Episode 44: Landlord's Decision: Short Term Versus Long Term Rental?
Summary
As a landlord, how do you decide how which to do: a short term versus a long term rental?
In today's episode I interview business strategist and long time landlord Dan Dyble, asking what landlords should consider when making this not-so-easy decision. Dan's expert advice turns to the landlord FIRST, and challenging how the rental fits into the landlord's life (and not necessarily the other way around). While landlords still need to create an amazing team around them for support, the education aspect of what is allowed in the local City, Subdivision, Condo/Strata, or even Province/State is interesting and ever-changing when it comes to considering short-term rentals. As a landlord, the answer is not easy, but Dan's answer to short term versus long term rental is: YES.
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Full Episode Transcription
Welcome to my life as a landlord where we untangle all things housing and educate the curious. If you're
looking for some entertainment with some honest, awkward conversations, you've come to the right
show. I'm your host, Dr. Jennifer Salisbury. This is my life as a landlord. Welcome to it.
Hello. Hello, this is Dr. Jen. Welcome to my life as a landlord. Episode 44, which is I can't even believe. Or to almost a 50. This is amazing. So today's topic is landlord based, and we are talking about short term versus long term rentals and making that decision. As a landlord. I've had several people talk to me about this topic specifically, which kind of surprises me because it's not something in my in my personal experience because I'm a long term landlord. But, um, as we move forward, I just wanted to remind everybody, especially if you're new to the channel, that my podcast is all about educating you and Canadian landlords and tenants who seek calm success. That's my that's my game with my life as a landlord. On today's show, I have invited longtime friend and business strategist and landlord. You've been around landlords. You've been around rentals lots of times. Dan Dibble, let me tell you why Dan Dibble is on the show. I just love this, but this is the first time that I've learned a little bit more about his education. I know the practical side of him, but let me let me tell you who he is. So he's got education, which is pretty incredible. Bachelor of Arts and Psychology, Bachelor of commerce, Masters of science and organizational Development. Wow. Lots of $10 words in there, Dan. For your education, which is good. He started in his corporate world at at Imperial Oil, doing logistical things like warehousing and shipping dangerous goods. And there was a merger involved there, and he became an ethics adviser and shifted on to many other corporate corporate entities, helping with a boy. Lots of more $10 words. But you're a serial entrepreneur. I could go on and on about your business consulting, both in the corporate side, nonprofit side, but also in small business. And that's that's ultimately how Mike and I met through Mutual Friend. And you've got tons of business experience. And when you and were talking just to coffee the other day because you're a personal friend and you said, how's your podcast going, Jen? And I said, well, I'm excited because Spotify had invited me to take part and attend the podcaster masterclass, which was really cool. That's pretty neat that I got to get Am now in the educational program that Spotify offers, which is an amazing milestone in my life as a landlord. And he said, what's the next podcast topic? And I said, short term versus long term rentals. And here I was thinking you were going to help me explain some different things. And you went totally in a different tangent, totally a different way. And am so excited to have you talk about your perspective of this question, because it's absolutely different than mine, which is really neat. So now knowing you are just a business strategist, you've been around rentals since you were a teen, you own rentals, you've been around rentals lots done, lots of renovations, things like that. Help me educate some of these landlords on how to even approach making this decision short term versus long term.
So when when you asked when you said that was your topic. The first thing I asked was what's their objective? 1s Right. And and so for me, the answer to should I do long term or short term is yes, you should definitely do long term, short term, or as we were discussing in a subsequent conversation, blended ones, which is multi-day but not just Airbnb length a few months at a time. And we've got a niche market for people to look at that way. But really. The idea for me, when you're trying to make this decision has to be in context. So when I talk to you and Mike about what you guys do, it's really simple for me because I know that you're into it for the long haul. That gives context. When you talk about doing a new development, my first question is, are you going to hold on to this or are you planning to sell? So it all comes down to what's your exit strategy? That's one of the most important questions that I ask business people when I'm working with them is. 1s How do you plan to get out of this? Because how you plan to get out determines how you'll get in. And it's a different answer. It really is substantially different. Let me turn it back to you for a second. No, no, it's it's a complex topic. And because Mike and I are developers and real estate investors, I instantly went when I was bringing up this topic going okay, instantly went to zoning carriers. You know, that's where my mind went. But you went the opposite way. You said before, this landlord makes a decision on short term versus long term rentals. It was all about their personal role, their personal goals. How are they going to exit? And that was such a surprising answer to me. That's why instead of me just doing the lesson, I wanted you to come on and hear him talk about it. In your experience as a landlord and doing renovations, you've done several renovations on your time and what's really interesting is that you've had corporate experience and just business experience in general, not just in Canada, because we're in Canada now, but also in the States. And so you've got this cross-border experience as well.
