Is a short term (Airbnb) rental investment the best option for you in Canmore, or a traditional long term rental?
Canmore has a unique value proposition for Canadian property investors. With its stunning scenery, proximity to Banff National Park, and lovely townsite, what’s not to love? Along with Banff, Canmore is an international tourism destination receiving millions of visitors each year from the US, Canada and abroad.
As a property investor, you can really have a long term rental property anywhere there are people – something that can be a great investment (in our area, too). But in such a unique tourism hotspot, a Canmore short term rental is a unique opportunity in Alberta, and Canada generally.
Canmore has a unique edge as a community in which you can own a profitable short term Airbnb rental – a property you can use and enjoy, that will work as hard as possible for you taking advantage of a strong tourism economy.
Let’s break down some of the key reasons for this:
Having the right Realtor guiding you through the process of searching for a property in our area is key. Please don’t hesitate to reach out to me any time if you have questions on listings, zoning or the current market. I’m here to help!
Canmore is a small town, high in the Canadian Rockies, bounded on all sides by mountain ranges, national and provincial parks. Sound finite to you? Thats because it is.
Unlike typical communities and big cities like Calgary, Edmonton, Toronto, etc., Canmore is the kind of place where you can’t go down the road and have a comparable experience. There really isn’t some suburb just a bit further away for folks to commute from; the difference between Canmore and nearby Calgary is vast.
Canmore’s residential (long term) rental vacancy rate has hovered around 0-1% for the past decade. This is due in part to a high demand from seasonal and mobile workers with high incomes, but also due to the limited supply in town. High rents are a symptom of the same constraint in the residential real estate market – a tendency for more buyers than sellers.
On the Short Term / Airbnb side, the same is true (and perhaps even more concentrated). Very few buildings and areas in town allow for nightly rentals. Due to this highly specific and coveted usage, demand for compelling properties is always strong and options for buyers remain limited.
In Canmore, the long term trend has been for demand to outstrip supply, exerting an upward pressure on real estate prices.
OK – let’s talk about a key difference between short and long term rentals in Canmore.
My family and many families I’ve worked with have owned long term rentals. They’re fabulous for the steady building of wealth over long periods. But – and I’m sure many readers will have had this same experience – you don’t get to enjoy the property you own. Often, you only get to drive by at night and look at the lights in the windows. With a full-time tenant in the property, its theirs to enjoy. Not yours.
With a short term rental Canmore Airbnb, you get the amazing benefit of being able to use it personally, as well as share it with your family and friends as you wish. Of course it would be nice to get months of personal use out of a vacation rental – who wouldn’t enjoy that?
Too often though, the reality is that you may get to use it for 1 or 2 weeks per year (especially if you are out of province). With a nightly rental property, you have 365 chances each year to rent – meaning that the other 50 weeks each year, this property will work as hard as possible for you as an investment.
When it comes to long term rentals, I find a good rule of thumb is: Rents typically won’t exceed what it would cost for the renter to own the property themselves. Because if rent was more, why wouldn’t they just buy it themselves? Most long term rents rarely exceed the cost of the mortgage & property tax, and potentially some maintenance or condo fee.
With this in mind, most property investors with smaller capital and looking to use a large mortgage likely won’t realize much (if any) cashflow on their investment at first. Highly mortgaged long term rental properties tend to have a longer time horizon for cashflow; as the mortgage is paid down, you keep more of the rent. Over time, rents gradually rise – and ideally your property appreciates as well.
Don’t get me wrong – I love long term rentals. They are a solid, sound business and a great way to invest in real property. But what about short term rentals?
There’s a reason the Banff Springs Hotel has been operating successfully for over 130 years just down the road. The Canadian Rockies have been beckoning visitors to come and visit (and spend) for a long, long time.
A short term rental Airbnb property in Canmore is more like owning a small hotel business than a rental. In fact, a key part of the local zoning bylaw around these properties is that they are not, and were never intended to be, housing. Technically, most of these properties cannot be lived in full time. This is protective for Canmore as a market, as these short-term rentals are not part of the housing supply and exposed to legislation changes. It can make lenders more picky though – something I guide my clients on every day.
Since an Airbnb is more like a business, there is a lot more turnover. Costs are higher, with cleaning, stocking, maintenance and management. But, with this comes a higher potential for revenue and cashflow over expenses, including your mortgage. You are entering into a competitive marketplace, up against other rentals as well as local hotels. Standing out with great photography, amazing decor, and compelling features is critical to generating strong returns.
Identifying the right property is key!
Unlike other areas of the country, Canmore has a strong case for a short term rental. Yes, long term rentals are an essential type of investment here as in any community. And depending on your goals, a long term rental may be best for your needs.
But – in such a special location, awash in US and International Travellers (and the world-class scenery they come for), owning a short term rental here is like owning a hotel in a place where hotels perform.
The specificity of our location is a perfect match for this style of rental property.
If you’re curious about owning an Airbnb in Canmore, how the market moves here, listings you’re seeing or anything at all, please feel free to connect with me directly. No question is too small and I’m always available via text, call or email.
Cheers!