# Buying a house with my GF to rent as AirBnB



## Arnak (Feb 23, 2017)

My girlfriend and I are looking at buying a house for the purpose of renting it. We have never done that so it brings a few questions:

The first is the mortgage. Do each of us have to get a mortgage from our bank (we each bank at different bank) for half the amount? How does that work when 2 people invest together on something like this? Is it better do this as a small business?

Second is the kind of mortgage: joint tenants or tenants in common. I could contribute to the down payment a lot more than she does. If I understand correctly, as a joint tenant, I would lose half the propriety is we split and she decides to sell her. Right? I understand that with tenants in common, one can have more “shares” than the others so maybe that would be more what we need. But if own 75% the property, would that mean I pay 75% the expenses and get 75% the revenues after? Can we be tenant in common, own different “shares” in the property but split all expenses and revenues in half once we own the property?

We’ll need the city to accept changing zoning to commercial so that we can rend as an AirBnB. A friend suggest that we make it a condition when we make an offer to purchase the house. Does this makes sense. If so, how and where do we state this condition?

Thank you


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## AltaRed (Jun 8, 2009)

Joint title means undivided interest, so in a split, it will most likely go 50-50 (assuming you currently live common law today and are not just business partners) unless the court can see evidence and paper trail that one party consistently put more into the property than the other person (depends on family law in your province). There might be also a way to determine 'beneficial interest' on title which can be different than legal interest. That way, there could be a different split. You'd need to talk to a lawyer for the province you are interested in. You'd both get the mortgage together with this type of ownership. The mortgage company might be able to allocate along beneficial interest - don't know much about it.

Tenants in common can have different split of ownership and this is described on title. This type of title means proportional down payment and proportional share of mortgage and costs along the division noted on title. It may be impossible to get a mortgage(s) for tenant-in-common ownership since few companies would be willing to be exposed to potential liabilities of foreclosing on a 'portion of a property'. Further, there could be implications if one of you wants to sell and the other does not. You need to have a separate agreement on how a change in title (wind up) would be handled, e.g. right of first refusal, price such as formal appraisal, etc. 

Re-zoning land in a municipality can be a long process. In places that I know, there is an application that has to be made, then 1st and 2nd readings of a bylaw change, then a public hearing, and a final reading (or two) to approve the bylaw and put it into force. This could be months. Don't know how you could make an Offer to Purchase that would be conditional for months.

Some municipalities also have what are called TUPs (Temporary Use Permits) that are faster to get, but have a finite end point, e.g. 3 years, and then another TUP must be applied for again, and so on, with perhaps at most 2-4 renewals. Not what one would like to do in this case....although I don't think you and your gf are going to have the staying power to run this sort of business very long. It gets old really fast.

Added: You and gf have a lot to research to do, decisions to make and likely legal costs to incur before you even consider making any kind of offer. This is a seriously long road to travel.


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## Mortgage u/w (Feb 6, 2014)

You get 1 mortgage which you are both equally liable for. The mortgage can be obtained anywhere - not necessarily where you currently bank. The fact you are questioning mortgages, I will guess that neither you nor your gf currently own a property. If that is the case, investing in your first property with a girlfriend; zone changing; renting out on airbnb; is not something I would be quick to recommend. Rentals are already complex enough for experienced investors - it could escalate very quickly when you're new at it.


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## nobleea (Oct 11, 2013)

Making a zoning change conditional on the sale will never happen. Takes way too long.

I know the rules on airbnb are different for every jurisdiction. Here, you would probably just need a business license. Airbnb can operate in residential areas. There's no way we could change the zoning of a house in a residential neighbourhood to commercial. Just wouldn't be allowed.
could be different in your city. A call to the city should clarify this or maybe they already have a website on it.

Airbnb can be a far more involved process than just renting out by the month/lease. Cleaning, fixing, calls about how to use a washing machine, can opener is missing, will my suitcase fit between the bed and the wall - go measure it before i book.

Around here, airbnb can be quite profitable during our summer festival season. But outside of that, its not great.
I have friends that rent out their entire house on airbnb - they just go live with a friend/parent when someone books it. That works very well for them.


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## Arnak (Feb 23, 2017)

Thanks for all the replies, 

So to sum up, we go get the mortgage together with whatever financial institution we want. That part is easy enough. I’m still unclear if we should do this as a small business. The way I see it, it would be a better option since rent payment can be made to that business and then we can split it. It’s easier for expenses as well. 

We’ll consult a lawyer for sure but so far, from your answers I get that a joint title would be better and more likely to happen. We’ll have to check about the “beneficial interest” on the title and see if that can be done. 

