Rental property management companies handle residential rentals and vacation rentals for a fee. As an owner of a vacation property, it is important to understand how the fees you’d pay as a vacation rental owner are calculated. Many owners charge fees to their renters to cover these fees. On average, the charge ranges from 25 to 30 percent of the vacation rental revenue. This cost varies according to where the property is located and the property management company. Some dealing with premium vacation rentals or those located in exotic destinations charge a higher percentage in fees.
How are vacation rental property management fees calculated?
As a vacation rental owner, it is important to understand how much of the rental revenue will go to a property management company and how it is calculated. Regardless of the model used, there is usually an initial fee that covers the initial costs of having the property advertised to attract vacation renters. This includes all the paperwork and marketing costs such as the cost of advertising.
After this there are three big factors:
1) The structure of the fees will either be percentage based or a flat fee
The management fee – which is charged to cover the cost of maintaining the property – usually varies between 25 and 35 percent of revenue in a percentage-based fee structure. This fee includes cleaning, repairing and maintenance jobs. If there are additional costs of marketing such as booking and credit card transaction fees, they are included here. Note that this fee varies widely between vacation rental property management companies and locations. It can be as low as 12 percent of the rental revenue or as high as 40 percent.
The flat fee structure
There are property management companies that charge a flat management fee throughout the year, consistent through the low and high seasons. This fee is arrived at by the property owner and the management company. It’s determined by the type of property in terms of size and amenities and its location. The rental rates in the area are also factored in and so is the prevailing fair market value of the property.
2) The fee model will either use commission or guarantee models
With the commission model, the property management company earns a commission off of the rental revenue. The company earns money if the owner does. The commission is typically a percentage and such contracts usually run for a year. This model works well for owners who sometimes use their property themselves and who can afford to keep the rental well-maintained even if it doesn’t bring in a lot of money.
With the guarantee model, a vacation rental property management company guarantees a property owner income whether or not their property is occupied. This model has only recently been adapted in the industry. The two parties agree on the amount to be paid every month. For the property owner, it means guaranteed income even during low season periods. However, it also means making less than they would during the high seasons.
Many property management companies, including those on Rented.com, use guarantee models for specific types of properties. Property managers only offer guaranteed income for vacation rentals that are in high demand for most of the year or that are in exotic or exclusive locations.
3) Additional fees
Property owners should check to see whether additional fees are charged for cleaning services and supplies or if these costs are covered in the flat fee. Note that most costs of short-term rentals are passed on to renters. This includes daily cleaning and laundry services. Deep cleaning, repairs and maintenance are absorbed by the owner.
Another additional fee for vacation rentals is booking fees. If bookings are done by the property management company, then they will charge for this. The alternative is for an owner to list their property on sites like Airbnb, HomeAway and VRBO and eliminate/reduce booking costs for themselves and their renters.
Choosing a rental property vacation manager
Using an online vacation property management fee calculator will give an owner a clearer idea of how much they can expect to make from their property and how much will go to the vacation rental management company. Upon coming up with a shortlist of two or three property managers, it is important to go over the specific costs before signing up.
Another precaution property owners should take is to examine the history and reputation of the management company they are considering. Going with a reputable business can help prevent potential conflicts and ensure an owner gets the rental revenue due to them on time every time.
Son-Rise Property Management has been serving the property management needs of Bellingham and Whatcom County since 1996. Contact us today to see how we can help you find a rental property for your family or manage your rental properties.