Property Management 13 mins read

A Guide to Short Term Rental Management Fees (Maximize Your Profits)

By March 7, 2019 August 2nd, 2022 No Comments
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Property managers offer clients many conveniences, but hiring a property manager for your vacation rental is a big decision. After all, how do you know your property will get the attention it deserves? What about the guest experience? Will problems get adequately fixed? And, perhaps most importantly, how much will all this cost me and what fees do I need to budget for? The truth is that there are many rental management fees you need to consider. These fees may include the cost of the property management company, periodic maintenance fees, and local taxes.

Let’s demystify short-term rental management fees to help you make more informed decisions about your vacation rental property. To get you the best intel, we’ve canvassed many 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!

Note: In this article, we interchange vacation rental and short-term rental. There may be a difference in the offerings each provides. However, both rely on similar processes and marketing tactics to run successfully. In general, a great vacation rental management company will be able to operate short-term rentals (and vice-versa).

Benefits of hiring a property manager

The benefits of a short-term property manager are 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. This transfer of responsibility can be transformative in a vacation rental owner’s life because it lets you categorize your investment as truly passive income. 

 

Value for money

Obviously, a property manager is not free. Though there are fees associated with this service, it also has the potential to increase your potential income thanks to all of the perks that a property manager provides. 

Free time

Managing a property on your own will take time. Unfortunately, that time will likely come from other aspects of your life that you formally had the space for. However, you get that time back when you hire a property manager. To many, the small fees associated with a property manager are worth it for this aspect alone.

Don’t need to be physically present/available

You may live away from your vacation rental or have a full-time job. Therefore, you cannot be physically available all of the time for your renters. However, your property manager could be!

Peace of mind

There’s a lot of behind-the-scenes stuff when managing a rental property. If you are new to short-term rentals or feel like you may become overwhelmed, hiring a property manager lets you have peace of mind that everything is being handled that needs handling. 

Easy to manage multiple locations

Managing one vacation rental can be a challenge, but if you manage several, you may be overwhelmed by the prospect of taking care of everything for each of those. But, again, a property manager can make sure that each rental gets exactly what that specific rental needs. So, especially if you have several rentals, a property manager can save you a lot of time and money.

Expertise when you don’t have it yourself

Property managers are experts in taking care of rentals. Since it is their job, they know more about managing a property than you do. Therefore, hiring one for your property puts the expertise in your corner. There’s no need to be an expert! They already are! This will also help you avoid common mistakes that first-time managers sometimes make.

So as you can see, the benefits are many. However the convenience of a property manager has a cost: management fees. Let’s look at that. 

What are property management fees & what is the average monthly fee?

Vacation rental property management fees are the monies you spend to have a property manager care for your rental. These property management services may include booking, communication with guests, marketing, and maintenance of the rental. It’s also difficult to determine an exact industry average as many factors play into deciding the amount, for example the type of short-term rental property (house vs. apartment) and location (urban, alpine vs beach). 

Typically, the range of vacation rental management fees for vacation rentals is going to be between 10% and 50% of the total monthly rental income. The reason the percentage span is so wide goes back to what services are being offered. If you choose to have a full-service manager in which they care for all duties, that percentage will be on the higher end. If you choose to have partial management, you can select what duties they will have, and the percentage will be lower.

When it comes to location, urban rentals have the lower fees whereas alpine rentals have the higher fees due to higher maintenance costs. 

 

What are the most common property management fee structures?

There are three standard models for short-term rental management fee structures: the fixed, guaranteed, and percentage models. Each management fee structure has its pros and cons. There isn’t necessarily a better or worse one. It comes down to what’s best for you and your property.

Fee structure #1: Guaranteed income

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

This is great for property owners who want a stable and 100% passive income. Your investment will earn you the same income throughout the year in high or low seasons. But for properties in some tourist hot spots, you could make less when compared to the commission or fixed-rate models.

Fee structure #2: Fixed-rate

Some short-term rental management companies offer a fixed-rate fee model. The owner pays a flat fee with a predefined set of services. The fee doesn’t change based on how many nights the property is booked a month. So, for example, you may be charged $300 a month for handling bookings and cleaning fees. The advantage is that you pocket the profits during high season or if your property has a high occupancy rate.

Seems too good to be true? Here’s the catch. Many companies charge additional short-term rental management fees on top of your monthly payment for other services, including check-in greetings, marketing, essential maintenance, and more. If you choose this type of fee structure, read the contract and negotiate to have additional services included in the monthly fixed rate.

Fee structure #3: Commissions

In the commission model, a property manager will take a percentage cut of your overall monthly earnings. This is a popular fee structure since your expense is directly linked to the income generated. Slow month? No problem, you’ll pay less.

Just how much property managers charge depends on the company and the services you get as well as the vacation rental’s location. However, according to a 2016 survey, the industry average is 28%. In general, commissions will be lower for urban properties compared to rural, mountain, or beach locations.