What about the rental itself? Let's say somebody inherited a rental and it's not it's not in their location. What's your take on that making this decision on again we're still helping these landlords try to decide short term versus long term. It still? How do you want to get out of it? What? What are you. Let's say let's say you inherit one. Or you do what? A lot of people in the area that we're in. So the people down the street from me have now moved into their home after owning it for almost 15 years. So their purpose for being a landlord was to buy an affordable property, have it pay for itself. Once they owned it, they moved in. And they now they're no longer landlords. They're living there. They had a long term. Their exit strategy was to move in themselves. Okay
When I bought my first house, my exit strategy was, well, I'll sell the house. But my purpose was I needed a mortgage helper because it was back in the 80s. The interest rates were at for mortgages were at 16 to 18%.
So Fathomable now what's brought you in? In the example you gave me, someone inherits a house. Well, just because you inherited doesn't and it's not in your city, doesn't mean it's got to be stressful or out of control. Like, things really couldn't be simpler for planning this if you set a plan. So how do you want to get out? Just because it's in another city, in another province, state, or country, doesn't mean that it has to be difficult. You need to build a team around you. You can't do it all yourself. So if you're going to be in another city from where your rental is, you need local feet on the ground to support, and that's putting your team together. But one of the first things you need to do as a landlord, no matter what is be clear on what kind of landlord you're going to be. 1s What do you mean? Well. If you're going to be a long term landlord, then you're going to have different business needs than if you're short term. 1s Short term requires a lot of day to day attention. From you. And so if you're going to be Airbnb being a condo in another province or state, then, well, you live in Hawaii quite often. A lot of the people you advise. Live on the mainland and have a place that they come to for a few months a year. The rest of the time it's out quite often on short term basis. Well, they need somebody who's going to come in and clean. They need somebody who's going to be repairing things. They need all of this long or short term. You need that repair team, but it's that much more intense. If you've got to have daily cleaners, if you're going to have high turnover, if you with Airbnb or something like that, you don't get to interview the people, right?
It's so it's the same thing when I advise people on financial investments. What's your risk tolerance? Short term rental carries some risks that long term rental doesn't. But long term you're committing to someone. And if they turn out not to be who you thought they would be. I told you about at my farm, very nice people came in. Then they started dating this person who turned out to be a drug dealer. And had you not helped me with some of the forms that you had and things, I would have been in a lot of trouble. I mean, my contract with them said, if somebody new moves in, you've got to let me know. So I had leverage, even though I'm in a location where the bias of the landlord tenancy agreements. Is strongly in favour of the tenant in British Columbia.
Yeah, that can be true. Yep. And so it really depends where you are. But long term versus short term you need to look at what's your intent. Long term. How much time do you have to deal with day to day stuff. If you want to be fairly hands off then you're going to need a team. And I think. Have you done a podcast on team yet?
I have, I have advisors. It was all about picking advisors. Yep. Right. Episode 14 was about picking your advisors. Yeah.
So that's rather than getting into it now then just go listen to that podcast. But it's about making sure that in the decision you're clear about the role that you're able to, that you want to and that you're able to play. And that is allowed. So for example, near us in Vancouver, which is only 60 miles or 100km from here, as the crow flies, they now have very strict rules. If you're an absentee landlord, if it's not, if you're renting out something in a building that's not yours and you're trying to do short term rentals, all of a sudden you need to talk to your accountant again, because the rules have changed recently, and all that you had has been eroded by new taxes that will be laid in on you. So if you had tight margins, you don't have the breathing room anymore.