As for the rezoning, I understand the complication behind that idea. I know more and more cities are regulating (sometimes restricting) short term rentals. I wouldn’t sleep well at night if I invested 200,000 on a property 5000 km away from where I live and have nothing to do with it because the city doesn’t like short term rental anymore. Hum.. I have to think about this part some more and for sure, I need to talk to the municipality. 

We found a property management business who would take care of the cleaning and giving the keys and managing the property for us at the price of 20% the income. We also have family members within 10min drive to help if needed. The spot is busy with tourist in both summer and winter so we figured the idea was worth considering.


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## lonewolf :) (Sep 13, 2016)

If I was to buy a house for renting it out as airBnB I would get the house 3 D printed with cement walls.


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## Just a Guy (Mar 27, 2012)

I'd suggest you do a lot more research before you even think about starting. Check out www.easysafemoney.com for a really good beginners book as well as some good articles and the videos published by MR.Matt (a user on here) on YouTube. 

I'd also review your relationship very dispassionately. Partnerships and relationships are very difficult things to manage, especially where money, renovations and stress is involved. They rarely work out long term unless your personalities mesh well.

As expressed earlier, your basic lack of understanding of mortgages lends me to think you are a ways away from starting this without setting yourself up for a hard time. 

If you're thinking this will be a we buy and collect cash, you're fooling yourself, even with a property manager. Real estate investing is work. In the boom years, it's fairly easy to make money, not so much in a downturn. Think of your property manager for example...they may have a client like me with multiple doors and building and then there is you with a single door...who are they more likely to fill first? The big client who pays them big bucks or the single client with a minor place? There is also a lot of corruption in this industry. Property managers can get kickbacks from shoddy contractors, they can steal money, tenants can trash places...there is a lot more you need to know about before you jump in.


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## OhGreatGuru (May 24, 2009)

A. It's a good thing you re asking for advice, because you clearly don't understand what you are getting in to. As others have recommended, you need both legal and accounting advice. (And BTW, do you have a co-habitation agreement?)

B. The business plan could be risky. A lot of municipalities are beginning to get worked up about these "mini-inns". The trade name AirBnB is highly misleading. A conventional B&B (Bed & Breakfast) is occupied by the owner, or an agent of the owner, who provides the breakfast; housekeeping; and property maintenance. In most cases there is a permanent, or at least long-term, resident on the premises. Municipalities, and neighbours, are rightly getting concerned about people like OP who are absentee landlords, operating what amounts to a year-around commercial mini-hotel in a place zoned residential. Places like Orlando, Florida, where there is a high demand for vacation homes, have adopted a specific zoning called "Short Term Rental Zone" to try to get a handle on the issues. See http://cu-inorlando.com/orlando-short-term-rental-zones/ for example.


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## Longtimeago (Aug 8, 2018)

I suggest you do a lot more research into Airbnb before deciding if you are happy with doing business with an unethical company.

https://www.google.ca/search?q=airb...rome..69i57.3135j0j8&sourceid=chrome&ie=UTF-8

It is not just about you and you making money. It is a question of how you make the money. Let me give you two scenarios to consider.

You look at buying an apartment in a residential apartment building in Paris, France and rent it out using Airbnb. Paris has a huge problem with Airbnb as you will discover if you do some research. Most of their listing there are illegal rentals. It is so bad, that a young couple perhaps much like yourselves, ie. hard working, just trying to build a decent life, cannot find a place to live. Airbnb rentals are actually harming ordinary people's lives in Paris.

Or you look at buying an apartment in a building in Puerto Vallarta in a building where all the apartments are also rental listing on Airbnb and are not illegal rentals and the locals are not competing to rent or buy them. No one is really being harmed by the short term rentals, it brings money into the local economy.

Those are two simplified examples but they are all that is needed. Now here is the question to answer for yourself. You may well say, OK, I won't buy in Paris and be part of harming ordinary people's lives but I will buy in Puerto Vallarta and contribute to the economy, that's a good thing. But are you not still contributing to a company that knowingly is harming people elsewhere? Does that not make you part of that harming of people? 

I for one would neither rent from Airbnb when I travel nor list a property for rent that I owned, with them. Doing business with them in either case would mean to me that I was contributing to their unethical practices. People are very good at saying, 'I'm not doing anything wrong, my listing is legal and a property that does not impact others' but I cannot see any way to say, 'I'm not doing anything wrong when I do business with an unethical company.'


