Understanding Zoning before you buy a short-term-rental in Canmore

By Robin Tuck
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Short term rental properties are one of the most popular and profitable types of investment in the Bow Valley.

Unfortunately, Airbnb’s aren’t allowed in Banff, so you can generally find them all in Canmore and Dead Man’s Flats. Some have, quite frankly, astonishing returns on investment, and when the good ones come up for sale, they fly off the shelves like there’s no tomorrow.

“Why isn’t everyone buying these properties then?”, you may find yourself wondering. And the truth is there are a few reasons:

  1. Only certain properties allow for Airbnb rentals in Canmore, so there’s limited supply.
  2. Financing can be complicated (more on that shortly)
  3. It isn’t widely known how good the returns can be on these properties (shh don’t tell anyone)
  4. Condos in Canmore aren’t cheap, so they’re not viable investments for everybody.

To enter the short term rental market in Canmore, it pays to do a bit of research. The market is very nuanced, and by reading this blog post, you’ll save yourself a LOT of time down the road. By the end of this blog post, you’ll know exactly which properties you should be looking at, and why some are easier than others to finance. If you have any questions at all, please don’t hesitate to shoot me an email at info@robintuck.com

Only certain properties in Canmore can be used for short term rentals

When it comes to buying an investment property, you might be thinking, “hey, I’m the owner, I should be able to do what I want with it”, but the truth is, the town of Canmore has very strict rules about what can and can’t be used as a short term rental property (i.e. you can rent it out on Airbnb or VRBO)

The reason for that is simple; there just aren’t enough homes in Canmore, and we need to keep enough of them free for the locals to actually live in.

Property prices are far too high as it is, and removing condos and homes from the market for tourist rentals reduces the overall supply of homes and drives prices up. This is already a very contentious issue in the town, and some locals are fighting against more short term rental development or even allowing Airbnbs at all. But, that’s a different issue for a different blog post!

Which properties in Canmore allow short term rentals?

It all comes down to the zoning and the land use by-law. Some parts of Canmore have been specifically earmarked for short term rentals. Below, you’ll see a map of the areas that allow short term rentals in Canmore, and more specifically “Tourist Homes”. You can also download a full resolution pdf here.

Permitted vs Discretionary Use

What the map above shows are two different categories: permitted and discretionary use. In short, buildings within the permitted use area (purple) have a blanket acceptance for short term rentals. These are the ideal locations to purchase in Canmore because you don’t really have to jump through any hoops with the town (aside from getting a development permit).

Discretionary Use areas (green), are areas where you have to meet certain specified criteria to be allowed to operate as a short term rental.

For example, discretionary use areas might only allow tourist homes on the second or third floor of a building, and not on the ground floor. It’s important to know these things and scrutinise the land use by-law when looking at properties to purchase so that you’re not caught off guard later on.

Financing a short term rental in Canmore

I mentioned at the beginning that financing for short term rentals can be challenging, and the truth is, it all depends on the property you’re looking at and the permitted uses. In particular, it all boils down to one thing; is “Tourist Home” a permitted use, or does the property simply allow for “visitor accommodation”.

Visitor Accommodation

If your zoning only has visitor accommodation as a permitted use in Canmore, it allows for short term rentals ONLY. That means the zoning only allows for stays of up to 31 days. No long term leases are allowed.

Typically this is where you’ll find ‘condotels’, or vacation condos, where you might be forced to join a rental pool or buy a room in a hotel. These buildings typically make you use the hotel services (cleaning, booking portal etc) and may demand a hefty management fee.

Tourist Home

This zoning is much more flexible and allows for BOTH short term AND long term accommodation. What that means is that yes, you can put your condo on Airbnb or VRBO, but you can also live in it or rent it out to a long term tenant. This is extremely important when qualifying for financing.

How does the permitted use affect my financing?

The reason that the permitted uses above are so important to understand is that banks in Canmore (and Canada) are absolutely terrified of Airbnb’s and short term rentals. Banks like stability (i.e. long term leases), and they generally like you to prove that the income is safe before they’ll finance a purchase. In recent years (e.g. Covid), it’s been shown that tourist income is incredibly unstable and unpredictable, so banks are increasingly scared of lending for Airbnb properties.