What you're saying, what I'm hearing you say is you might be running cashflow negative. Might be costing you money based on the revenue you're bringing in. If you were doing a short term rental in like Vancouver, British Columbia, that now if you've got this extra tax burden that now you might be operating that at a loss. You mentioned something a little bit more, a little earlier about risk that the risk between long term and short term might be bigger. If you're doing a short term because you can't interview. You can't interview your your visitors say more about the risks with short.
term or the risk with short term is you. I mean, we I don't know about where the listeners are, but we get constant barrage where I live on the radio and on television about the nightmare Airbnb tenants who have destroyed the place. They aren't who they said they were because some of the rental, some of the intermediaries who are bringing people to you, 2s the person who signs up, but the gang that comes with them is a different group. 2s The opposite side. So you've got people coming in. The advantage is that you're not stuck with people. The advantage of short term is that they're gone after a week or after three days, but they're gone and you don't have that deposit you don't have. You don't have a you do not have a damage deposit that is going to pay for a ceiling or for a new refrigerator or for a damaged bathtub or something like that. And quite often these things that are damaged are done quite unintentionally. But now. So to mitigate that kind of risk, you look to your insurance. So there are ways to take these risks that look horrible. Talk to your insurance agent. They're part of your team. Help them get you reasonably priced insurance. My insurance was cut in half with a stronger policy when Jill, my business partner who also happened to be the accountant for our team, went out and started talking to insurance companies in other cities that would still cover a farm property, which is what we had in our location. And so our local guys weren't set up for that. But when we started looking out, we found some really good insurance outside. There is also insurance that is available for short term. That is a developing niche in the insurance in every state and every province. The insurance providers are starting to provide more of that way. Now the flip side is let's talk about the risk of long term. You get some. And depending on the landlord tenancy agreements. And I know I'm pretty sure it was in your first podcast that was I know it was one of the first five you said. I think the message was find out what it says. And the second thing you had to do was find out what it said. And the third one was find out what it said. So know your environment, but understand what it's going to take. If you sign in a long term tenant and all of a sudden they aren't who you thought they were going to be, or they marry somebody who isn't who you wanted, or someone moves in with them and things. And as I mentioned, a lot of that can be controlled through the contract that you have with them. But there is always that chance I've had.
I've had several newbie landlords who either are about to inherit, or they want to get into the real estate industry. And they're having this discussion and they're having this, this conversation in their head about how do they choose what to do. And the biggest thing for me looking at, you know, said, you know, where are you located? What state, province, territory, where are you located? And then what regional district, what county, what what city, whatever, whatever local area. And said, does your local area allow your rental to be rented short term? Because the answer can be no or you have to have certain inspections. You have to have certain licensing. You might have to have a business license.
You were talking about London, England, and like I was amazed at the controls they have there.
Yeah, in London, London, England, not North America of course. Of course. Podcast listeners right now, half American, half Canadian. Then we've got some other folks worldwide. So most almost wholly North American based listeners at the moment. But I happened upon an audible book called How to Be a Landlord and went, oh, this sounds interesting. Well, but it was United Kingdom based. It was how to be a landlord in London and they were talking about how landlords have to be licensed and how tenants have to be prequalified prescreened so they're not in the country illegally, and then the rentals get inspected often and renovations are mandatory. They are not optional. As a landlord, you have to keep your your rental at a standard. Now of course this is London, England, but this is where I go. Okay. Jump back to, you know, Oklahoma City, Oklahoma if you inherit a house in Central City. Are you allowed to make an Airbnb? Is there a market for it? But are you allowed and and that's a separate discussion of. Is that business model aligning with your personal outlook on how to do this and think there's some folks that just, you know, maybe they've inherited a single family home in subdivision and that subdivision has and says that you can't have tenants less than six months or a year, whatever. Right. So you have to do your homework as well.
Associations also can restrict. So sometimes it's not a single family dwelling that's a standard. But you're inheriting or you're taking over control of a condo. The condo association may have things and the rules that apply to you from the state and city levels may be different in a condo than they are in a single family dwelling.
Okay, wait a minute. Say more words about that. Say more words about this. The condo. Let's say somebody inherits a condo in a building, and there is an association set up with certain rules that they agree to when they bought it or when they inherit it. Say more words about that, how they could get that could potentially go sideways. Well, for example, there's a condo that I'm involved with down in Vancouver and of the 72 units were allowed our agreement, our association says 10% can be rented out. 1s Mm. At a given time. So if somebody is renting out. 1s Then that has to be reapproved every so many years, because someone else may need to be able to rent theirs out for a reason. So there's always a list of people waiting to rent their units out. And in the meantime, and this doesn't we do not allow short term rentals at all. 1s The minimum you're allowed is six months, and part of the vetting process is the condo board has to meet the tenant. Just just has to buy in that building. You have to go through credit checks. You have to like they have a really strong set of rules there. It's an adult building. And so if somebody moves in and has a family, they've got 18 months to move out. Wow. Now you take that and that may get you. You can beat that. I've got a friend who bought a place down in Florida, and there is a local ruling at the I don't know if it's at the county level or at the state level, but down there, even adult communities. Where these people had bought in thinking you had to be 55 plus to move in. When he bought in there, he found out that at the state level.
