When hiring a property manager or property management company to oversee your vacation rental, it’s important to understand how vacation rental property management fees work and how they will affect your business profits.
The structure and types of fees that you will pay to a manager will vary across vacation rental property management companies. There are benefits to hiring a property manager to manage your short-term rental properties but, before you do, make sure that it’s the best decision for your business and your rental income goals.
Vacation rentals come with a number of fees that need to be paid to maintain it. Vacation rental property management fees are the fees that you pay to a property manager for any management services they provide for your rental. These services could include booking management, guest communication, onsite maintenance, and emergency repairs handling. This is usually a monthly payment made to the property manager, based on a certain rate.
It can be difficult to determine an exact industry average for vacation rental property management fees, as they often vary depending on various factors. These factors could be the property type (a house vs an apartment) as well as the property’s location (an urban location vs a beachfront or mountain location). Despite this, it’s possible to identify some distinct trends in property management fees.
The typical range of property management fees for vacation rentals is anywhere between 10% and 50% of the monthly rental income. Besides property factors, this range can also be explained by whether or not a property manager offers full-service management (where they manage all property duties) or only partial management (only marketing or perhaps only customer service).
The more commonly observed range is between 20% and 40% of the monthly rental income. Urban rentals generally have a lower vacation rental property management fee of 20% to 25%, while beach rentals see a range of 25% to 30%. Mountain rentals usually see a higher management fee range of 30% to 35%. Urban rentals tend to have lower management fees because they are considered easier to access, and generally require less maintenance than beach or mountain rentals.
How a management company decides to charge for their services will vary, but generally, there are three popular models that managers use to calculate their vacation rental property management fees:
Guaranteed income model: In the guaranteed income model the property manager pays a fixed monthly rate to the homeowner, even during months when the property has few or no bookings. This model ensures that property owners have a guaranteed passive income coming in all year round.
The catch in the guaranteed model is that your income will always be the same, whether the property is being rented during high or low season. Any income earned in excess to the agreed rate is paid to the manager or management company.
Fixed-rate model: If you select a fixed-rate payment model for your manager, then you and the manager agree on a fixed, flat rate that the manager will receive every month. This fee remains the same regardless of the number of bookings the property has in a month.
During the low season, this may not seem like an ideal arrangement, but during high season you will pocket all profits made over and above the vacation rental property management fee that you pay. The downside of this model is that the fixed fee will often have separate, additional management fees on top of it, that push up the final price.
Commission model: The commission model works on a percentage-based commission that you as the rental owner will pay to the property manager on a monthly basis. This is a popular fee structure because the monthly fee will be directly based on the amount that your rental made for that month.
The hidden cost lies in the exact percentage that the manager will be taking in their fee. As mentioned earlier, the commission rates will vary depending on the manager or company you hire. Always be sure you know the exact percent they will be charging for their fee, and if this percent includes or excludes any additional fees that need to be paid.
It’s extremely important for rental owners to know upfront what service fees are included in the management fee, and what fees are charged additionally. A property manager might quote you a very low monthly fee, but then provide a list of separate fees charged on top of their rate. On the other hand, a property manager may quote a seemingly high monthly fee, but it’s inclusive of all services.
Some services that can be included in the monthly management fee include:
Marketing services: Vacation rental property managers make a career out of understanding the STR market and staying on top of industry trends. Because of this, they have a good understanding of the best way to market a vacation rental, when to adjust prices, which platforms to market on, and how to attract ideal guests for your property.
Some managers will offer this service as part of their monthly vacation rental property management fee, and others may offer it as an additional service. If you would like to have this service excluded, you may enquire with your manager, but first, decide if you have the time and skills to market your rental by yourself.
Cleaning services: Each time guests check out of your rental, the property will require a cleaning service. Some vacation rental managers may include cleaning fees in their monthly rate, which means you will be paying for the cleaning services out of your own pocket.
Other managers may add a cleaning fee as part of the rental fee and charge guests for cleaning. Make sure you know how the cleaning fee is structured and how it will be paid, before hiring a manager. The cleaning fee charged will depend on the property’s size, location, and amenities.
Maintenance and repair services: Maintenance fees are usually included in the monthly vacation rental property management fees charged by managers. This is because repairs and maintenance often need to be done on short notice and as quickly as possible. If a pipe bursts or the washing machine leaks, guests are going to expect that it gets fixed promptly, otherwise they may not leave a good review.
If a manager charges a maintenance fee, be sure to ask them exactly what maintenance it covers, if they have their own maintenance team or if they outsource, and if the fee covers all necessary repairs for the month. The last thing you will want is to have to top up the maintenance fee if it runs out during the month.
Often property managers will charge additional vacation rental property management fees on top of the regular ones. Additional fees are for services that exceed the essential cleaning, maintenance and guest management services offered.
Additional fees could include things like:
Before hiring a property manager and paying the relevant vacation rental property management fees, ask yourself these questions:
If you own a few vacation rental properties, managing and overseeing them yourself will be a lot easier than if you own multiple properties.
Your decision should also be influenced by how much time you can realistically commit to managing your listings. Managing a vacation rental business requires a lot of work, and if you already work a full-time job, you might have less time to focus on your listings than you need.
In this case, it might be a good idea to pay a monthly vacation rental property management fee to a hired manager. This will put your mind at ease, as they will handle all the necessary work. If your vacation rental business is your primary focus, then you may be able to handle the workload on your own without a manager’s help.
Finally, your rental goals should also influence your decision about hiring a manager. If you live in your rental property and only rent it out when you are traveling or vacationing, then you won’t be looking for full-time occupancy and may be able to manage it yourself. On the other hand, if your listings are vacant and you want to maximize their occupancy potential, then hiring a manager to oversee all operations would make more sense.
Will be more likely to guarantee management success due to the company wanting to protect its brand identity and reputation.
There is no right or wrong option for choosing a property manager, it depends on your property needs and business goals. Either way, it’s best to do some research about the individual or company after you’ve discussed their vacation rental property management fees and services with them.
Ask for opinions from other vacation rental owners who have worked with a manager or company you are interested in, and see what their feedback is.
Before hiring a vacation rental management company, it’s a good idea for rental owners to ask some important questions about the exact services they offer. By asking detailed questions you can find out exactly what vacation rental property management fees you will be paying.
Some questions to ask include:
If you don’t want to pay continuous vacation rental property management fees to hired managers, consider using vacation rental software to manage your properties for you. Vacation rental software like iGMS makes managing properties easier, with functions like a unified inbox, automated guest messaging, calendar sync to prevent double bookings, channel manager, financial reporting, and many more.
By automating all of these management tasks, rental owners can save on management fees by running their business on autopilot with iGMS.