Vacation rental property management is a highly lucrative industry to get into. If you own a property in an in-demand neighborhood with a wide range of amenities, you can gain many bookings and bring in a tidy annual income. However, everything good has its downsides; in this case, they are property management fees.
But what are vacation rental property management fees, and why do you have to pay them? Well, there is a lot to it, and not every fee will apply to you and your situation. That’s why we have put together this mini-guide on the topic to provide you with all the information you need when hiring a property manager.
What are vacation rental property management fees?
If you’ve ever owned a long-term rental, you would’ve had some property management fees you had to pay for, such as home maintenance or emergency repairs. Property management fees for vacation rentals are similar, however there tend to be a few more of them because there is a higher turnover of guests.
Some fees you may need to consider include the following:
- Hiring a separate property manager to maintain your property
- Cleaning of the property
- Maintaining the property
- Marketing and advertising
- Property management tools, like Hospiria
Not everyone will need to pay the same fees, especially if you are the landlord and the property manager. However, most of the time, all of these things can be included in the fees you pay when hiring a vacation rental property manager.
Average property management fees for vacation rentals
So, how much will you actually be spending when you pay for vacation rental property management fees? There is no specific answer we can give you, as these costs can vary significantly between different rentals.
The fees you pay when managing a vacation rental can range drastically, with the lower end being 10% of your gross rental income and the maximum being as much as 50% of your profits. However, most property managers will have to pay around 25% to 30% fees.
These costs can appear relatively high and make you want to back away from renting our vacation properties. However, it is good to keep in mind a few things. One is that your gross rental income can be much higher than if you were to rent out a property long-term. Another is that a lot of work is involved in maintaining a rental property, so these fees make your job much easier.
The 3 structures of vacation rental management fees
You can approach these fees in various ways, such as paying them yourself or getting your guests to pay extra to cover them. It can be difficult to figure out which vacation rental management fee structure to use, but here are the three most popular options:
Commission fee model
If you’ve ever managed a long-term rental, you’ll be fairly familiar with the commission fee model for vacation rental properties.
We’ll set this out for you with an example. You have a vacation rental that costs $100 per night, your guest stays with you for three nights, and you have a property manager that requires a 20% commission. You will earn a total of $300, and your property manager will receive $60 in fees. This will include their services, such as interacting with the guest, helping them check in, and inspecting the property.
This is a good option if you want to encourage your property manager to get as many bookings in as possible. This is because they will earn more for each night a guest stays in your rental, and you’ll have a higher annual income. However, discuss this with your property manager before you start to see what they include as part of the commission.
Fixed-rate fee model
If you hire a vacation rental property manager, they may ask you to pay them a fixed rate. This flat monthly rate will include the services they offer you. This option is better for budgeting because you always know how much you will pay them, and you may earn more some months because you aren’t paying them per booking.
However, as we mentioned as a positive in the commission fee model, the fact the property manager is getting a fixed rate regardless of the number of bookings may stop them from working as hard to ensure you have full capacity. And just like with any other model, you should understand if there are any extra fees you’ll need to pay and what services are included.
Guaranteed income fee model
Last but not least, we have the guaranteed income fee model. This structure is good for you if you want a constant stream of revenue. Your property manager will offer you a guaranteed fixed monthly income for their work. If you end up earning more than this guaranteed income, the rest will go toward the property manager. Similarly, if you end up earning less than the guaranteed income, the losses are paid for by your property manager.
This structure is incredibly attractive for property owners because they guarantee a monthly passive income. It is a particularly good option if you own a vacation rental in an area with a steady stream of guests, where you earn more or less the same monthly.
The downside to this model is that if you do end up having a really good month in terms of bookings, a lot of your earnings could go to the property manager. Therefore, you could end up earning more with one of the other models if your listing gains a lot of traction in certain seasons.
Factors influencing vacation rental property management fees
Various factors can affect how much you pay in property management fees for vacation rentals.
If your property is quite big, you will probably have to pay more in vacation property management fees.
Depending on whether you’re renting from your family home, commercial properties, or even a spare room, this can affect the fees you pay your property manager.
If you own an older property needing more maintenance and repairs, you must fork out extra costs.
Locations with a higher demand for vacation rentals and that are busier in seasonal times will require you to pay more.
What you want from your property manager in terms of services will affect how much they charge you monthly.
Services included within vacation property management fees
Vacation rental property managers offer a wide range of services, and sometimes you can choose what they do for you. Sometimes you might offer a separate business or individual to help you out with the following services:
Cleaning is one of the most important things you’ll need to pay for when owning a vacation rental property. This is because short-term rentals have a high turnover rate, meaning you’ll need to get someone in to clean the property each time someone checks out. This will include things such as sweeping, mopping, emptying the trash, and making the beds.
Maintenance and repairs
Things like appliances don’t work to their full capacity forever, which means someone will have to maintain items throughout the property frequently. For example, things light lightbulbs and locks need to be checked and replaced. Similarly, if something breaks down suddenly, you’ll need someone to go out and repair it.
There is no point in having a vacation rental property if no one knows about it. That’s why many property managers will offer a form of marketing and advertising as one of their services. They will post your listings and share them on the relevant platforms. They might also communicate with guests and handle the bookings.
Advantages of having vacation rental management
There’s a reason many vacation property owners opt for rental management, and that’s because there is a wide range of advantages:
- Saves you time
When you try to be a property manager and landlord at the same time, it can be extremely difficult to juggle all the tasks yourself. By hiring a property manager, they will take a lot of the jobs off your hands and save you time.
- Expand your business
Having just one vacation rental property to manage can be hard, and it is even more challenging when you have multiple. Property management companies can help you look after various rentals in several locations so you can expand your business.
There’s a chance you don’t know how to do every job regarding property management, such as cleaning, repairs, and advertising. When you hire someone to help, they offer special expertise, which ensures the job gets completed to the highest standard.
Disadvantages of having vacation rental management
Although vacation rental management has a lot of upsides, it does come with a few downsides as well:
- Hidden costs
While you could follow any of the fee structures we mentioned in this article, a property manager may still have some hidden charges you don’t know about. It is best to check with them about all their fees before you start with them.
- Less income
Since you have to pay for a property manager and take it out of your annual net income, you will have less for yourself.
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