Property Management 8 mins read

Should You Hire a Property Management Company?

By May 4, 2021 May 11th, 2021 No Comments

As an owner of vacation rental property, the question of whether or not to hire a property manager or property management company is an important one. The responsibilities and duties of owning a short-term rental property are many, and hiring a professional can help simplify your day-to-day. You’re essentially outsourcing the operation of your vacation rentals. In this article, we look at some factors that you might want to consider when assessing if hands-off vacation rental management is right for you.

What does a property manager do?

Before deciding if you need to hire a vacation rental property manager, it would be helpful to understand what this type of professional does. Some of the most popular services offered by vacation rental management companies include:

Setting the right rental rates: performing market research to find out what similar properties are priced at. Management companies also have licenses for dynamic pricing applications that harness big data and AI to come up with the best price/occupancy ratio.

Marketing your property: the manager will first take high-quality pictures and write a compelling listing for Airbnb, Vrbo, Booking.com and HomeToGo. With a property management platform, your manager will list the properties on all those sites simultaneously. Your manager might even use a channel manager to increase the number of niche platforms your properties are advertised on.

Creating a direct booking site: odds are, your properties will also be listed on the vacation rental management company’s website so that guests who use Google can book direct. This won’t affect your bottom-line, but it’s a way for the manager to further reduce vacancy rates, and create long-term repeat guests.

Screening for high-quality guests: your manager will likely use automated guest screening software. This is to make sure that no one uses your property for fraud or criminal activities.

Managing maintenance and repairs: this service is optional. Some companies offer it, others don’t. But maintenance will ensure that everything is working in tip-top shape. An important point to remember is that it’ll be the vacation rental management company that will handle the call when a guest will inevitably clog the toilette at midnight.

Curating a 5-star experience: some companies include in their fees the guest experience. The manager will provide guidebooks, recommendations, and upsells for the guest when they are in the rental.

You should hire a vacation rental property management company if…

Knowing what a vacation rental management company, we can now look at the benefits most get from outsourcing the operations of their rentals to a third-party. The most common reasons for hiring a management company tend to centre around the following considerations:

  • You own multiple vacation rental properties.  Self-hosting is costing you time which you can’t or don’t want to dedicate.
  • You live far from your vacation rental properties and are unable to tend to quality-control (assuming you already outsource cleaning and turnover)
  • You have a hard time with marketing, and may even struggle with finding the right price vs occupancy rate
  • Your financing has enough leeway that you can afford to lose a % of your vacation rental revenue in management fees

This isn’t an all-or-nothing list. Some owners have one of the points, while others all of them. It really depends on your current situation.

Outsourcing vacation rental property management isn’t for you if…

Now let’s look at some key considerations that make this sort of service not a great idea if:

  • You want to scale your Airbnb/Vrbo empire in the next 1-5 years
  • You are comfortable learning new software and skills
  • You have a basic understanding of marketing your vacation rentals at scale (it’s not hard to learn)
  • You live close by to your rental properties and can do the final quality control (or have found a reliable way to outsource this)
  • You have a hard time seeing someone else make major decisions over your investment properties
  • You have a small portfolio (under 5 properties) and have time to manage them (all you need to do is optimize your processes)

Quick note on vacation rental management fees

While hiring a property manager or management company can help streamline the process and operations of owning a rental property, making sure you can afford to hire a  property manager is also important. In this section we break down the fees charged by short-term and compare them to long-term lease management.

Short-term property management fees

Short-term, or vacation rental, management involves a high turnaround. Depending on the market your properties are in, the management company might have to coordinate 2-3 cleanings and turnovers a week. That’s much more involved than long-term leasing. Then consider the marketing and responding to guest inquiries. And of course, the management company will need someone available 24/7 to handle guest emergencies or respond to mid-stay communications in a timely manner.

All this sounds expensive doesn’t it?

Vacation rental property management fees generally run 30%-50% of your overall revenue (with an industry average of 28%)  if your compensation structure follows the “commission model” management fee. If you are looking for a potentially more cost-effective management fee model, you can also use the guaranteed model, where the property manager is guaranteed a fixed monthly income, regardless of how often the property is rented.

Long-term property management fees

Typical long-term property management fees range between 8%-12% of the monthly rental cost, with most property fees settling around 10%. Properties with 10 or more units, usually larger apartment complexes, command rental fees in the 4%-7% range.  Like short-term rental compensation structures, long-term rental compensation structures can also be based on flat rates. However, there is no general industry figure due to the variability in the size of property and the services required.

A more affordable alternative

A lot of the challenges faced by vacation rental property owners can now be fixed with technology. Well actually, the use of multiple tech tools. In the industry, we call this a “tech stack”. It refers to the number of software stacked together to allow for the smooth automation of your vacation rental portfolio. So if the fees outlined above made you jump, or outsourcing to a vacation rental manager just isn’t right for you, you should consider getting the following “tech stack”:

  • Property management software (PMS): this will be the hub of your business. PMSs perform the following core functions: manage listings on multiple sites (Airbnb, Vrbo, Booking.com etc) all at once, allow you to automate tasks based on conditions or events, reporting and analytics, and integrating other vacation rental software. On that last point – integrations – it’s kind of like adding a module to your basic software. Those modules are niche vacation rental software solutions like dynamic pricing, or cleaning management tools.
  • Dynamic pricing: This will integrate into your PMS. Dynamic pricing automatically optimizes your rates based on your surrounding competition to boost revenue and decrease vacancies. Set your minimum rate, activate, and forget it. If there is a seasonality change, the software will detect it. Or if there’s a sudden surge in demand (i.e.; a conference is announced in your area), your rates will rise automatically.
  • Cleaning and turnover: Another integration. This is specialized software that will help you assign cleaners automatically. Essentially, your PMS will send the calendar to the cleaning software. Based on the gap between check-out and check-in, the software will assign the best cleaning team for the task. This means once you’ve trained your cleaners on how to setup the property after the guests leave, cleaning and turnover can be automated. You might have to do a spot check once in a while, but that’s about it. Note that based on where you are, you might not need this software. In this case study, a vacation rental manager uses his PMS’s automation for cleaning task assignment.

All-in, you’re looking at less than $50/month per property in software. Now compare that to the 30%-50% of earnings of outsourced management.

 

 

Weighing convenience against cost

As Daniel Rusteen of OptimizeMyBnb.com points out “All property managers are not created equal. If you are hiring one, then presumably you want to be 100% hands-off. If you make a poor hiring decision, this can cost you time, money, damage, and even long-term security issues. Learn how to filter for the best local property manager.” So while retaining a vacation rental property manager to manage your  properties can help make your life easier as an owner, it’s important to evaluate personal and financial considerations to truly understand if you need to hire one.

Vacation rental property managers can be expensive and take a huge chunk of your revenues. But if you lack experience in hosting, own numerous rental properties, or live far away from your properties, it may help streamline your daily operations.

Wrapping up

Hiring a property manager is a big business decision. By taking a step back and evaluating many of the considerations we have listed, rest assured that you will go into the decision-making process much more prepared and informed.