Airbnb vs. Long-Term Rentals: Which Makes More Money for Ontario Landlords?

Introduction & Guest Background

Hey everybody, welcome to another episode of CRESI’s Ontario Landlord Series, where we speak to Ontario landlords and investors in real estate about whatever it is that they need to know, speaking to experts and professionals in different trades and professions to make sure you’re always getting the information to make the right decision for your specific situation. We talk a lot about the long-term rental game here, but there’s another niche in this market — short-term rentals, or Airbnb-type rentals.

What are you looking for — vacation, or something short-term to fill a gap? There are a lot of different ways to approach it. So today we’re going to speak with Brad McRae, who we spoke to before about cottage and vacation rentals, but he also runs an Airbnb short-term rental business that doesn’t just include cottage rentals. We’re going to talk about the other side today — Airbnb in general, downtown Toronto or wherever else you might have them. Without further ado, let’s bring in Brad — say hi.

Good morning, how are you? Hey Kevin, thank you so much, thanks for having me back — excited to chat today. For anyone who didn’t watch the last episode, a quick background on myself: my wife and I got into short-term rental management when we had a house of our own that we wanted to rent out when we went on vacation, right down in Toronto. That turned into managing properties here in Ontario, up in cottage country, plus a couple of properties in Florida and Arizona.

Getting Started: Primary Residence Strategy

Some people getting started use their own primary residence — we’ve talked before about someone’s first step into landlording being renting out a basement apartment. I have a friend with a property out in Caledon who rents it out and goes away, whether to his trailer in the summer or on vacation with his family, and it’s paid for and more just by leaving his house to somebody else. That’s a great way to get started if you have the ability to travel.

I couldn’t get out of my house that easily, that’s for sure, but I think it’s a great idea for someone to get started. Is that how you got started too? Exactly — it was really an experiment. We knew we wanted to eventually start a property management company managing multiple properties, so this was our stepping stone — try it with our own place, see how it goes, and if we liked it and made the money we thought we would, continue with more properties.

The money is something I want to dive into today. We’ll speak generally, since every situation is different, but I think there’s money to be made here if you’re in the right location so you’re not sitting with constant vacancy. I’ve had people talk about getting an Airbnb in Hamilton, for example, and I’m not sure what vacancy looks like there unless you’re catering to someone staying a month or two while transitioning into the city, rather than a vacation stay. Niagara Falls seems like a good spot for vacationers, and Toronto too, for people coming and going as a major city — but you mentioned you also have places in Arizona and Florida, both major travel destinations. Is that what mostly drives it — vacation rentals, people going away?

Location is EVERYTHING

Great question. I think one of the biggest pitfalls for people getting into Airbnb is thinking that any property in any location can do well. There are multiple avenues that drive vacation rental or short-term rental business, and it comes down to knowing your avatar — who your target guest actually is.

If you’re in downtown Toronto, you’re probably not catering to the same clientele as if you were in cottage country, or the Niagara region, or Florida. You have different clientele — business travellers who need a place for a week, two weeks, three weeks, or a month and a half for a work trip, where you might only need a one-to-three-bedroom condo. Or, like our own house, a place that gets rented out to people doing renovations for three to six months who need to be fully out of their house, with a fully furnished home nearby so their kids can stay in the same school. There’s money to be made, but you need to know where the money is to be made when you’re setting your property up — just like with a long-term rental, you’re looking for who that tenant is going to be, and if your property is set up for tenant X, you need to market to X, not to some other type of guest.

Especially with short-term rentals, it’s like that principle times ten — the furnishing, the marketing, the pricing, the settings, everything goes into getting in front of the right people. When we travel, especially as a family, my wife is very particular about having a full kitchen wherever we stay — that’s the reason we’ve stayed away from hotels for close to a decade now. We’re heading to Halifax in a couple of months and stopping in Quebec along the way, and I got an Airbnb for two nights near the Chateau Frontenac. When I saw what it would cost to actually stay there, I decided I’d just eat dinner there instead of paying a thousand dollars a night, but I still wanted to be in that area. To maximize ROI, you have to be very particular about what you’re looking for and how you execute, whether it’s vacation or not.

The Money Reality Check

Exactly — gone are the days where, and it’s been a while since I’ve looked at Ontario cap rates specifically compared to long-term, but back five to eight years ago you could see 10-15% cap rates on a property just about anywhere because supply was so limited. Now you might get a cap rate above the norm for that area, but you have to be careful — it’s not this money-printing machine all the time. Sometimes it’s just a few thousand dollars a month better than long-term in that area, and that’s only if you set it up properly, rather than assuming that owning a long-term-viable property automatically means you’ll make money hand over fist short-term.

There’s a real niche element too. I have two realtor friends in different areas — one does short-term relocation housing for military families, who don’t want to buy right away and need three to six months to get situated before moving on. Another helps incoming immigrants get settled quickly with a three-to-six-month spot before they find something longer-term. It takes away the initial stress of relocating. There are opportunities out there to fill places if you’re flexible about who you’re renting to and have a plan for where you’re looking.

