Breaking Down the Numbers: How Much Do Property Managers Charge for Short-term Rentals?
Managing everything from marketing to maintenance can be overwhelming for rental property owners. That's where a property management company comes in. They can take care of all the details, while you focus on growing your rental business.
Is a property manager worth the costs for something that you can essentially do yourself? To try and start answering such a loaded question, it’s best first to understand what the property management fee will cover and which factors will impact it.
Here’s a look at how most property management companies structure their management fee to help you reach an informed choice. From the regular monthly fee to a potential one-off setup fee or occasional advertising costs, continue reading to find out if your average rental income will be able to cover this extra expense.
Key Takeaways:
- Hiring a property management company to handle the marketing, maintenance, repairs, and other aspects of a vacation rental property is a great way to generate income while freeing up time for other things.
- It’s important to take factors like the property’s location, type, size, and condition into account when making a decision.
- In urban areas with high property values and rents, fees may be higher than in suburban or rural areas. In addition, property management firms in more expensive areas may charge higher fees to cover the increased cost of doing business.
Factors that Affect Property Management Fees
There are a number of factors that can influence the cost of property management services. It’s important to understand these factors and how they may affect your bill before hiring a professional property manager. Some of the key factors that can impact property management fees include:
Location of the rental property
The location of your rental property is a major factor in determining the cost of property management services. Property management companies in high-cost and popular Airbnb areas typically charge more for their services than those in lower-cost areas. This is because companies in high-cost areas may have to pay higher wages to their staff or deal with extra overhead costs.
Type and size of rental property
In addition to location, the property’s type and size can also impact property management costs. Different types of properties, such as single-family homes, condos, or apartments, require different levels of management services. For example, managing a single-family home typically requires less time, effort, staff, and resources to manage effectively than a larger property like a whole apartment complex.
Services offered
The services offered can also have a significant impact on the cost of services. Some companies may offer a wide range of services, such as tenant screening, rent collection, and property maintenance, while others only offer basic services. The general rule is that the more comprehensive the services offered, the higher the fees.
Rental property’s condition
If your property requires a lot of maintenance and repairs, the company may need to dedicate more time and resources to keeping it in good condition. As a result, you may end up paying more.
Either way, it’s recommended that routine inspections are carried out every three to six months. This way, you can spot maintenance issues early, which can help to reduce the repair costs.
Factors that Affect Property Management Fees
There are a number of factors that can influence the cost of property management services. It’s important to understand these factors and how they may affect your bill before hiring a professional property manager. Some of the key factors that can impact property management fees include:
Location of the rental property
The location of your rental property is a major factor in determining the cost of property management services. Property management companies in high-cost and popular Airbnb areas typically charge more for their services than those in lower-cost areas. This is because companies in high-cost areas may have to pay higher wages to their staff or deal with extra overhead costs.
Type and size of the property
In addition to location, the property’s type and size can also impact property management costs. Different types of properties, such as single-family homes, condos, or apartments, require different levels of management services. For example, managing a single-family home typically requires less time, effort, staff, and resources to manage effectively than a larger property like a whole apartment complex.
Services offered
The services offered can also have a significant impact on the cost of services. Some companies may offer a wide range of services, such as tenant screening, rent collection, and property maintenance, while others only offer basic services. The general rule is that the more comprehensive the services offered, the higher the fees.
Rental property’s condition
If your property requires a lot of maintenance and repairs, the company may need to dedicate more time and resources to keeping it in good condition. As a result, you may end up paying more.
Either way, it’s recommended that routine inspections are carried out every three to six months. This way, you can spot maintenance issues early, which can help to reduce the repair costs.
Common Property Management Fee Structures for Short-term Rentals
While there’s no one-size-fits-all answer to the question of how much property managers charge, there are three common fee structures that you’re likely to encounter when hiring a property manager. These include:
Percentage-based fees
Percentage-based fees are calculated as a percentage of the monthly rent for your rental property. This fee structure is common in the property management industry and can range from around 8% to 15% of the rent. For example, if your monthly rent is $2,000 and the company charges a 10% fee, you would pay $200 per month for their services.
Flat fees
Flat fees are a fixed amount that you pay the company each month, regardless of the amount of rent collected. This fee structure is less common than percentage-based fees and can range from a few hundred dollars to several thousand dollars per month.
