Last updated on September 4th, 2023
Are you interested in achieving financial independence through passive income? Here’s a disclaimer: You don’t need to own a property to start the Airbnb rental arbitrage business!
Moreover, one of the most important factors to consider is the location and among the best cities to own a rental property in Canada is Toronto.
In this article, we featured the entire process of Airbnb rental arbitrage in Toronto, its profitability, along the best areas and neighborhoods. Continue reading to learn more about short-term regulations and ways to convince landlords to sublet properties for rental arbitrage!
What is Rental Arbitrage?
Rental Arbitrage is a way to start an Airbnb business with no money. By convincing landlords to lease you a property, you can furnish and sublease it on Airbnb and VRBO. No need for you to buy a property!
It is perfectly legal and is a proven scalable business model. In my podcast, I have spoken to various entrepreneurs doing Airbnb arbitrage full-time.
Here’s a proof! In Toronto, Julie manages 42 listings and I’m pretty sure she doesn’t own all the properties. She made C$1,737,314 in the last 12 months.
Is Airbnb legal in Canada?
Here’s the catch: Airbnb is certainly legal in Canada! As particularly stated in Airbnb rules in Toronto, hosts are prohibited to operate less than 28 nights at a time for listings that don’t have a valid registration number. Listen to one of our featured hosts from Toronto in our podcast, Into The Airbnb:
How much can I make with rental arbitrage in Toronto?
Before you dive in and start putting out your hard-earned money on a property, it’s important to know how much profit you can make. For instance, the best neighborhood to invest in is Yorkville, located in the M5R district, which is the fastest-growing area in the country.
Since this neighborhood is situated near upscale restaurants and tourist destinations, it’s mostly preferred by tourists & young professionals – and has an incredible rental demand!
How much can I make with rental arbitrage in Toronto?
Before you dive in and start putting out your hard-earned money on a property, it’s important to know how much profit you can make. For instance, the best neighborhood to invest in is Yorkville, located in the M5R district, which is the fastest-growing area in the country.
Since this neighborhood is situated near upscale restaurants and tourist destinations, it’s mostly preferred by tourists & young professionals – and has an incredible rental demand.
Profit & Monthly Expense in Toronto
Based on Airbtics’ data, you can earn a whopping C$10,634 per month for a 3-bedroom apartment in Yorkville alone. With the data provided, you can certainly tell that investing in a property in Toronto is profitable!
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| C$4,500 | C$10,634 | C$2,127 | C$4,007 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price and the monthly expenses (C$10,634-C$4,500-C$2,127= C$4,007).
Startup Cost in Toronto
Now that you have an overview of how much your monthly expense and revenue is, let’s talk about the start-up cost! How long does it take for an investor like you to get back the startup cost? Let’s take a look at this calculation:
| Total Startup Cost (Average startup cost + 2 months rent price) | Cash Return Time |
|---|---|
| C$11,000 | 3 months |
The average estimated startup cost (for furnishing) in Toronto is around C$2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price (C$4,500). Now that we have a total startup cost of C$11,000, cash return time can be calculated by dividing this by the monthly profit (C$4,007).
Given your monthly revenue of C$4,007, it will take approximately 3 months time to get back the startup cost! In such a short period of time, you can already expect profit and consider starting your second unit for rental arbitrage. If this sounds promising to you, then go ahead and look at the other best areas for rental arbitrage in Toronto.
Best Areas for Rental Arbitrage in Toronto
Before investing in a particular area in Toronto, you have to take a look at the top markets and number of listings to set your expectations towards success. Check out the top 3 boroughs in Toronto ranked by their annual revenue, along with their occupancy & daily rates!
1. Cabbagetown
This popular and historic neighbourhood located in the downtown of Toronto is home to many artists, musicians, and writers. It’s a preferred area for many young professionals and people who want to enjoy the energy of this culturally rich place!
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | C$1,723 | C$2,816 | 93% | C$153 |
| 2-bedrooms | C$2,050 | C$3,694 | 90% | C$211 |
| 3-bedrooms | C$3,750 | C$5,357 | 89% | C$418 |
According to our Airbtics Dashboard, there are more than 93 Airbnb listings with 24 condo properties and 3 one-bedroom properties in this area. The monthly revenue for most properties in Cabbagetown is more than C$2,135 per month with occupancy being more than 71%.
