Canmore Property Investors: Is a Short-Term or a Long-Term Rental right for you?
If you’re a property investor looking at real estate in Canmore Alberta, you may be weighing the options between a short-term rental and a long-term rental. In some of my other articles, I’ve broken down how to own an Airbnb in Canmore, what the rental market is like, and different types of investment properties in our area.
One thing I’m hearing from a lot of prospective investors and new clients lately is something that has been a constant question from curious investors: Should I buy a short-term or a long-term rental in Canmore? What about monthly rentals?
This important question is perhaps the very first thing a Buyer must make a decision on when it comes to property in our area!
Due to our restrictive zoning, Canmore has distinct sub-markets for different types of properties. The best first move you can make is to connect with a qualified local agent with a track record of helping investors find the perfect property.
As always, please feel free to text, call or email me any time – no question is too small and I’m here to help you understand our marketplace.
In this article, we’ll discuss:
- So Why is the Zoning so Complicated in Canmore?!
- The Key Questions A Canmore Property Investor Must Ask Themselves
- Short-term (Airbnb) or Nightly Rentals in Canmore pros & cons
- Long-term Rentals in Canmore pros & cons
- Monthly Rentals in Canmore pros & cons
It’s important to note that this article is for informational purposes only, and is not intended to advise or create a client relationship. Zoning and property uses are determined by the municipality and can change at any time. Always contact me directly for the most up-to-date information and answers to your specific questions before making any decisions!
So Why is the Zoning so Complicated in Canmore?!
If you’ve had the chance to visit our town, you’ll likely know why. Canmore is a special place naturally bounded by soaring mountains, Banff National Park, and Kananaskis Country. The supply of land in Canmore is naturally finite, meaning there is only so much room to grow – most of which has been filled.
You can’t just drive down the road to another town and get a similar experience – this place is unique.
Like other mountain towns (Aspen, Whistler, Jackson Hole, etc.), we have a shortage of housing due to a number of really valid reasons, including environmental concerns and poor past development decisions.
The simple answer for why zoning is so complex is that if every property in Canmore could be turned into an Airbnb, it would be – and there would be nowhere for anyone who works in town to live. And if we built everywhere under the sun, the amazing things about Canmore would change.
In reality, zoning is determined based on the best use for each piece of property as well as by the community at the time the zoning is determined. Today, we see more development being held back as environmental concerns come to the forefront; we also see community-focused and higher-density developments picking up steam to help aid in the housing crisis facing our town.
The Key Questions A Canmore Property Investor Must Ask Themselves
With all of these issues and important concerns in our community, matching your expectations as a property owner to the reality of the properties themselves is a key part of your decision. Canmore is a small town, with only ~5500 dwellings. There may only be less than a hundred listings on the market at any time, with only a fraction of that with the approved use you desire.
Certainly though, there is no property in Canmore that will be perfect for all of your needs at the same time. This means that the best investment property will not make the best retirement residence, and the best Airbnb may be the place that may not fit your family at the moment.
The Key Questions you must ask yourself are:
- What is my Budget, truly? This is simple, but important in our expensive marketplace.
- Will I be financing this Property? This is a key consideration for things like nightly rental Airbnb properties.
- Would I like to use this Property Personally? Is it strictly an investment, or would you like to use it yourself sometimes, perhaps for a ski trip or family getaway?
- What is the Timeline of my Investment Goal? Is this a legacy property that I one day hope to leave to my kids, or is this a stepping stone to the Mountain Home of my dreams?
- What is my vision for this Property? A private lot, a hot tub? A garage for my mountain toys or simply a place to rest my head while in town? A piece of a larger portfolio?
Let’s answer these questions in the context of the different types of investment properties below.
Short-Term (Airbnb) or Nightly Rentals in Canmore Pros & Cons
Pros: Highest investment return. Allows for owner use, rents strongly the rest of the time. These are the Airbnbs, VRBOS, etc. in town.
Cons: Harder to Finance. Limited property styles for the cost. Impersonal type of property. Rewarding, but Complex to Manage.
There is no doubt that the best return on your investment dollar will be a nightly rental in Canmore. This is because of the tourism-focused nature of our town: people come from across the globe to spend their money here. A high amount of US and International, as well as strong domestic travel, means a huge supply of guests for your “hospitality business.” Think of it as having your own cash-generating hotel property. You can use it for that ski vacation 1-2 weeks/year; and use the other 50 weeks/year to generate cashflow.
The drawbacks: due to our restrictive zoning, Banks don’t like to lend on them, with only a couple being even able to do it. Sometimes they can require as much as 35% downpayment. Another thing: 95% of these properties are 1 & 2 bedroom resort-style condos – there are no detached homes zoned for nightly rental, and 3-4 bedroom units and townhomes are very uncommon.
