Rental Arbitrage in Montreal

Rental Arbitrage in Montreal

What is Rental Arbitrage ?

‘Rental Arbitrage' is the act of renting a property long-term and then re-renting it on a short-term basis on vacation rental platforms like airbnb and vrbo.com. Rental arbitrage focuses on leveraging other people's properties by subletting and renting through sublease agreements, requiring little investment and providing a positive cash flow. Because of the simplicity of the business model, the Airbnb community has widely embraced this concept.

Before we dive right into how Rental Arbitrage works in Montreal, let’s look at some of the benefits of this mechanism.

Why Should You Consider Rental Arbitrage?

1. Low Investment

As you won't be purchasing the property outright the investment needed is minimal. Infact, all you need is your first month's rent, damage deposit, any furniture and linens and amenities needed to get your property Airbnb ready.

2. Low Risk

Usually long term rental/ lease rules apply for the contact between you and your landlord which means if the roof needs to be replaced it's on the landlord to fix it. If the property does not generate enough bookings to cover your costs you can always walk away from the lease.

3. Quick Scale

You can utilize a channel manager software and manage as many locations as you can afford. In other words, you can rent and arbitrage as many units as you like.

4. Less Tasks

Landlords have to manage and pay multiple expenses, from HOA fees, mortgage, utilities, maintenance, and much more. The rental arbitrage host on the other hand only has to pay one flat fee to the landlord each month: rent. Montreal 2

How Does Rental Arbitrage Work In Montreal?

There are a number of regulations one must comply with before starting to short-term rent their property, many of which are specific not only to each province but to each borough. In Montreal, the rules are a combination of provincial and city regulations.

Business Licensing

In the province of Quebec, the laws provide that any person who offers for rent to tourists, in return for payment, at least one accommodation unit for periods of 31 days or less must have obtained a classification certificate from Tourisme Québec of which you can find details at bonjourquebec.

Montreal has both provincial and city regulations on who can operate a short-term rental, as well as restrictions on neighbourhoods in which they're allowed.

Zoning Laws

Regulations on zoning in a municipality in the province of Quebec may apply to your listing. In the case of Montreal, the Master Plan explains the city's planning and development vision, including land use and building density policies in Part 1, Chapter 3.1. In Part II, the Master Plan contains information for individual boroughs, including land use designation. Zoning and other urban planning by-laws for the city of Montreal are available here.

Rent Control

In Quebec, rent increases may be subject to the rent control system administered by the Quebec Régie du logement pursuant to standards set out in the Regulation Respecting the Criteria for the Fixing of Rent. You should review these standards carefully if you plan to collect or adjust rent. More information is available here.

Fines for lawbreakers range from $2,500 to $50,0000. But Revenu Québec — the provincial body responsible for monitoring Airbnb listings since June 2018 — has not issued a single fine, just warnings.

Taxes

Under An Act respecting the Québec sales tax, a tax on lodging applies each time an accommodation unit is rented for more than six hours and up to 31 consecutive days in most tourism regions in Quebec, including Montreal,as explained here. The province of Quebec and the municipalities collect various other taxes that may apply to residents renting out accommodation units. More information on taxes for the city of Montrael is accessible here.

Other Rules

It is also important to understand and abide by other contracts or rules that bind you, such as leases, condo board or co-op rules, HOA rules, or rules established by tenant organizations. Please read your lease agreement and check with your landlord if applicable.

In Montreal, some neighbourhoods have also implemented their own rules. For example, in Ville-Marie, listings for "tourist residences" are only allowed in a 3.3-kilometre stretch surrounding one of the city's busiest commercial streets.

The rules also prevent new rentals from opening within 150 metres of each other. But a recent CBC investigation found between 700 and 800 active listings and almost all of them are outside the permitted zone.

To get more information about short-term rental regulations in Montreal, you can also read Airbnb's article.

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