According to Denise Supplee, Co-Founder of Spark Rental, the fees for short-term rental management are about 25-50% of the rent plus costs. Vacation rental business owners who are also residential landlords probably just jumped out of their chairs seeing that figure (they’re used to seeing 6-10%). So here’s the difference: long-term rentals are generally cheaper to manage because there is less turnover and involvement. But, on the other hand, a vacation rental requires regular cleaning and much more commitment (bookings, communicating with guests, paying attention to details).

 

Factors that influence vacation rental property management cost

You’ll find those Airbnb property management fees vary depending on several factors. These may increase or decrease the fees, but they will likely have some kind of impact.

Size of property

If your rental is quite large, that will likely increase your property management fee. On the other hand, your fee may be lower if the property is more quaint. Larger properties tend to have more to take care of than smaller spaces.

Type of property

The type of rental can also influence the price of your rental fees. After all, short-term rentals can include family homes, commercial properties, multiple-family properties, or perhaps even vacant properties. 

Condition of property

Older properties tend to have more to manage, while newer properties (or ones that have been recently renovated) tend to need less care. After all, the older a home is, the more likely something is to break or need attention.

Location of property

When a property demands a higher rent due to its location, property managers tend to also charge more. The law of supply and demand applies here, too, after all!

Extent of services

And lastly, depending on what you are asking for, the property management fees may be higher or lower. As we discussed earlier, the more you have your property manager do, the higher your fees will be. 

What services can be included in your vacation rental property management fees

Depending on the structure of your vacation rental management contract, there are a few services that may get tacked on to your monthly fee.

Cleaning services

Many short-term rental management companies pass this fee directly to the guests. Once they take control of your property, they add the cleaning fee to the reservation. Most owners won’t see this fee in their monthly management bills. However, if the contract is set up in a way that cleaning is an added expense, you may see this as a recurring expense. Any time there is turnover at your property, a manager will arrange for cleaning to take place. Of course, this costs money and will dig into your earnings.

Cleaning fees depend on the location and size of the vacation rental property, plus the extent of cleanliness you’re looking for. If you own a studio condo in the city, this cleaning fee might 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’s included in the cleaning fees?
  • 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?

When discussing property management fees with a potential vacation rental company, there are a host of important questions to ask. These are some of the most critical ones as they might affect the stability of your income if they aren’t adequately defined.

 

General maintenance and urgent repairs

There’s no doubt that one of your most significant short-term rental management fees is routine maintenance.

You, the vacation property owner, must understand how the manager structures the maintenance process. Here are a few questions you can ask:

  • Do they have an in-house team, or do they outsource?
  • What maintenance issues can’t they fix in-house?
  • What’s their turnaround time for a regular repair?
  • Is there an emergency number for guests to contact?
  • When are they required to consult you as the owner?

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

Once again, before you sign up with a vacation rental manager, make sure you check if this is included in the monthly fee or if you’ll get an additional charge.

Marketing/advertising fees

Vacation rental property managers make a career out of understanding the market. They are also updated on industry trends. They may even know better than you how to market a vacation rental, when to adjust prices, which platforms to market on, and how to attract ideal guests for your property.

While some property managers may include this in their fees, other managers may charge extra. If you want your property’s marketing handled by a professional, be sure to ask how they handle those fees.

Additional short term rental management fees

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

Some property managers charge extra for parking, hot tub, pool, and booking management.

Additionally, almost all short-term rental management companies charge an annual or bi-annual deep cleaning. While this is likely a good idea, make sure you understand the frequency and cost of this additional fee.

Credit card processing fees are also something to consider if bookings are made directly through your vacation rental management company. 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.

Key questions to ask when assessing the management fee

When deciding if a particular management company is right for your property, take some time to ask questions upfront that really get to the heart of what they offer. Here’s a list of some questions to get you started:

  • What main management services do you offer?
  • Are there any other additional services you offer?
  • What is your preferred payment structure? What is included?
  • Are there any services charged separately?
  • What other administration fees do I need to be aware of?
  • What technology or software do you use for managing properties?
  • How do you market properties?
  • What is your process for taking care of maintenance?
  • Can I see your inspection checklist?
  • How will you keep my property safe?
  • If there is an emergency, how will you contact me?
  • How long have you been managing short-term rentals?
  • Can I talk to some of your former and current clients as references?

How to save on vacation rental property management costs

If the thought of having someone else manage your property makes you uncomfortable, there are other things that will help you. Consider investing in a vacation rental management software that helps to streamline all your day-to-day operations. Hostfully offers a powerful property management platform that will make the process much easier, offering features that allow you to control your bookings, messaging, property cleaning, maintenance, and reporting all in one place. By automating all these tasks you can save a lot of time and earn much more money.

Takeaways

Rental management companies do a great job of taking care of your properties. However, they do so at a cost that comes right out of the profit you earn from your rentals. So, weigh your options. If it is worth the money to have someone else handle everything, a property manager may be a perfect fit. On the other hand, if you would prefer to keep that money in your pocket, check out Hostfully’s property management platform!