These properties are right in the middle of town close to restaurants, shopping and trails – ideal for guests. They are not housing, and extended stays would be like living at a resort; maybe a bit busy for some. These properties will lack your personal touch as they must be as appealing to potential guests as possible.
Nightly Rental properties have complex decisions and details when it comes to things like financing and management. Please reach out to me directly via text, call or email and I’d be happy to have an in-depth chat with you on how things work!
Let’s discuss Long-Term Rentals Next:
Long-Term Rentals in Canmore Pros & Cons
Pros: Easier to finance, all styles of properties including detached homes and townhomes, wide range of budgets, less intensive management. May be a great property for full personal use in the future. Strong rental market in Canmore.
Cons: No owner use as an investment, returns may be lower at first, tenant use of property. Longer term investment vision is best.
This is your classic investment rental property style. When you own a long-term rental, you become a landlord to a single tenant, ideally renting to them on an annual basis. You only have to find one tenant once each year – and in ideal cases you simply keep the same good tenant for many years. Banks like to finance long-term rentals because they are housing – something that is in short supply in Canada.
Typically these can be financed with 20% downpayment. In Canmore, you could rent anything from a 1 bedroom condo, to a townhome, to a sprawling house and property. These residential properties could be a great place to retire in the future, or to use as your own mountain home when your free time allowance grows.
With long term rentals, a key thing to always consider is that rent will rarely surpass the costs of the landlord to own it. This is because if a tenant could afford the costs of the property, or more, they would simply buy it themselves. So it is unrealistic to have a very large mortgage on the property but still hope to have cashflow beyond the monthly costs.
Typically, as the duration of ownership increases, financing costs for the owner go down, market rents may increase, and you may start to see more of the monthly rent become cashflow. The best part of long time periods as well is that you are also more likely to see the best appreciation of a property over the long run.
However, with a long term rental, should you come to town for that hiking trip or ski vacation, you’ll only be able to look at the lights through the windows. Your property will be in use by your tenant essentially 100% of the time, until you choose to use it (or use it more), for yourself – something we will discuss below.
Let’s talk about Monthly Rentals:
Monthly Rentals in Canmore Pros & Cons
Pros: Easier to finance, allows for some owner use, most styles of properties including townhomes and detached homes. May be a great property for full personal use in the future. Strong rental market in Canmore.
Cons: OK investment, moderately intensive management, tenant use of your personal property.
What is a monthly rental? It’s exactly that: renting a property for a minimum of 30 days at a time, but not for a full year lease. This means you can rent it for a month here-and-there, or for 6 months during a season where you don’t plan to use it. These properties can provide a key part of the housing market for locals inbetween homes, or a great pied-a-terre for guests to our area taking an extended ski or hiking vacation of 30 days or more. Ideally a townhome or detached home, these properties allow you to have a mountain home that meets your vision but can still generate some return when not being used by the owner. Can be financed as residential property.
As an investment, these are a bit of a trade off. With an Airbnb, you have 365 days (opportunities) per year to rent it out. With a monthly rental, at best you have only 12. So if you plan to use it for 3 months, and 3 other months are less-desirable, you may only have 6 available months to rent through the year. While monthly rentals can achieve a higher rent than annual leases, the lower amount of opportunity to rent can drag on your return.
But, if you want a stunning mountain home you wish to retire to some day, or leave to your family, renting it some of the time may be better than paying all of its costs, all of the time. You can also add more of a personal touch to these properties, as it would be a residence and have things like storage and even land. Something to consider for any investor and potentially a good fit for a family looking for a touch-point in Canmore that is more than just a short-stay here and there.
Is a Short-Term or a Long-Term Rental in Canmore right for you?
What type of property in Canmore could be the best investment for your goals and needs? I always advise clients to purchase the property that is right for them at the right time. If a 1 or 2 bedroom condo doesn’t fit your family, and your primary goal is to have a place in town – a residential property may be right for you.
If you’re looking for the best return on your capital in the near-term, perhaps a nightly rental makes the most sense. You can always trade up to a home when you’re ready – especially if you’re still 10 or 20 years from retirement! Often, key factors like budget and financing play a big role in the decision process.
The Canmore real estate market is a complex landscape, but helping my clients navigate and connecting them with the best contacts for financing, management, inspections, legal & more is part of the service I provide. Helping families choose the right property for their needs and securing it for them is my focus.
As always, I’m only a quick text, call or email away. Please don’t hesitate to connect with me directly if you have questions about Canmore, properties you’re seeing, or how things work in our special area.
Cheers!
Like this article? Check out:
4 Things to Know about Alberta Investment Properties
Feel free to call, text, or email Dan today for no-pressure advice,
tips and insights into the Canmore, Cochrane & Banff real estate market.