Popularized by platforms such as Airbnb, short term rental properties have become an increasingly prominent method of investment in recent years. Boasting strong profit potential, both homeowners and strategic investors have capitalized on Toronto’s distinctive tourism and corporate travel industries to earn an exceptional income.
While a high-calibre investment, short term rentals are also subject to a range of regulations, restrictions, and taxation. For operators in Toronto, understanding and accounting for the Municipal Accommodation Tax (MAT) is a major factor in optimizing your investment.
Looking to operate a profitable short term rental unit in Toronto? Our strategic advisory services can help you accomplish your real estate goals. Call us at 416.441.2888 or reach us by email at evan@christensengroup.ca.
MAT Applications
A distinct method of accommodation, short term rental properties are defined by the City of Toronto as any property that is leased for a period of 28 days or less. This applies to separate, standalone units, suites, and homes, as well as rental units that are only a portion of the residence, such as a spare bedroom, den, or other living space.
All short term rental properties in Toronto are obligated to hold a 4% Municipal Accommodation Tax (MAT). This tax is mandatory on any transaction related to a stay of 28 days or less.
As an operator, you are responsible for collecting this tax and are required to pay it on a quarterly basis. However, you may have the option to streamline this process based on the booking services you work with. Most platforms and accommodation sites offer voluntary collection agreements, which allow them to hold and pay MAT on your behalf.
Note: In addition to Municipal Accommodation Tax, operators of short term rental properties are also required to collect standard Harmonized Sales Tax on all transactions.
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Shaping Your Investment
In a high-traffic travel destination such as Toronto, short term rental properties can provide reliable, lucrative income with minimal labour input. In addition to planning and accounting for the Municipal Accommodation Tax, strategically shaping and operating your short term rental requires a few further considerations.
Property Utilization
Unlike traditional income properties, dedicated short term rental units may only be operated at the investor’s primary residence – i.e. the address used on government identification, taxation forms, bills, or other formal documents. This restriction also prevents investors from operating more than one short term rental at a time (if the units are at separate addresses).
While this restriction does introduce certain limitations, there is still plenty of space for investors to be successful. For instance, if you are already looking to upsize your home, purchasing a property with a built-in basement or secondary suite makes for an advantageous investment.
Real estate in Toronto is notoriously competitive. For an investment with maximal returns and minimal labour input, you won’t want to navigate the market on your own. With the assistance of an experienced and investment-savvy real estate professional, discovering and securing a high-potential property can be a seamless process.
Registration & Regulations
While you may primarily view your property as a strategic long term investment, it’s also a business. As a result, there is a range of bylaws, regulations, and other restrictions that you will need to adhere to.
In Toronto, municipal zoning bylaws dictate how properties can be used based on their location. Given these regulations, short term rentals are only permitted in certain neighbourhoods across the city. Before registering your property, do your research and speak to your real estate agent about zoning laws in your neighbourhood.
In addition to zoning bylaws, all short term rental properties must be formally registered with the City of Toronto. This process is relatively straightforward, however, there is a small fee.
Interested in purchasing a short term rental property? Our strategic advisory services can guide you toward a refined, lucrative investment. Call us at 416.441.2888 or reach us by email at evan@christensengroup.ca.