Niche Markets & Opportunities

Definitely — and especially in Ontario, you want to be very careful about tightening restrictions. In Toronto, which I know very well because that’s where our property is, it has to be your primary residence — you have to live in the unit, or you can rent a secondary unit if you live there, and you can only rent it for a total of 180 days a year. Airbnb tracks that, and other platforms track it too, because it’s all tied to your licensing number — go over by one day and you lose your license the next year. No ifs, ands, or buts. They crack down hard on it.

Every city is different — Mississauga has something similar, requiring primary residence, but without that 180-day limit. It’s really about knowing the rules, either when you’re transitioning into this or before you buy, because there’s money to be made, but only in the right spot, and you want to make sure the city isn’t about to tighten the rules right when you’re about to buy.

Regulation Nightmare

That’s a great point — things are changing constantly. What do you see changing across Ontario, and the US, over the next few years? Unfortunately, I think Ontario is just going to keep getting harder on restrictions, because every municipality has control over it. Even some vacation spots, like Blue Mountain, don’t let you get a short-term rental license within certain pockets because they want to push people toward the hotels there.

Compare that to Florida, where the attitude is more like: as long as the government makes money, they don’t care what you do — you can get your license and have 200 Airbnbs in a row, because it’s more of a free market and the bad operators tend to sort themselves out. Ontario is trying to control it more because of the perceived over-proliferation of Airbnbs around 2019-2021, which some blamed for rising housing prices — but when you look at the data, it’s really more of a scapegoat. It’s just an easy story for the average person, so it’s easy for regulators to put restrictions on Airbnbs. I do see Ontario getting stricter, and most of Canada, including BC, moving the same direction with short-term rental regulations. So it’s worth thinking about a Plan B — a furnished mid-term rental, say one to six months at a time — if short-term rentals under 20 days become restricted where you are. It’s similar in the US — some states are very restrictive, some are wide open, so it depends on where you’re looking and what your goals are.

Government Money Grabs

It all comes back to money, I think — a lot of these policies are the government trying to get extra revenue, whether it’s short-term or long-term rental licensing. A few years ago they charged foreign investors an extra 10-15%, thinking it would slow things down, and it really just put more money in government pockets, since it was still a good deal for those investors at the time. That’s changed now. The N13 process for demolition and renovation is also costing landlords more money to go through. Licensing and fees — a lot of it is a money grab by government. As an investor, no matter what sandbox you’re playing in, you have to figure out the rules and do the best you can within them so you don’t get penalized, fined, or lose your license.

Whenever people try to take shortcuts, they get burned eventually. I was told once that there are no elevators in life — you have to take the stairs. I think that’s true here too — every once in a while, if you look hard enough, there’s an escalator, but mostly it’s do it right, take the hard way, and it pays off. Don’t shortchange your furnishings if you’re trying to play in the luxury rental space, for example — you can’t skip on furnishings but still expect to compete as a luxury listing.

The Luxury Standard

Right — like I said on the last podcast, “Airbnb” is really shorthand for any platform you list on, it’s just the most common term. If your main source of income is Airbnb-style rentals, it’s a guest-review game — it’s all about the reviews. Anything less than a five-star review hurts your search algorithm and your visibility, because the platforms want to wash out negative reviews and bad properties. You’ll actually get your listing taken down if you get too many reviews of three stars or below in a row.

So when you set unrealistic expectations with incoming guests — whether it’s a two-to-three-month stay because they’re between properties, or a two-to-three-night vacation stay — you want to make sure you’re hitting those expectations exactly, which is when you get the good reviews: “this is exactly what I thought it would be.” You can offer a little more than expected, but you don’t want to pretend to be something you’re not, because that’s when you run into trouble with the platform. What I’ve said all along is you need a professional on your side — it’s about who your team is and what you’re doing. If you’re an investor, the goal is to make money, not add more headache and stress to your life.

The way we run our property management is similar — we take care of everything, you give us an approval and pay us, and everything works out, guided specifically to the individual investor’s situation. Having someone who can make sure you’re doing everything properly saves you from making mistakes you don’t need to make. Same principle applies with long-term tenants and getting more short-term guests in the door through good reviews — it’s about handling things properly and reacting quickly when something happens. Brad, what mistakes do first-time Airbnb hosts or short-term rental hosts commonly make that could cost them money or set them back?

Brad’s 5K Mistake Story

Yeah — so the first property we set up in Florida, we knew we weren’t going to be local, so we set up a full team there: maintenance, cleaning, no problem. But we were brand new, and even with a mentor at the time, we just assumed all booking sites worked the same way. We put the property up on three different sites, and as we were leaving to come back to Ontario, we got a booking over the weekend on the third one.

That third site doesn’t actually collect the money — it’s more like the eBay or Kijiji of rental sites, just connecting guests and hosts, and the host is supposed to collect payment separately. We didn’t know a setting had to be turned on for that, so we ended up with no money in hand, and that platform doesn’t provide insurance the way Airbnb does, so we had no coverage if the guests damaged anything and no way to remove them. We spent the whole weekend hoping these guests didn’t trash the place because of a mistake we made.

