So I have been an Airbnb host for about a year and a half with my primary residence (in-law suite in the basement as well as private rooms) and just got our second property up on the Airbnb market. My wife and I do all of the work (cleaning, messaging, turnover, middle of the night phone calls, restocking essentials, etc) and we love it. Our goal is for Airbnb to replace our 9-5 jobs until we can acquire enough properties to live fully on passive income.
I would love to start a local company that manages listings and cleans for the Omaha area. I have spoken with several investors at local meetups that have talked about wanting to turn their rentals into STR but either don't know how and/or don't want to put the work in. I was thinking we could do all of the set up for them, as well as then managing everything afterward.
1. Has anyone started something like this? If so, how much did you charge, how did you set everything up, etc?
2. How much would you want to pay for a service like this? I was thinking 20% plus the cleaning fees?
You don't have to be in the Omaha market to answer, either, just curious if this business model has worked for other people before (either you use a business like this or started one)
Hi @Jenessa NeSmith , thanks for the post! I commend you on your voracity at the STR market and entrepreneurship! I will simply answer your 2nd question as a VR/STR owner as I have never started such a company.
Generally speaking I would expect to pay anywhere from 16-30% for full turnkey STR property management. (Housekeeping is pass thru to the guest anyway and do not count that). That would be for Advertising, Booking, Payment processing, housekeeping, hot tub/pool cleaning, pre-post inspection of property, etc. etc.
Your other venture of 'converting rentals into STR's' almost has another consulting dynamic to it as you are going to have to properly assess the return on investment of converting the rental to an STR including market analysis, FFE costs and overall just figuring out if it's a financially sound business decision for your client. Perhaps you don't need to do that for them however (meaning, that's what they want and just want somebody to do the legwork), but I'm guessing if they don't know how to do convert it to an STR, they don't know how to property analyze the return on their investment. As in most cases, STR's do not perform as well from an ROI perspective then conventional rentals (depending on the region of course).
Anyway, for me, I would expect to pay a 'service' to manage all of that process probably at some set hourly rate since some owners might want to pick their own furniture, some might want you to pick it, some might want to do permitting or rehab themselves or want you to do it. There are so many variables and operations channels that a flat rate likely would not benefit you or the owner. And I would probably pay somebody anywhere from $50-$100/hour depending on what kind of amazing STR they are creating for me.
Not sure if that helps or not, but I wish you the best of luck on your ventures and look forward to hearing how it goes if you choose to proceed!
Hi there! Thank you for taking the time to respond to my post and thank you for your input. 16-30% is about what I have seen other larger companies advertising. Is there a way you could narrow that down for me? Obviously your market is different, but how much would you personally pay for a full turn-key service? My service would include cleaning, linen and towel restocking, lawn mowing/snow removal, organizing minor and last minute repairs, messaging guests, and being available 24/7 to deal with guest issues. I also have a separate website for our STRs that link to Airbnb, so was thinking about adding that service as well - including the properties I manage on this additional website as well.
For the start up section, the investors that I know have the ability and basic knowledge to convert their conventional rentals to a STR. However, most don't have the nuanced knowledge/experience that I can offer, and also just don't want to spend the time investment in doing the conversion - writing the listing, shopping, unpacking, and setting up household things, and thinking of all the small items required for a house. If they are on a budget, I am really great at finding free things and deals, so my time could translate into savings for them. I also have an in-depth local guidebook that I wrote for our Airbnb. I was thinking just having a flat start up fee for a unit depending on the size, and then working with the investor to set up a budget for household goods. Obviously it would be in both of our interests for me to maximize the budget to attract future guests.
I do have a question for you, though...you said that STRs don't have as good of a ROI as conventional rentals. Can you go into more detail on that? From my numbers, even an area like Omaha (not as popular as some other cities for some reason!) offers more of a return on a STR. Just wondering how you came to that conclusion!
Thanks again :)
Congrats on taking a big leap! Or at least considering it. I'll let some others respond to your specific questions. (@Tyler Work runs a great short-term rental company here in Denver.)
I just wanted to add that, in addition to networking with investor groups, you might try to find a real estate agent that specializes in Airbnb and work out a referral program. They may be able to provide you leads when their clients buy a property to turn into an STR.
Hey @Jenessa NeSmith we charge 20% here in Denver, Breckenridge, and Boulder, CO markets. Just some fair warning - if you're looking for passive income, don't get into property management. It's about as active as it gets :) However, I'd be happy to help you get started and point you in the right direction, feel free to shoot me a pm!
Re: management percentage, I'd say a minimum of 20% for what you're offering. The high-end and very vacation-rental oriented markets can charge up to 40%, but in Omaha I don't think you're going to see those numbers. You may want to take on your first couple of units/clients at 20% (a special introductory deal) and once you have some traction bump it to 25%. Make sure you pencil out what sort of return you're getting on your time investment so you know this whole venture is worth it to you!
As for the initial setup, I think a flat rate is the way to go - outline specifically what is involved in the rate, but note that of course you'll customize it depending on client needs! You'll end up drawing up specific rates for each client, probably, but that'll give them (and you) an idea of what you offer and what sort of price point they're looking at. I know that personally I shy away from very open-ended "inquire for pricing" sort of models, but give me a guideline and I can make a decision on whether my expectations are realistic.
(I'd also say offer a couple of options - for example, you've got one fee for consulting with owners to analyze if their unit is a good fit for STR, another for actually transforming it, etc. Don't make it too complicated, but I bet you'll get some traction on intro-level consulting, even though some of those owners will decide STRs aren't a good fit for them)
Ok what’s an STR?
Oh, the pretension of using acronyms! Sorry about that. An STR is a Short-Term Rental. In its current usage, it means any rental of fewer than 30 days.
@Jenessa NeSmith , just wondering where in Omaha your rental is? I have wondered about this business model, but assumed Omaha wouldn’t bring year round customers. What’s your typical vacancy rate? I would be interested, but I’m awfully cautious with the seasonality of Omaha.
Hey Jenessa, awesome that you're exploring this option. It's definitely a great business model. Little liability, little capital and overhead involved. Those are some of the best ingredients for a business, but it is definitely not passive. You already have an idea of what it involves by hosting on airbnb and others above have also went into some detail with great advice for you.
We charge 25% of the nightly rate here in Chicago. The fee includes listing the unit/home, communications, vetting, inspections, cleaning and pricing (the most important of all).
Along with the advice above, I would add in:
1) Know what business you're in + outsource wisely. Are you in the management business? Are you in the cleaning business? Or the furnishing business? Unless you have capital to hire a bunch of employees (even then, would you really want to?), it's difficult to do all 3. And damn difficult at scale.
2) You will be glued to your phone. Be ready! It's constant communication and pinging.
3) Create systems for everything or you will get overwhelmed.
I wish you luck and hope that it comes together. It won't be easy, but it is very lucrative if you do it right :)