Here in Niagara on the Lake over the past 5 - 8 years there has been a boom in the number of vacation properties available. The number has increased so fast that the town had to add bylaws to ensure that they were not becoming an issue for the residences. When bylaws are introduced then normally neither side is happy and hence that happened here. The town decided to put a moratorium on giving out new licenses until this was all settled.
The good news is that the OMB hearing is now over and the moratorium will be over shortly. The bad news is that historically a person could purchase a property to run as a cottage and then later move into it full time. Now it depends on the size of the property.
What is a Vacation Rental?
Basically a detached home! It is the right in Niagara on the lake that property owners can rent out the property as a vacation rental, as long as it is 3 bedrooms or less.
Who buys them?
There are two different groups that purchase properties to rent out. The first group, the larger one for Niagara on the lake, is people looking to retire here in the next couple of years, find a property that they like but know that they will not make full use of it as they are still working. Hence they rent it out during the summer months to make a little income - basically to pay the bills on it until the can move down full time. This way they can enjoy the property when they want and make it pay some of the bills.
How much do they make?
That depends on the property. If you think about it, the season starts slow in May and then goes until Thanksgiving in October. Count the days and think logically about it. You will not run full occupancy and depending on where and what you have bought will depend on how much you can charge per night and how popular the property will be.
Most popular are those properties located within walking distance to Queen St and have a bathroom per bedroom, nicely laid out and in good repair. With a two bedroom, two bathroom, pleasant decor, you could charge for approximately $350 - $400 per night. Therefore it would not be unusual for a property to make around $30,000 per year (before expenses).
The further out from the core of town these cottages make. Of course, if the owners decides to close on a couple of weekends in high season for personal use then the number will be less.
What is the difference between a Vacation Rental and a Bed and breakfast?
In a bed and breakfast the owner lives on site and offers the guest a bedroom and breakfast. The guests do not have access to the whole house nor do they usually know the other guests in the house. The owner will prepare breakfast for them. In a Vacation Rental the guest (s) rent the whole house, have access to the entire house and know all others in the house at the time as it is one reservation. The guests bring and prepare their own food. The owner is not present.
From a Real Estate perspective the difference is SIZE of property. A bed and breakfast must have room for the owners and the guests and most owners are getting more and more demanding in the space. A vacation rental can be as small as a one bedroom cottage to a large home.
From a time commitment it is easier to run a Vacation Rental than it does a bed and breakfast.
Bylaws affecting Vacation Rentals in Niagara on the Lake
Prior to May 2013 the number of bylaws were minimal for Vacation rentals, since then a number of bylaws have been added. Most do not have an effect other than costing the operator more to buy a license. Historically a license was $116 plus hst now it is $116 times the number of bedrooms. One has come into play and the effects are not fully understood and that is the definition of a Bedroom.
The first changes made were to the definitions. Please note that these definitions are exclusive to the town of Niagara on the Lake for bylaws and zoning issues and are not used in advertising.
Cottage Rental means the commercial use of a single detached dwelling unit up to three (3) bedrooms that may be rented for periods up to 28 consecutive days for use as temporary accommodation and used as an occasional or seasonal residential dwelling for recreation, rest or relaxation by one household, but not occupied continuously as a principal residence. When occupied continuously as a principal residence (i.e. more than 28 days), a "Cottage Rental can be used as a " Single Detached Dwelling". A "Cottage Rental' use is not a "Villa"
Villa means the commercial use of a single detached dwelling unit with four or more bedrooms, that may be rented for periods up to periods up to 28 consecutive days for use as temporary accommodation and used as an occasional or seasonal residential dwelling for recreation, rest or relaxation by one household, but not occupied continuously as a principal residence. When occupied continuously as a principal residence (i.e. more than 28 days), a "Villa" can can be used as a " Single Detached Dwelling". A "Villa" use is not a "Cottage Rental" Villas located in the Agricultural Zone District are restricted to a maximum of six (6) rented rooms.
BEDROOM means, for the purposes of determining the number of bedrooms in a BED AND BREAKFAST ESTABLISHMENT, COTTAGE RENTAL, COUNTRY INN, VACATION APARTMENT OR VILLA, a habitable room larger than seven square metres, including a den, study, or other similar area, but does not include a living room, dining room or kitchen, and which meets the requirements of the Ontario Building Code for a bedroom.
Just as with a Bed and breakfast, when the property is larger than 3 bedrooms, the zoning has to be changed. The process is expensive; approximately $12,000 and the neighbours get to weigh in.
It is the definition of Bedroom which is causing issues for the vacation rentals. If you want to license your property as a 3 bedroom cottage and it has 4 bedrooms, you cannot just change the furniture to make it look like a sitting room. The property would have to be a 4 bedroom Villa which would require a zoning change.
As this is a Bed and breakfast website – I get to end it here. I will be discussing this more in the new year on my other website – www.realestateinniagara.com.
The informaition on this web page concerning bed and breakfasts is based on knowledge concerning properties in Niagara on the Lake, Niagara Falls, Niagara Region. No warranties or representation concerning properties for other parts of Canada.