5% of the properties are. Some percentage of the property must be available to families with younger people
So you again, you've got to do your homework. You've got to do your homework
knowing and you've got multiple levels. In in the US when I was renting in Beverley outside Boston, the rental rules in Beverly were different than they were in Salem and all the other villages around. So each city will have a set of rental rules that is based within county. Or if you're in Louisiana Parish, then outside that you've got state. And then there is federal stuff that applies to all of us.
And that's true not only just Canadian, but also the US. It's different and they're usually similar. But there are nuances there for sure. Yeah.
to the question of what do you want to do long term or short term? And the answer being yes. You can also be doing both. So. Okay
What do you mean, you can? Well, I know of one landlord who has. Their home in their dwelling. They've got a long term rental and then they've got another space that's good for Airbnb. Okay, so they are doing both long term and short term. While they're while they're there, you also may want to do long term with the intent of moving in. So my and things change. My plan when we bought the farm was that was going to be my retirement home because it was single. I live, I live on in a property that has a strong slope and I'm aging out. I'm in, I'm pushing 70, I'm not 35. My knees are starting to go from stuff I did on mountain climbing expeditions. You know, stuff is not as easy as it used to be. And so I was looking forward to having a flat place. Then my business partner that I had bought that property with decided to move to another location, and I chose not to hold on to that property. So even your best laid plans. I'd been working on fixing that place up for my retirement for a decade. When we decided to sell long term. Short changed was
renting out, and I decided not to Airbnb that one because I didn't want to be out there daily or weekly changing sheets. I didn't want to have to furnish it and have all the difficulties of broken furniture and resupplying dishes and things like that. So there's also you want to do you want to rent it out? Furnished or unfurnished. Now, if you've inherited a property, one of the easiest things to do. May be to rent out a fully furnished term property.
Doctors and nurses. There's a shortage everywhere in our village, where I live up on the coast of British Columbia, we are short and we have constantly have a churn of travel nurses and doctors doing locums here, and they are a great place to rent out to. They're in for 3 or 4 months at a time. So your property is short term. You aren't stepping into a 2 to 3 year lease. It's month to month, but you've got a 2 or 3 month window that you're locked in there pre vetted by the local hospital, and the hospital is standing behind them when they introduce you. So you've got kind of a mix of this is long term short term I've got a friend who is doing that they rent out. 1s Five months of the year. They've just left last week to live in their place down in Panama. They rent their place out for so many weeks. For so many months, rather every year, and I'm part of their support team
It goes wrong at their place. I know the plumbers, I know that, and I know what they want. Last year, when one of their tenants decided that they didn't like the house and moved out partway through, I stepped in. Did all the interviews, things like that for them, and was constantly in touch with them while we found them a new tenant to bridge the gap to fill in.
You know your team, your team is so critical. We've talked about this at length on both you and I mean, you were one of my advisors for doing my doctorate. And so we've talked you've been on my team. I'm always on your team. There's so many aspects to advisors, and I would really like to have you back on the show. We're talking maybe in the next three, 4 or 5 months somewhere in there. And let's talk more about the importance of finding the advisors, especially to to fill the roles that we know that we're weakened. Right. There's there's all kinds of things that people say, I'm, you know, I'm good at this or I'm not good at that. That everybody needs help and everybody needs experience. What we're finding now is that we've got landlords that are either brand new to business, brand new to rentals, or so they're my newbie landlords or we've got landlords that have done it wrong, and now they're educating themselves, trying to get out of a problem area. We call them pickle landlords. But then I've also got, yeah, I've got my pickle landlords. And of course I've got bingo cards on the website now to help both of them, which is really neat because you play these blackout bingo cards on the website, which are free, by the way. Go to my life as a landlord.com for all my listeners out there. But then we've also got these up and coming growing landlords that they're not newbies. They've got a few rentals under their belt. They're learning the whole strategy, whether they're doing long term, mid term or short term rentals. But everybody needs to update advisors. And as you mentioned, Dan, life happens, life happens. And so you've got to adjust.
