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Canmore Rental Properties for Cash Flow

210-379 Spring Creek Drive Canmore alberta

Canmore Rental Properties for Cash Flow

Let’s talk about Canmore rental properties. Often these days, in my discussions with property investors I’m finding more and more that buyers are seeking cash flow when they make an investment property purchase. Lots of buyers are initially brought to our market here in the mountains with the idea of owning an Airbnb or nightly rental property, but sometimes they have trouble “making the numbers work” upon closer inspection.

While nightly rentals can generate some great revenues, their popularity as of late has caused prices to spike. With some nightly rental properties gaining as much as +$100,000 in market price in the past 18 months, as well as tough financing requirements (35% down), positive cash flow can be hard to come by.

With this in mind, in this article I’d like to explore some of the advantages of owning a long-term (monthly/yearly) rental here in the Bow Valley – especially if you’re looking for cash flow.

In this article we’ll cover:

  • Types of investment properties in Canmore, Banff & Dead Man’s Flats
  • The Benefits of owning a Long-term rental in Canmore or Banff for Cash Flow
  • The Drawbacks of owning a Long-term rental in the Bow Valley

a condo building of rental properties with mountains behind in the town of canmore alberta

Types of Investment Properties in Canmore, Banff and Dead Man’s Flats

I’ve broken down some of the types of investment properties here in the Bow Valley in my other article here, but below is a quick overview.

  • Hotel Condominiums: Zoned only for nightly rentals. No stay can exceed 28 days in a given month as per town bylaws. Can be in a managed rental pool, or usually self-managed through Airbnb & VRBO. Located in the town core off Bow Valley Trail as well as in Dead Man’s flats.
  • Tourist Homes: Zoned for nightly rentals AND long-term rentals. Usually located above commercial properties, these can be priced at a premium due to the flexibility of their zoning. Located in the town core off Bow Valley Trail.
  • Residential Rental Properties: Zoned for rentals of a month or more at a time. Located throughout Canmore, Banff, and the whole Bow Valley. Generally rented on 6 month or 12 month leases. One thing to keep in mind: anyone can own a rental property in Banff. Only the occupant has a “need to reside.” Check out my article on this here.

The Benefits of Owning a Long Term Rental in Canmore or Banff for Cash Flow

For any asset, cashflow equals revenues minus costs. When it comes to real estate, often the biggest cost for many investors is their financing obligation. Nightly rental properties often will draw real estate investors in with their high revenues, but when their costs are equally high, it can be tough to get the cash flow you desire. Nightly rental properties often require 35% down payment at a higher interest rate, compared to only 20% down payment for a conventional mortgage on a residential property.

Consider the following benefits of a long-term rental property in Canmore or Banff:

  • Lower financing cost means easier entry into the market.
  • Extremely strong rental market – 31% rental tenancy in Canmore / 53% rental tenancy in Banff vs. 27% AB Average
  • Less competition – you aren’t competing with hotels, campgrounds, etc. for renters.
  • Stability through long leases – finding one tenant once every 12 months.
  • Lower exposure to unforeseen risk events (ie. COVID-19)
  • Easy to manage yourself at minimal additional cost.
  • Lower management fees – if you are overseas or out of province, management fees for long term rentals can be as low as 10% (vs. 20%-55% for nightly rentals).
  • Pass on ongoing costs to tenants (bills, condo fee).
  • Lower Property Taxes / No GST
  • Lower running costs = easier to achieve cash flow.

The Drawbacks of Owning Long Term Rental in Canmore or Banff

If you’re looking for your own ski-chalet to use each time you head out to the mountains, unfortunately you’ll have to stay at one of the fabulous local hotels we have here! With your property being consistently occupied by a tenant, the main drawback is that you won’t be able to use it yourself whenever you’re in town (unless you’re in between tenants or using seasonal leases to meet your vacation needs). If the property is in Banff, unless you have a need to reside (ie. a job in town yourself), you won’t be able to occupy the property even when its not rented.

Long leases are preferred by landlords, but sometimes they don’t appeal to tenants. With the seasonal nature of the Bow Valley economy being geared towards summer, its not uncommon for tenants to hit the road when fall rolls around. Having a secure lease and tenant in place can help reduce seasonal volatility – professional management can really help here.

Also, if you’re looking to add your own touch through furniture & decor, you likely won’t want to do this with a long-term rental as the tenant can just use their own furniture. Sorry, HGTV fans!

Canmore & Banff Long Term Rental Properties – The Bottom Line

Gross revenues on a long term rental property will understandably be lower compared to a nightly rental, often to the tune of 50% less than a moderate-performance Canmore Airbnb. But with this in mind, it’s important to note how much lower your running expenses can be – especially if financing is a factor in your purchase.

When it comes to investing in real assets like rental properties, its always important to consider cash flow in addition to potential capital gains when you’re looking for a return over time. Bigger revenues don’t always mean bigger profits!

If you’re looking for an investment property to diversify your retirement plan, or rent out until you can move to the mountains yourself one day, let’s connect! I specialize in helping people find the best properties in Canmore & Banff to meet their needs.

Cheers!

Like this article? Check out some of my similar posts:

Whats the difference between a Buyers agent and a Sellers Agent?

How to own an Airbnb in Canmore

Can you own a home in Banff?