Cottages are a big part of our summertime experience. We build memories there with friends and family that last a lifetime. But owning one can also be a source of extra income if you’re willing to share.
In fact, according to a recent Leger survey commissioned by RE/MAX Canada, 45 per cent of Canadian buyers plan to purchase a recreational property as a way to get into the housing market. Among Canadians aged 18 to 34, that figure climbs to 54 per cent.
And why not? If you’re renting an apartment because you can’t afford to buy a home in the city, it’s possible you can afford a property elsewhere. And part of that appeal may be the ability to generate passive income at the same time as owning, while still having the ability to enjoy your own little piece of pastoral paradise whenever you choose.
However, if you’ve never been a landlord before, you’ve got a bit of a learning curve to overcome to ensure you have the most positive experience while at the same time protecting your home, your belongings and your peace of mind.
Do your homework
While it’s possible to make a lot of money if you own a really great vacation rental property, it can also end badly if you aren’t properly prepared for every outcome. For most, the profits will simply be enough to cover the cost of owning, which in itself is a nice bonus. But in the latter case, your margin for error is slim, so you want to avoid any missteps.
Since short-term vacation rentals don’t fall under the same jurisdiction as single-family residential rentals — which are usually governed by the province with straightforward landlord and tenant agreements — you’ll want to protect yourself against damage to your property by coming up with your own rental agreement or contract. Draft clear rules covering quiet hours, pet policies, use of the property’s amenities (like a firepit, hot tub, dock or canoe, etc.), guest limits and cancellation terms.
Many cottage regions require you to purchase an annual short-term operating license and expect you to follow specific local conduct bylaws that limit noise, parking and maximum occupancy, so research what the municipality allows as this will inform the content of your agreement. For example, popular cottage regions — like the RM of Gimli or the Whiteshell — set their own licensing, conditional use permits, and operational standards. Many rural municipalities cap guests at two adults per legal bedroom. Standard municipal rules enforce strict quiet hours (often 11:00 p.m. to 7:00 a.m.) and ban extra unpermitted campers, tents or RVs on the cottage grounds. Owners or a designated local contact must typically be reachable 24/7 to deal with noise or nuisance complaints about the rental.
Remember to call your insurance provider. Standard homeowner or seasonal property policies typically don’t cover damage or liability caused by paying guests, and require a specialized rider or commercial policy. If a guest burns down your cottage (it’s happened!) you want to be absolutely certain your insurance will cover the cost of rebuilding it.
Remember to keep track of your income and expenses. Rental income must be declared on your tax return. Operators must collect applicable federal GST (5%) and PST (7%). Certain municipalities also layer on a local accommodation tax (around 5% to 6%). Note that the Government of Manitoba requires properties used for short-term transient accommodation (90 days or less a year) to be reassigned under a different assessment classification.
To figure out what to charge your renters, calculate your expenses plus add-ons such as the cost of cleaning the property between guests and any extra stress on your power grid and septic system. But don’t go overboard, because if you charge too much, you won’t be able to rent it out when you want to. The more time it sits empty when you aren’t using it yourself, the more potential income you’ll lose.
Instead, list at a price that is appropriate for the area but also within the demographic you’re looking for. For example, if it’s a waterfront property with a hot tub, private dock and boat, you’ll attract more active people and charge more for those amenities, but if it’s a more isolated property, those seeking privacy will likely prefer it, and if it’s not waterfront, you’ll charge less. Always include a refundable damage deposit — typically, 10-25% of the rent you’re charging, paid upfront — plus a cleaning fee.
Check guest references
You’ve listed your rental property on Airbnb, Vrbo or cottagesincanada.com. Now what?
Bad renters who won’t respect your property are out there. To avoid them, ask all potential renters for permission to check their rental history and other references to avoid a poor outcome. Before welcoming anyone into your property, be sure that they’re able and willing to abide by all of your “house rules.”
Remember, the cost of contractors and building materials are at a premium the further away you are from the suppliers, so you want to avoid any unnecessary damage or unexpected repairs that could have been avoided by doing your due diligence.
Get a signed contract from your renters, credit card information or government issued photo ID, and take a damage deposit just in case. No exceptions, even for family or good friends. You’ll be pleasantly surprised by how well a signed agreement can keep the peace.
Prepare your property
Short-term vacation rentals are considered furnished, turnkey experiences, which means you supply linens, towels and an equipped kitchen. You don’t need to supply food, guests bring their own, but you can leave some treats for them if you want to.
Be sure to pack up your valuables and personal items like clothing and toiletries, along with any alcohol, in a locked closet or utility room. Better yet, don’t keep any irreplaceable personal mementos at the cottage at all if you’re renting; stash them at your main residence to avoid any upset.
Just like a hotel, your guests will expect the place to be pristine, with zero sign that anyone has been there before them. In addition to washing all the bedding and towels, you’ll want to take disinfecting to the next level. Wipe every surface down with antibacterial wipes or sprays. Consider wearing face masks or shields and gloves while you’re cleaning between guests.
Leaving toiletries is optional. Usually people have their own preferences and will bring those, but hand soaps by each sink, along with dishsoap and scrubbies in the kitchen, is common sense. Guests don’t usually think to bring along hand soap or hand sanitizer, though, so refill these as needed.
If there are area amenities nearby, leaving pamphlets and maps of public beaches and docks, hiking or bike trails, stores, casinos, restaurants and whatever else the area offers in the way of outdoor experiences is a thoughtful touch.
It’s also good to leave your tenants with a checklist for how you want the property returned to you. Leave cleaning supplies plus a vacuum and broom with a dustpan, so renters can tidy up after themselves. Add a note on the checklist as to where guests can find these items, whether inside the cottage or a storage shed on the property. But don’t make the list extreme: You don’t want your guests to feel as if they have to spend an entire day scrubbing with a toothbrush to get their deposit back.
Like a home, you want to make sure that everything is in working order, and that the proper amount of smoke detectors are installed. If you have a fireplace, leave clear instructions on how to use it.
It’s important not to head into being a landlord without first educating yourself to both the positive side, as well as the potential pitfalls. The more research you do beforehand, the less you’ll have to pay on the back end. The point is to make some extra cash while renting; not expend cash to fix damage caused by a bad tenant. You want this experience to be as pleasant for you as you’re making it for your guests.
If you’re considering cottage ownership, remember to call a local REALTOR® to help you choose the perfect fit.
This article should not be considered legal advice. Remember to do your own due diligence.