Property Management 6 mins read

A Breakdown of Short Term Rental Management Fees

By March 7, 2019 June 26th, 2019 No Comments

Deciding whether or not to use a property manager for your vacation rental is difficult enough. Will they treat your property as you would? Will they prioritize the guest experience? Will they fix problems as they arise? And, most importantly, how much will it cost me and what are the short term rental management fees I should consider?

The simply answer is: there are many rental management fees you need to consider. These range from the cost of the property management company, to routine maintenance fees, to local taxes.

Today we are going to demystify short term rental management fees to help you make more informed decisions about your vacation rental property. We’ve also canvassed experts in the vacation rental field to give you their insights on short term rental management fees.

There’s no fee for this ride folks!

Property management fees

The benefits of a short term property manager is clear. A vacation rental management company can take over the day-to-day running of your property, ultimately freeing up your time and reducing stress. There are three standard models for short term rental management fee structures that you need to consider – the fixed, guaranteed, and percentage models.

Many property managers follow a guaranteed model. With this fee structure, the property owner is guaranteed a fixed monthly income, regardless of how often the property is rented. Any income above and beyond the homeowner’s guaranteed income goes to the property management company.

For a fixed short term rental management fee, property management companies charge a fixed monthly rate. For instance, the property manager would charge you $200 a month as a flat rate, and then additional fees for other management activities. In this model, additional short term rental management fees are applied on top of your monthly fee including cleaning, check-in, marketing, and more.

In the percentage model, a property manager will require you pay a percentage of your overall earnings, rather than a fixed amount each month.

This can range from 10-50 percent depending on the company and location. According to a recent survey however, the industry average is 28 percent.

According to Denise Supplee, Co-Founder of Spark Rental, the fees for short term rental management is about 25-50% of the rent plus costs. According to Denise, this is different from long term rentals which generally requires a flat fee to find your tenant (usually an amount equal to one month) and then about 6-10% of the monthly rent.

The cleaning fee

Many short term rental management fees are passed on to renters themselves. Any time there is turnover at your property, a manager will arrange for cleaning to take place. Of course, this costs money.

Cleaning fees range widely depending on the location and size of your vacation rental property. If you own a studio condo, this cleaning fee can easily be under $100, but if you own a 5-bedroom estate in the Hamptons, you may be looking at several hundred dollars.

Steve Patterson, founder of Ur Home in Philly (UrHIP) believes there are a number of factors to consider when analyzing cleaning fee structures for your vacation rental: “What are the fees for cleaning costs? How good is the cleaning? Is there a process and check-lists in place? How long does it take? Will you be able to clean the home between guests without losing any potential bookings?” These are all critical questions that you should be asking your vacation rental manager.

Your maintenance fee

There’s no doubt that one of your biggest short term rental management fees is maintenance.

It’s important for you as the vacation property owner to understand how the manager structures their maintenance process and fees. Do they have an in-house team? Do they outsource? What maintenance issues can they not fix in-house? When are they required to consult you as the owner? These are all critical questions to keep in mind.

Elysia Stobbe, a nationally recognized author and property expert, believes all owners should be asking how a property management company handles their maintenance fees, “Do they have an in-house team, how do they charge you, and do they take it out of rent or is it separate?”

Additional short term rental management fees

Be sure to ask your potential property management company up-front what kinds of fees they charge. Many will throw in additional charges like a check-in fee which covers the cost of the property manager welcoming guests or exchanging keys.

It has also been reported that many property managers are charging parking, hot tub, pool, booking, and everyone’s favorite, convenience fees.

It may also be a surprise for you to learn that almost all short term rental management companies charge an annual or bi-annual deep cleaning fee. Now, this is likely a good thing to do, but make sure you understand up front the frequency and cost of this additional fee.

Credit card processing fees are also something to consider if bookings are done directly through your vacation rental management company. Further, if the management company books rentals for you, as opposed to you bringing in the lead through Airbnb, HomeAway, or VRBO, they may take a higher percentage.

You need to know exactly what a property manager is charging you and your guests because it has a direct impact on your bottom line and the satisfaction of guests. If you or your guest unexpectedly receives a pool fee that wasn’t clearly explained at the beginning, there could be problems.

Final thoughts: Finding the right vacation rental property manager

Most professional vacation rental managers will be able to provide you with a complete list of their short term rental management fees and be able to explain the importance and reasoning behind each one. Stay vigilant, and know what you’re paying for.

Denise from Spark Rental sums this sentiment up best: “When you are hiring a management company, do not just look for one and hire them. Do the digging. Because of poor management, attracting tenants takes longer and keeping them happy is difficult. That is a big old loss of money. Make sure that whoever you hire has a great reputation. Read reviews on Google. Ask others about them. Get both sides of the story, renters and owners. If a renter has a bad experience, that may be detrimental to you as an owner. Frankly, it all falls back on the owner.”