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## OnlyMyOpinion (Sep 1, 2013)

OhGreatGuru said:


> A. It's a good thing you re asking for advice, because you clearly don't understand what you are getting in to. As others have recommended, you need both legal and accounting advice. (And BTW, do you have a co-habitation agreement?)
> 
> B. The business plan could be risky. A lot of municipalities are beginning to get worked up about these "mini-inns". The trade name AirBnB is highly misleading. A conventional B&B (Bed & Breakfast) is occupied by the owner, or an agent of the owner, who provides the breakfast; housekeeping; and property maintenance. In most cases there is a permanent, or at least long-term, resident on the premises. Municipalities, and neighbours, are rightly getting concerned about people like OP who are absentee landlords, operating what amounts to a year-around commercial mini-hotel in a place zoned residential. Places like Orlando, Florida, where there is a high demand for vacation homes, have adopted a specific zoning called "Short Term Rental Zone" to try to get a handle on the issues. See http://cu-inorlando.com/orlando-short-term-rental-zones/ for example.


Yes, IOW, the neighbours are likely to hate your guts with good reason. Find a better way to make your fortune.


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## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> Yes, IOW, the neighbours are likely to hate your guts with good reason. Find a better way to make your fortune.


It depends on where the property is located. If it is among a lot of other vacation rentals and/or mixed residential/commercial use, there may not be a lot of resistance. That said, re-zoning is not assured and it takes a long time. As a person who has been involved with municipal land use planning from a community (land owner) perspective for a long time, I'd be very vocal about "denying" short term vacation rentals in primarily a residential community. A lot of party scum often rent such places causing damage, noise, and unsavory practices.... and that doesn't even count taking a property out of circulation for true residential living.


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## kcowan (Jul 1, 2010)

Longtimeago said:


> Or you look at buying an apartment in a building in Puerto Vallarta in a building where all the apartments are also rental listing on Airbnb and are not illegal rentals and the locals are not competing to rent or buy them. No one is really being harmed by the short term rentals, it brings money into the local economy...


PV is like much of North America. VRBO and airbnb compete with property renters and hotels. There are several agencies that handle short-term rentals but they have to collect 3% hotel tax and 16% IVA. They charge 20%. So there is 39% of the rent one has to give up plus the cost of doing turnovers and maintenance. And any net income has to be declared to the CRA.

But most of these landlords are tax-evaders so renting from them encourages tax evasion. Plus they compete with hotels and property agents locally.


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## bgc_fan (Apr 5, 2009)

kcowan said:


> PV is like much of North America. VRBO and airbnb compete with property renters and hotels. There are several agencies that handle short-term rentals but they have to collect 3% hotel tax and 16% IVA. They charge 20%. So there is 39% of the rent one has to give up plus the cost of doing turnovers and maintenance. And any net income has to be declared to the CRA.
> 
> But most of these landlords are tax-evaders so renting from them encourages tax evasion. Plus they compete with hotels and property agents locally.


It depends on jurisdiction. IIRC Quebec had reached an agreement with AirBnB so people are charged the hospitality taxes appropriate to running a hotel. I remember there was a case of a Quebecois who was bragging on social media about having made $200k on AirBnB without paying the appropriate taxes ($60k). Shortly thereafter, Revenue Quebec came knocking on his door and haven't heard much from him.


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## AltaRed (Jun 8, 2009)

LOL There is always some Neanderthal that stands in traffic.


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## OhGreatGuru (May 24, 2009)

I heard on the radio the other day that there are some 4000 AirBnB units in Vancouver (that they know of). (It was in the news because the city has only just brought in licensing and rental rules for them.). That's 4000 hotels that haven't been paying appropriate taxes. In a city that has a critical housing shortage. And we won't even go into the effects on community planning and other issues. One only needs to read posts like this one to realize that, in popular destination locations, people are using AirBnB to facilitate a plan to buy housing solely for the purpose of turning them into short-term rental accommodation.

It may be that our assumptions of business models for the hotel industry are outdated, just as UBER has shown the business model for taxis is outmoded. But replacing it with community planning chaos and tax dodgers isn't the solution.


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## Mazzawi (Sep 8, 2018)

Sorry to be the bearer of bad news, rentals make great investments but I think you still need to learn a lot more before you start. Maybe chat with your current landlord and see if you can learn something from him.

- A bank won't finance a house you are planning to Airbnb.

- you will never be able to change zoning as a condition for purchase. It takes years and you will probably not be able to do it without having experience in this sort of thing. And knowing which properties and areas are possible to change.

- buying a property with your girlfriend is a very bad idea. If you are saying you have 75% of the down payment they go at it alone. Buy a smaller property or save more before you start.


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