Cornwall / Brockville

Milena Cardinal LL.L., J.D.

Daniel: Let's say number one, you are a lawyer. Number two, you're a business person. You're an investor. You're really smart. And you do Airbnb. I'm just going to let you go. And I'm going to ask you to share with our people on this call on this webinar. Maybe some tips and tricks so they can do better at their short term and medium-term rental.

And also, maybe being a lawyer and being an experienced BNB owner, a few shortfalls or issuing a few traps to avoid. Go ahead. And if there's something that comes up that generates a question I'll interrupt you otherwise go for it.

Milena: Thank you, Daniel for having me. Thank you.
It's always an honor to speak at these events of yours and thank you for the glowing introduction always. Yes, I am an Airbnb owner. We have two units, so very small compared to the last two presenters. I figured maybe I would get the investor that only has a few units that I want to dip their toes in the water and try it out with a few units to start.

I guess we've learned a lot of things the hard way. And I've had some clients that have learned things the hard way as well. I figured I would share a few guests, maybe be at your party before tonight a little bit, and talk about the issue that can come up and things to avoid.

I guess my message here is really that it is so important to have a team of professionals that not only understand what they're doing in their own little bubbles, but also work collaboratively with one another. For instance, story number one. Who was selling an Airbnb property where a few of the units were Airbnb.

A few of the units were long-term rentals. They had looked up the use of the property and the portion that was considered that they had on Airbnb. Found out about the Airbnb use and they felt like it had been converted to commercial and then it caused them one big nightmare right there to try to revert back to residential while still running an Airbnb.

Something to keep in mind is, earlier we talked about building permits, that's true, but also super important to understand the mechanics of the change of use of a building, which can be partial or full change of use. And that is an issue at the city level. But it's also a really big issue with CRA.
I wish there was an accounting here to speak about these things. And I collaborate with the accounts all the time, especially when I'm talking about real estate investors and my clients are investors, but it's so important, especially in the Airbnb world, because relatively new still and even not all the council know, but mostly, most lawyers don't know these things and clients may fall in tracks because the lawyer just doesn't know and doesn't recommend the client to go and speak to an accountant about these things.

Another situation was a case where a client was selling an Airbnb to someone who wanted to buy a house. They weren't looking to keep the property as an Airbnb. And the issue that they ran into is that, of course, the agreement, a purchase and sale said that the HSP is included in the purchase price.

They're thinking I'm selling a house. It's absolutely fine. For tax purposes, If you haven't actually, I believe, and don't quote me on this because I'm not an accountant. I totally recommend that you consult with an accountant on this, but if you haven't rented your property for at least 60 days consecutively during the course of the last year, or at any point during your ownership, you've actually changed the use of that unit to commercial.
For CRA purposes, what does that do? You're basically selling it to yourself. HFE is applicable when you sell it back to a new buyer. It can really be tricky.

It's extremely important to understand these rules and there's ways around it. From what I understand from speaking. There are ways around it, such as never claiming ITCs on renovation. The term I can see is basically not claiming HSV. When you do renovations on the building as like to offset the HSP that you're actually receiving from your Airbnb guests. There are ways around it. I'm only giving you the surface stuff because I am not an accountant.

But it is something that came up for a client relatively recently, and it was a really big invoice to that client to pay for each. Definitely something to keep in mind. I think another really big issue is when you're a realtor and your employer and your mortgage broker are not fully in the know of all of what you're trying to do.

One of the things that I see really often is when realtors put offers in Airbnb trying to attract buyers. The problem is that, and I'm going to let Claire talk about this a lot more than me, but from what I gather the problem is that it's really difficult to get a mortgage.

If you make a change to the MLS listing, For the purpose of presenting the property to the bank can find out that there's been a change to the MLS listing. It can be very tricky for people who only own a few Airbnb’s trying to sell a property. It's extremely important to have a real tool that fully understands all those rules that understands the difficulties of the buyer to get a mortgage themselves.

If you have a realtor that speaks regularly with the mortgage broker and that collaborates, the most important part is really having all of your professionals collaborating with one another. Ideally the team that knows each other, and that really are willing to work together.
I don't know if there's anything else Daniel that you want me to speak about tonight?

Sarah: I think it's really interesting Milena what you've got. Does this still apply for midterm? I know in the beginning we were talking a little bit about midterm rentals. The one to three months, is that viewed the same from your perspective as the shorter term?

Milena: My understanding is basically no. And as far as the mortgage is concerned, that's something I'm going to let Claire speak to. But my understanding is the risk is how it's worded in the MLS. If you're saying it's rented, if that's not a problem, but if you're mentioning Airbnb right away, banks go, oh, Airbnb short term rental.

We're not touching it well, something's due in late. And then when it comes to the CRA rules again, My understanding is advocate. We've done at least once a year for 60 days, or if you never claimed those IPCs on any kind of renovations. You can claim it if you buy coffee or things like that. But if you claim, if you never claim anything on renovation, that's fine.

You just need to have an account that I understand. And in our case my brother is a CPA with a master's in taxation. He's very knowledgeable. And he sent me to an expert to go get that opinion, because even he felt like that was outside of his purview. It's really important to just have that information because I ran into that with a client called my brother. And he was like, you know what I'm going to send you to this expert because that's so specific.

Sarah: It sounds like you work with your lawyer, your mortgage broker, and your accountant, before you go ahead and purchase a bunch of short-term rentals. That you know what you're getting into ahead of time. How to figure out the tax potential, workarounds.
But everybody, all three members need to be on the same page.

Daniel: One of the mistakes that I see people make often. It is so in the medical world, right? You go see a dentist, dermatologists, and everybody as a specialty, then we go to real estate and people say I'm going to talk to my lawyer. I'm going to talk to my accountant. I'm going to talk to my realtor.

No, there are probably as many specializations in legal and accounting as there are in medical. Because, I'm not talking about you there, of course Milena but just because you walk into an office and behind the guy or it does a certificate on the wall that says law degree or whatever, that doesn't mean that they know what it is that they can help you with what it is that you're looking for.

I had a lawyer recently tell one of my investors that RRSP mortgages were illegal in Canada. Okay. Make sure that, like you said, this is very specific, make sure that everybody, the realtor, the accountant, the mortgage broker and the lawyer that you're going to be working with are really knowledgeable about what it is that you want to do. You don't get into some sort of trouble at some point. Thank you so much Milena.