2. King West
Located in Toronto’s downtown area, King West is claimed to have the most attractive property types. It is also the city’s largest and busiest transit route and is home to many business professionals! Here’s what you can expect in this neighborhood:
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | C$2,375 | C$3,432 | 91% | C$232 |
| 2-bedrooms | C$2,500 | C$5,842 | 87% | C$409 |
| 3-bedrooms | C$4,200 | C$5,946 | 87% | C$533 |
This area has a total of 331 Airbnb listings with 221 condo properties and 206 one-bedroom properties. The monthly revenue for most properties in King West is more than C$2,940 per month with occupancy being more than 68%.
3. Yorkville
If you are looking to target various kinds of tourists and prefer long-term profitability in the business, this area might be the best one to invest in! Home to Canada’s most exclusive shopping districts, this borough is one of the fastest-growing areas in the country. Here’s what you can expect in this neighborhood:
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | C$2,400 | C$3,344 | 90% | C$223 |
| 2-bedrooms | C$2,600 | C$4,762 | 81% | C$314 |
| 3-bedrooms | C$4,500 | C$7,634 | 51% | C$1,651 |
This area has a total of 155 Airbnb listings with 17 private room properties and 101 one-bedroom properties in this area. The monthly revenue for most properties in Yorkville is more than C$3,282 per month with occupancy being more than 72%.
Short-term rental regulations in Toronto
To begin with, it’s certainly important to be familiar with the Airbnb rules in Toronto to make sure that your business will run smoothly. Here are some of the short-term rental regulations and laws to take note of:
- Short-term rental operators must register with the City in order to operate in Toronto.
- It is required to collect and remit a four percent (4%) Municipal. Accommodation Tax (MAT) on all rentals
- Hosts will also need to provide the name and telephone number of an emergency contact person who will be available 24 hours a day during rental periods. The city of Toronto will also require that hosts keep all records of short-term rental activity which will need to be provided to the city upon request.
- Under the new rules, Torontonians will only be able to host short-term rentals in their principal or primary residence, with homeowners and tenants both able to participate.
- Hosts will also need to ensure that their property is located in a residential zone, or the residential component of mixed-use zones.
- Hosts renting their entire home while they are away will only be able to rent their entire home for a maximum of 180 nights per year. While there is no limit to nights for renting private rooms, a host can only rent up to three bedrooms if they are renting multiple rooms in their residence.
Rental Properties in Toronto
Since Toronto is known for its cultural diversity, this metropolis is home to towering buildings and busy streets. While the number of executives & business professionals are increasing in Toronto, the demand for rentals also skyrockets!
To run an Airbnb rental arbitrage in Canada, you can look at property websites and get a grasp of the ranging prices in Toronto:
1.Toronto Rentals
2. Zillow
How to Find Landlords for Airbnb Rental Arbitrage
Airbnb investment through rental arbitrage is one of the best strategies to have passive income. However, it could be a challenge to find a landlord that allows their property for subletting on Airbnb. You can also convince a landlord by following the rental arbitrage email template & be extra creative!
Here are ways how you can find landlords that allow Airbnb rental arbitrage:
- Real Estate Websites
Renters in the digital world who are looking for properties online can easily connect with landlords. Some of the most recommended online real estate websites which allow you to filter by city, state, or ZIP code are:
However, you can also find apartment & condominium properties online on the following websites:
Search Engines & Marketplaces
There are numerous property owners who are leasing their properties and you can easily find them on Google & online marketplaces. Check out some of the most recommended marketplaces:
- Craigslist allows renters to specifically state what kind of property they are looking for. You can try typing in ‘landlords allowing Airbnb’ or ‘sublease property in (city name)’ and try other keywords to get you on the right track.
- Facebook marketplace has a vast community of landlords & renters, so you can try joining the right groups to lead you on the right path. Here are some of the finest Facebook groups that you can join:
Communicate with Landlords
If you are currently renting a space or know someone who is, then it’s also recommended to speak with them. Start by asking if there are vacant rooms or properties and let them know about your intentions of putting them up for rental arbitrage. They might also be able to recommend neighbors or local friends who are also interested in this idea!