Yeah. Well we were talking the other day about the person whose husband suddenly died. Yeah. What do you do unexpected for them on the team two that you must have. Absolutely. You need legal a legal team. So for me I, I keep a lawyer on tap. I've got a lawyer that I can reach out to. And for a flat fee each year, I just pay so many hundred dollars, it's not a lot. And I get actually, I get a lot from them. I can probably they and they know the they, they keep an eye on what's changing in the laws, but they also have a paralegal that's assigned to me. And that paralegal bones me once in a while and says, this is what's changed now. As somebody who owned a brewery, that was where I was a tenant. That paralegal let me know when the municipality was starting to consider changing the rules for us on water usage.
Mm. That would have impact you for sure.
Huge amounts of water. And that was going to change my business model. Well, that paralegal can also be keeping track of what's happening around tenancy in your city and letting you know what's changing. The other one is your accountant. When I was in my 20s and I was a landlord. My my goals and objectives financially were very different than they are today. So right now that I'm pushing my 70s, my tax structure is different. You, your RSP or your 400? It's 401 in the US, yeah.
I haven't I've got one somewhere but I haven't accessed it. 1s And like just the at some point when you hit 70in Canada I have to start depleting my RRSP. So all of a sudden I'm forced to take revenue. Well, I may not want to structure my rental revenue the same way. Sure. And now. So start with the end in mind. How are you going to get into this? Well, that depends on how you're going to get out of it. 1s I've got one friend who only buys single family dwellings. His plan is he, I think, owns 20 or 25 right now. And his plan is when he gets to my vintage, he's going to start selling one every couple of years. 1s And then having that money come to him. Now, then you need your accountant and your lawyer to have structured that. Should you be doing that through a corporation or should you own these directly and so on? And what are the advantages and costs and disadvantages? And your team is so important at the beginning. They're grow what you think you're going to be doing in the end. Have a picture. And literally so I've got a background with clerks because today we're talking about time. Normally I have a vision from space because I like to remind people to to back out and take a long term view at things visually. Sit down and say, what do I see myself doing as a landlord? How do I visualize my landlord ship? Because it is a journey. You're taking on a ship and it changes over time. You are going to have rough weather. You're going to have calm seas, everything. You're from the Navy. You know this. So. Yeah.
As as we as we come to a close on this episode, I am so happy to have you, not only to introduce you to my listeners, because I know we're going to have you on the show many more times. You're just a wealth of knowledge, and I'm so excited that that the listeners were able to hear from you today, especially on a topic that many people have asked me about. Um, so I just wanted to summarize. So we had talked a little bit about how landlords can make this decision, whether it's long term or short term or, as you mentioned, mid term, on what to do with their property. It depends on where the landlord is in their journey. It's their team is absolutely critical. So we're going to talk much more about a team of advisors and then also educating themselves on the rules of the local area of where the rental is. And if it's like you said, if it's a condo association or a subdivision that has carriers or zoning restrictions that can heavily influence your decision of what you're going to do with this, and you also mentioned about the differences in operating long term versus short term rental, like furniture, you know, different different appliances. You might put in different aspects you might put in, but also the daily operations of, you know, short term rental versus a long term rental. 1s I always have a call to action at the end of each episode, and you've got a perfect segue in. Is that the call to action? All you listeners out there is have a visual image of what you want your landlord life to look like. If it is sitting on your your porch of your cabin overlooking the lake and you're not stressed, you're having a cup of coffee, or it's sunset and you're having a drink, whatever it might be, you need to have that image in your daily life. So that's your call to action is find the image. It'll take you about 30s on Google to start googling images. And and you know, whether that's your background on your screensaver or your zoom calls or you actually make a physical picture out of that, you need to have that image. So that's that's your call to action today. As always, let me know your comments and questions by emailing me. Learn at my life as a landlord. Your questions, your comments, your stories. Create the next podcast and I'm always looking for entertaining, educational and lively guests like Dan Deville. Thank you so much for joining me today. Um, Dan, again, thank you so much for joining us. And I'm so excited to have you as a resource to the listeners, for all you listeners and your YouTubers out there, join me for next week's podcast. The topic is tenant based episode number 45, and it is all about what to expect when your landlord changes, what to expect as a tenant when your landlord changes. That's it for now.
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Thank you again for joining me, Dr. Jennifer Salisbury in this episode of My Life as a Landlord. I'll see you next time.