Combination of percentage-based and flat fees
Some property management companies may charge a combination of percentage-based and flat fees. For example, they may charge a percentage-based fee for ongoing management services, such as tenant placement and rent, and a flat fee for extras, such as:
Repairs and maintenance services
Property managers typically handle maintenance and repair issues for your property, and some companies may charge an additional fee for this service. What makes repairs costs challenging to calculate is that they’re one of the most variable components of property management costs.
For example, fixing a small leak will cost significantly less than a full roof replacement. At the same time, the same job can cost more if it requires an immediate response or after-hours attention.
Cleaning
Property managers may charge a cleaning fee each time a guest checks out, in order to cover the cost of cleaning and preparing the property for the next guest. Some companies may also offer ongoing cleaning services for an additional fee.
Marketing
This fee can cover the time and expertise needed to create listings and take photos. It can also include an advertising fee used to cover advertising costs for social media ads, for example.
Other Expenses and Considerations
Irrespective of which fee structure rental property managers charge, there are also other fees over and above the monthly management fee to consider. Some of these fees might be one-off, while others might only be levied in rare events.
Examples of common fees property management companies can charge include:
- a setup fee
- late payment fees
- an early termination fee
- a new tenant placement fee
- an eviction fee
- a lease renewal fee
- a vacancy fee
How to Choose the Right Property Management Company
Here are some tips to help you shortlist the best property management companies that can maximize your income and ensure a smooth rental experience.
Research different property management companies
The first step in choosing the right company is to do your research. Start by searching online for property management companies that specialize in short-term or vacation rentals in your area. Look for companies with good reviews and ratings, and check their websites to learn more about their offering to find out if it includes tenant screening services or maintenance services, which hosts often need.
Ask for referrals from other hosts
Another good way to find a reliable property management company is to ask for referrals from other hosts in your area. Reach out to local host groups or online communities and ask for recommendations. You can also ask fellow rental property owners in your own immediate network.
Consider the company’s experience and reputation
Look for companies that have been in business for several years and have a proven track record of success. Check online reviews and ratings, and look for any red flags or negative feedback. A reputable company will be transparent about its experience and provide references upon request.
Ask about their services and fees
Specifically ask about their services and fee structure. Make sure you understand what services they offer and how they will help you maximize your income. Ask about their fees, including any additional costs or fees for services like cleaning, maintenance, or repairs. A good company will be upfront and provide a clear breakdown of the property management costs.
In addition, ask them about any systems or applications that they use to ensure that there is transparency, especially when it comes to rent collection. These solutions are essential when there are disputes with tenants.
For example, iGMS vacation rental software can help property management companies to automate their operations and reduce their workload. Harnessing the power of automation, iGMS allows you to:
- Manage multiple accounts and listings on the top OTAs from a single interface via a channel manager
- Use the unified inbox to organize your messages into a single feed and ensure prompt replies
- Post guest reviews and automate their creation and send-outs
- Create cleaning tasks that can be tracked to completion in real-time
- Manage direct bookings using a direct booking management toolkit
Read the contract carefully
Finally, before signing a property management contract, read it carefully. Ensure you understand all the terms and conditions, including the services provided, extra fees, and any restrictions or limitations.
Specifically ask whether they charge a contract termination fee. This is important as some property management companies will be happy to charge only one month of lost income, while others view it as breach of contract and add applicable legal fees.
If you have any questions or concerns, don’t hesitate to ask the company for clarification.
FAQs
- What is the value of hiring a property manager vs managing a property yourself?
A good property manager can offer numerous benefits. They will ensure good occupancy rates for your rental property, helping to improve the return on your investment. Aside from minimizing the time you’re stuck with a vacant property, they also have the knowledge to increase your overall rental value, further improving your ROI. As such property management cost is more like an investment than simply an expense.
- How much does it cost to hire a property manager?
According to several online sources, property managers typically charge a fixed percentage of the gross monthly rent, with the average cost ranging between 8% and 12%. This management fee will typically cover daily rental property management, guest communication, and to collect rent. That said, in some instances extra fees like an eviction fee can be added, which will increase that month’s monthly fee.
- Do rental property managers charge for a vacant rental property?
It depends. Some property managers will charge a fee to manage a vacant property, while others are willing to waive their fee if the property is vacant. In the case that they charge a vacant fee, it can be a fixed fee or the sum of one month’s rent.