It turned out these guests were essentially professional grifters — they’d found a listing on that third platform with auto-acceptance and cash-payment-only settings, stayed the weekend, and left. Thankfully they only left about $5,000 worth of cleanup, when it could easily have been $20,000, $40,000, even $100,000 if they’d wanted to trash the place. That was a very fast, very expensive lesson — one small mistake, no insurance, the wrong settings, not knowing the regulations, and you could be out tens or hundreds of thousands of dollars depending on the property.

You got away with one there, for sure — who knows what could have happened. Those people are out there looking to take advantage of situations, and when you’re new, you can’t have all the right answers, which is why having a mentor to get started is so valuable, to avoid mistakes or get the right guidance early. As things keep changing, what are guests expecting today that they didn’t want before?

Guest Expectations in 2025

Great question — amenities are a big one. I’ve said this before: years ago, anyone with a tent could put a property up and make money hand over fist because there was no competition. The bar to just have an okay property is much higher now. You can’t just provide the basics anymore.

For our properties, we want guests to feel like it’s home — air fryer, Instant Pot, a good blender, all the things people have at their own house, and more. You want to go above and beyond with games, with design — that extra bit of thought and money going into the property really pays off long-term. People expect more now, which is good, because there are a lot of bad properties and bad hosts out there, and it’s not fair when guests get tricked by something that was promised but isn’t actually there.

I saw a property in Florida once where each of the four kids’ bedrooms had a different theme — bunk beds, Disney or Little Mermaid movie themes, really well done. And on Instagram you see the extreme versions — golf retreat weekends, even one in India with a go-kart track on the property for stag weekends. Those are the extreme end, but I get what you’re saying.

It also depends on the market — you won’t see that kind of thing in Toronto because of the restrictions on Airbnbs there, but in a place like Scottsdale, where properties sit on one or two acres, it can feel like a theme park — go-kart tracks, lazy rivers, sport courts, pickleball courts, because people have to do that to stand out. Similar to some Florida properties, though not quite as much. You’re not going to see that in Toronto given the restrictions and the weather, but every market has those standout properties that go the extra mile.

I’ve seen some fun ones too — we joked about one golf trip weekend property that was unreal. What trends do you see changing for short-term rental owners in the next little while?

The Experience Trend

Going in the same direction — Airbnb started as a hotel alternative, a room to share, and then it took over the vacation rental market and business travel market too. Now the trend we’re seeing is the experiential stay — one-of-a-kind stays, as unique as possible. Treehouses lifted over a river in the woods, wellness-focused setups, golf-themed properties, design-forward spaces built entirely around one concept. The ones in Orlando where the whole point is the experience of staying there — that’s what people are looking for, and that’s where the new money is being made.

You don’t have to spend $400,000 to $800,000 on a renovation to break into that market — there are small A-frame cabins between Muskoka, the Kawarthas, and the Bancroft area that are just 200 to 400 square feet, built in the middle of the woods, and they make a ton of money because they’re different. That’s really what we’re seeing — the want for something unique over the next couple of years. If that’s the direction you’re looking to invest in, that’s where I’d put the money. When we travel, our family always looks for a full kitchen and a pool — we’re simple, but I think that experiential element is what’s driving attention now. Brad, what’s a piece of advice you want to leave with our listeners who are thinking about getting into short-term rental investing?

Final Advice

My advice to anyone, short-term or not, is to do your research and work with a professional to get answers to what you don’t know. Just like a long-term rental, if you invest in the wrong place, at the wrong time, the wrong way, you can overspend on things you don’t need and it can turn out badly. I don’t want to see that happen to anyone, especially on their first investment property, or even the first couple — a bad investment can really set you back, and you don’t have to let that happen.

There are enough free resources and people you can work with — whether that’s my team and me or not — the important thing is making sure you know what you’re getting into before jumping in. There’s a lot of fake or overhyped information on Instagram making it look like putting up an Airbnb and making tons of money is easy. If it were that easy, everyone would be doing it — that’s why some people say Airbnb is dead, because you can’t just wing it anymore. But there are still plenty of people making really good money with it, and to me it’s often a better investment than long-term rentals, as long as you have the capital to do it properly.

I really like that answer, Brad — it’s about having the knowledge and information and looking to others to help guide you, because you don’t know what you don’t know. Thanks so much for listening, everybody — I hope you enjoyed this episode about short-term rentals and Airbnb with Brad McRae.

Thank you so much for having me, Kevin — I appreciate jumping on for the second time. If anyone has questions, I’m happy to chat, whether or not it’s something my team and I can help with directly. My information will be in the show notes below. Folks, if you know another landlord out there, please share this podcast so we can keep getting this information out to Ontario landlords. Thanks so much for listening — we’ll talk to you soon.

Bye for now. Please remember, while we are professionals, this podcast is for informational and entertainment purposes only. The advice shared may not apply to your unique situation. Always seek personalized advice from a qualified professional before making any investment decisions.

Hey everybody, thanks so much for joining us this week. I hope you enjoyed the episode. If you’re finding it informative and useful, make sure to like, subscribe, share with a friend so that we can keep getting the information out there to Ontario landlords, and keep on joining us. We’ll see you next time.