What makes Kelowna a good investment?
Kelowna, a city located in the Okanagan Valley of British Columbia, is quickly becoming a popular destination for short-term rental investment properties. Known for its beautiful beaches, wineries, and outdoor activities, Kelowna attracts a large number of tourists every year, making it a prime location for vacation rental properties. If you’re considering investing in a short-term rental property in Kelowna, there are several things to keep in mind.
First and foremost, it’s important to research the different neighbourhoods and find the ones that are popular among tourists. Areas near the lake, in places such as West Kelowna or Lake Country, are highly sought after for their stunning views and proximity to recreational activities. Keep in mind, there are limited areas that have the zoning for STR on both sides of the bridge. That brings us to the next most important item to look out for: Zoning and Bylaws.
Check the zoning and strata bylaws
Another important factor to consider is the local/strata regulations and zoning surrounding short-term rentals in your area of interest. In April 2019, the City of Kelowna implemented strict bylaws for short-term rentals, which requires property owners to obtain a business license, which requires you to submit a fire & safety attestation form, a parking plan, evacuation plan, and good neighbour agreement. It’s crucial to familiarize yourself with these regulations and ensure that your property complies with them before listing it for rent.
It is equally important that if investing in a strata type property, you review the rules and regulations to confirm that short-term rentals are even permitted. Even with the allowed zoning, you can’t assume that the strata is or will in the future ban or restrict vacation rentals in the building or complex. This is where a local real estate agent familiar with the many buildings and strata documents could be a valuable asset in your search.
West Kelowna, in slight contrast to Kelowna, currently (as of the time of writing this post) has more relaxed bylaws for short-term rentals. There are still many homeowners who want to retain the ability to rent out their homes to vacationers, however, Council were split in their last hearing.
To self-manage or automate?
How much experience do you have in managing vacation rentals? Have you just watched a few episodes of HGTV Vacation House Rules and feel you’re a pro now? A mismanaged property with a few poor reviews to start can permanently damage your short-term rental investment.
It could be a wise decision to hire a professional property management team, such as Duval, to take care of revenue analysis, full service turnover, professional marketing, listing optimization, 24/7 guest communication, marketing insights, and more.
It doesn’t hurt to interview and communicate with your property management company to see what they can offer you. There’s lots of flexible options to run your own vacation rental whether you want to be completely hands-on, split your duties or leave it to the pros.
Kelowna Condo Buildings (Allow STR)
- Playa Del Sol
- Discovery Bay
- Sunset Waterfront Resort
- The Royal Kelowna
- Caravelle by the Lake
- Brooklyn Kelowna
- St. Paul
- SOLE (multiple locations)
- Cambridge House
- Mission Shores
- Lakeshore Villas (Manteo)
- AQUA (2024)
- Caban (2024)
- The Pointe at Quail
- Pinnacle Point
- Bella Sera
- Granite Close
- Hillside Terraces
(More in West Kelowna and Lake Country) – for a full list and to find out active listings, hire a Letnick Estates agent!
Taxes and Budgeting
When it comes to buying a vacation rental property, it’s essential to have a tight relationship with your accountant. They can help you understand the potential tax implications of rental income and expenses. Additionally, it’s important to understand the GST (Goods and Services Tax) implications of the property you’re considering. As vacation rental properties are often considered commercial businesses, there may be opportunities to defer GST payments on the purchase. It’s highly recommended to consult with your accountant to understand how these tax regulations will affect you before making your purchase decision. Especially with new legislation (Foreign Buyer Ban) and regulations being introduced without consultation, Canadian tax laws can be complex and different from where you’re from, so having your accountant guide you through the process can help ensure a smooth transaction.
Long-term or Short-term | Which is better?
There are several pros and cons to consider when deciding whether to buy a long-term or short-term rental investment property. However, depending on your investment capital/budget, choice/style of management, risk tolerance, and lottery draw of tenants, the choice can vary from investor to investor.
Long-term rents in Kelowna and West Kelowna remain in high demand and can provide a safety net with a good stable tenant. With certain properties, there’s also the option to use them as vacation short-term rentals for the summer season (May-Aug) and find temporary long-term tenants such as university and college students who return home during summer break.
Pros of buying a long-term rental property:
- Consistent, stable rental income: Long-term tenants tend to stay in a property for an extended period, which can provide a consistent source of rental income for the owner.
- Lower vacancy rates: Long-term renters are less likely to move out frequently, which can lead to lower vacancy rates and less downtime for the property.
- Potential for appreciation: Long-term rental properties can appreciate in value over time, providing the potential for capital gains when the property is sold.
Cons of buying a long-term rental property:
- Limited flexibility: Once you’ve rented out a property to a long-term tenant, it can be difficult or pricey to change the use of the property or sell it quickly.
- Maintenance and repairs: As a landlord, you’ll be responsible for any repairs or maintenance needed to keep the property in good condition.
- Tenant issues: Dealing with long-term tenants can come with challenges such as late rent payments, property damage, and evictions. British Columbia has a very strict and sometimes time-consuming Tenancy Act to abide by.
Pros of buying a short-term rental property:
- Higher potential rental income: Short-term rentals can command higher daily or weekly rates than long-term rentals, which can lead to higher potential rental income.
- Greater flexibility: With short-term rentals, you have the attractive option to change the use of the property, use it personally, or market to sell it quickly.
- Tax benefits: Sometimes, there are certain tax benefits (ie. business expenses, add-backs, income splitting, etc.) for short-term rental properties.
Cons of buying a short-term rental property:
- Higher turnover: With short-term rentals, you’ll have to deal with a higher turnover of tenants, which can lead to more frequent cleaning and maintenance/repairs.
- Higher vacancy rates: Short-term rentals may have higher vacancy rates during off-peak seasons (ie. Kelowna Sep-Apr; except Big White).
- Regulations: Short-term rentals may be subject to more regulations and sudden legislation that you need to comply with relying on provincial government policy.
Wishing You Okanagan Investment Success
In summary, Kelowna is an excellent destination for short-term rental investment properties. With its scenic backdrop, consistently growing tourism industry, and high rental rates, it’s a great opportunity for investors to earn a steady stream of rental income. By carefully researching neighbourhoods with a local agent, familiarizing yourself with municipal regulations and strata bylaws, and working with a property management company, you can make your short-term rental investment a success.
If you’re looking to invest in a condo or strata property and would like to explore potential short-term rental investments in Kelowna and surrounding areas, feel free to contact us today. We’ll make sure to educate you on the different buildings and point you in the right direction of where everyone wants to stay and play.