentals. This can represent a phenomenal opportunity to earn income but must be carefully evaluated.

Investing in real estate has long been recognized as one of the ways to build wealth. It is often the single most expensive investment an individual will make in their lifetime. Individuals are however looking at real estate investment not only as a means of shelter and providing a home for their families but as an income generating asset. In the words of Thomas Shapiro of Brandeis University, “it is by far the single most important way families accumulate wealth”.