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Short-term rental property management: Will it work for you? [2021 Update]

By March 9, 2021 March 31st, 2021 No Comments
Master These 3 Basics and Boost Bookings for your Holiday Cottage

If you’ve already joined the fast-growing group of vacation rental property owners, a typical question that you might ask yourself is how to properly manage the property while still valuing your time. Whether you rent out on Airbnb, Homeaway, VRBO, or the myriad of other platforms out there, renting out your property to vacationing guests can eat up far more of your time than you bargained for.

On one hand, you’re living your dream. You’ve successfully rented out your property and are enjoying the extra income it brings in. On the other hand (and whether you want to or not) you have to deal with short term rental property management and everything that goes along with it. You know. The guest inquiries, cleaning, yard maintenance, reviews (good ones, please!), bookings, collecting payments and finding new ways to attract happy renters.

Do you, like many others who haven’t reached out for help yet, wish there were property management firms out there specifically with your situation in mind?

Introducing: short term rental property management firms

With the ever-growing popularity of Airbnb, particularly for the lucrative vacation rental property pool, it was inevitable that a new breed of rental property management companies came around. A traditional rental property management company typically deals with long-term tenants or larger commercial properties (think hotels, gated communities, etc.) and .

But a smaller, short-term rental property management is a whole different ballgame. While there is still a physical property management aspect (think maintenance, repairs), short-term (or vacation rental) property management also has to deal with the hospitality side of the operation. On top of that, since there are guests involved, the property needs to be managed on a smaller, more personal scale. In other words, short-term rental property management is much more involved than long-term tenant management companies. 

If you’ve been looking into it, the cost of hiring a short-term rental property management company can be pricey. Especially if you’re looking at the larger-scale firms that offer turnkey management (including marketing, guest experience, booking management, maintenance, etc).

On average, you might expect to pay around 30%-50% of total revenue. The higher end of that spectrum generally includes marketing and professional management services.

A competitive market for owners

In most markets, a 50% revenue fee would send potential clients to a competitor. But in the short-term and vacation rental world, that’s not the case. With Airbnb listings topping the 5.6 million mark, traditional rental property management firms are having a hard time keeping up with the demand for their services. In fact, in some markets, it’s the owner that has to convince the short-term rental management company to take on the property.

This trend isn’t likely to taper off either. Prior to the COVID-19 pandemic, short-term rental properties were gaining in popularity because the intimacy and coziness of a home, combined with amenities and proximity to local experiences versus a more impersonal getaway like a hotel. Since 2020, traveller awareness of short-term rental benefits has skyrocketed – this type of hospitality was the only game in town.

And while short-term rental awareness grew for guests and travellers, investors have taken note as well. It’s no secret that vacation rental properties in some markets can be extremely lucrative compared to long-term leasing. With near-0% interest rates fueling cheap mortgages, savvy real estate investors have turned their attention to short-term rentals. These investors typically don’t have time to be involved in the day-to-day management of the property and thus rely on short-term rental companies to do the heavy lifting. This drives demand for quality managers even higher.

Why are short-term rental management fees so expensive?

Since short-term vacation rental properties may include small personal touches like full-size kitchens, fresh flowers to welcome guests, laundry facilities, a private green space to relax and the like. If larger-scale rental property management firms offer these services, it will cost you. There’s no getting around paying for the time it takes to pay attention to that level of personal touch.

Luckily, there’s a new wave of short term rental property management firms on the rise. Backed by tech-savvy entrepreneurs, these companies can better handle the more personalized services required for the short term vacation market at scale through automation toolsWith powerful tech driving their operations, they break down tasks in small processes that are easy to follow up on and great for a machine to take over. When comparing property management companies, ask about their “tech stack” (the suite of tools they use). This is a quick way to differentiate which company has high overhead due to staffing cost and which delivers value.

What you can expect

Gone are the days of putting your property listing up on a website and sitting back to wait for the side cash to start rolling in. As with any business venture that becomes popular, competition comes into play. Guests expect a good hospitality experience and you need to be able to deliver one. As Daniel Rusteen of OptimizeMyBnB says, “Gone are the days where I tell you to create a catchy Airbnb title or choose a bright cover photo to attract more guests. It’s no secret that a lot of where your listing appears in Airbnb search rank has to do with your hosting abilities. The theory is the more your listing appears in relevant search results, the more it will get booked. And, the more it gets booked (with good reviews), the more Airbnb will encourage more guests to book your place, and your Airbnb search rank rises.”

So when you decide to make the leap from trying to manage everything by yourself to hiring a short term rental property management firm, here are two considerations:

  • You can expect to pay a hefty fee. Before starting your research and contacting companies, figure out what your margins are and how much you’re willing to pay. Note that in the U.S., the average vacation rental property management fee is about 28%.  However, the more desirable the location, say a beachfront dream home, the higher the fees.
  • The services you include in the contract will affect the fees.  The more services you include (housekeeping, in-person guest check-ins, maintenance, responding to complaints, etc.), the higher your property management fee.
  • You’ll have to relinquish control over your asset. If you’ve been running the property yourself for some time, don’t be shocked when the management company you hire revamps the unit’s marketing strategy. Similarly, you’ll lose control over guest screening. If you have a property susceptible to damages from parties, it might be worthwhile to ask if the managers use automated screening apps like Autohost and NoiseAware.

By doing your research and interviewing several different short term rental property management companies, you should be able to find one that makes you feel comfortable with their services. From handling the advertising/marketing to following up on availability and scheduling questions, in addition to keeping the property nicely maintained and clean, it can really be a worthwhile investment and huge time saver for you.

When you know it’s time to hand the reigns over

As with any new startup, there are concerns about how things will work out. For example, will the management firm be able to keep up with your attention to detail, cleaning and special little touches?  Will they make your guests a priority and follow up with concerns, questions, and availability in a timely manner? Will everything be in order to your standards? Can you afford to hand over these responsibilities to a short term rental property management firm? Is your goal to give guests a homey experience with a professionally-managed feel?

All of these are legitimate questions.

A property management company can handle the details of following up on issues or complaints, getting honest feedback to improve the guests’ experience and handle the day-to-day responsibilities for you.

Of course, only you can decide if giving up more control in terms of how things are handled and managed, is worth the time it takes you to properly manage the rental property.

You now know there’s help out there if you sometimes feel overwhelmed by all the day-to-day details of managing your vacation rental property.

After sitting down, asking the right questions and crunching the numbers, hiring a short term rental property management firm may be the best investment you can make.

So instead of feeling the vacation rental property management squeeze, check out the possibility of reaching out for help with some – or all – of the ever-growing list of management details.