With a building that allows long term rentals, proving stable income is fairly straightforward. The bank will do a rental appraisal and will generally give the purchase a green light. They may also even allow you to use a portion of the potential rent as additional income on your financing application.

When your Canmore Condo is zoned as visitor accommodation (i.e. short term only), many banks will not allow you to use any of the income towards qualifying, OR they simply won’t consider lending at all*.

This is why it’s important to use local realtors who can direct you towards experienced local mortgage professionals that understand the nuances of the market. The majority of financing that falls through, falls through because the mortgage professional is from elsewhere and doesn’t know how to navigate the different zonings.

*This is not 100% true across all banks in the Bow Valley. Some mortgage professionals do finance Visitor Accommodation properties if you can check certain boxes (more on that later).

So, in summary, if you’re looking for an investment property that you can Airbnb in Canmore, and you want to purchase it with traditional financing (i.e. 20% or less down), you are going to want to look at homes with “Tourist Home” as a permitted use. Typically these are easy to spot because TOURIST HOME is written in the MLS property description in block capitals.

When might purchasing Visitor Accommodation in Canmore make sense?

For some investors, traditional financing isn’t necessarily important and “visitor accommodation” properties might be appealing.

Typically these properties might appeal to the following purchasers:

  • All cash buyers
  • Buyers able to put down at least 35%
  • Buyers that don’t need to use the condo’s income to qualify

If you want to finance a visitor accommodation property in Canmore, you will need to put at least 35% down and to not need to use the condo’s income to qualify at all. If these criteria don’t work for you, then don’t waste your time looking at them. Stick with the Tourist Home properties and you can’t go wrong!

I’ve lost count of how many deals I’ve heard about that have fallen apart because the buyer has tried to purchase the unit without first checking the zoning and what they can qualify for. It also pays to know which mortgage professionals can get the deal done. I’m happy to connect you with one if you’re looking for help!

Final thoughts

Buying an investment property can be scary at the best of times, but understanding the Canmore short term rental market doesn’t need to be daunting. Hopefully this short blog post has given you the tools to narrow down your search and remove a few of the unknowns in your purchasing decision.

As always, if you’re looking for someone to help you navigate through the murky waters of buying investment property in Canmore or the Bow Valley, I’d be more than happy to help. Please feel free to give me a call on 4034012066 or shoot me an email at info@robintuck.com

3 Comments

  1. Ian Stephenson

    I already own a condo at 107 Armstrong Place in Three Sisters Village. According to the zoning map It looks like I can’t do any short term rentals.
    Although, someone told me I could rent it for 30 days or longer if I have a lease agreement and it is not advertised on Air B&B Or VRBO.
    Is that true ?

    Reply
    • Robin Tuck

      So sorry to just get back to you Ian. Yes that is correct, you are in a long term rental area, meaning as long as you rent out your condo for 30 or more days, it’s all allowable.
      I’m not sure that there is a restriction against putting your unit on Airbnb or Vrbo as long as you’re renting for a minimum of 30 days. It’s possible that there is a specific rule in your condo bylaws from advertising on these sites, but generally speaking I don’t think the town would have an issue if you were clearly advertising is as a long term rental (>30 days). I would advise speaking with the town though to confirm.
      I am also not 100% sure about the lease requirement, but I believe that nothing in the land use bylaw requires a lease to be in place. It would mostly be in your benefit to have a lease to protect you as a landlord. I have had short term renters ask me for a longer term (2 or 3 months) on Airbnb, but I believe it’s a lot riskier to do it without a lease. For long term tenants you might want to do credit checks and take a security deposit, as well as spelling out specific terms in a lease. With short term rental sites, you generally don’t have that option and you put yourself at unnecessary risk.
      I hope that helps, sorry again for the delay!

      Reply
  2. Kash Jawed

    Amazing Blog Robin. Thank you for putting this together!
    I started looking at zoning and came across your blog which summarizes everything I needed to know.
    Was comparing if it makes sense to buy something as STR but need some help with:
    – what is the profitability (let’s say 2 bed 2 bath with indoor parking). Do you have a breakdown of numbers of some recent deals?
    – how does seasonality look like? (% wise)
    – what buildings are more investor friendly vs. others? (e.g.: was eyeing 901 Mountain and a few on Kananaskis way)

    Reply

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