What Are The Things I Need to Know Before Signing an PM?

Question

I am about to sign a full-service PM to handle my short-term vacation rental house. I interviewed several PMs from mom & pop types (managing just a few properties but charging less) to big behemoth national PM companies. I am still not sure what to do or who to hire. Here are my questions:

1- Should I engage the PM as a "white glove" partner, meaning that I am co-managing the place with the PM? I want to learn the ins and outs of the short-term rental but I think I may not have the energy or time to do it. The alternative is to hire the PM and let him/her take care of the property completely. The drawback to that is that I don't get to learn anything. What should I do here?

2- It seems 20-25% is the standard rate. What do I need to know before I sign the agreement?

3- Most PMs will manage the money themselves and send you a check after all the fees. Is that normal?

4- Anything else I should consider before hiring a PM?

I apologize if these questions were answered elsewhere. If you see those discussions, please share the link, I will read through them carefully. Thank you!

Luke Carl · Answer

I’d torque using a PM you don’t need to be spending time in the internet doing research. That’s the whole point. You’re paying them to do everything so you don’t  have to.

No one here uses a PM. We’re all but jobs that do it ourselves. @Paul Sandhu taught me

Ryan Moyer · Answer

It sounds like what you're looking for is a co-host, not a PM.  A PM is more someone that you just hand everything over to, forget that you even own the place, and then either get a check or a bill every month depending on how well the place rents out.  It's for people who want a truly passive investment, as if they were just buying a stock to forget about for the next 20 years, but want their passive investment to be in a different asset class.

With a co-host the airbnb/vrbo listing is under your name, you own it.  The booking revenue goes into your bank account, but they do all the guest communication, hiring the cleaners, etc in the shared back-end system (so you can see everything they're doing and learn from them) and then you pay THEM every month.

Most of us here self manage.  If you're stuck on going the PM route, I think you'll have a lot more luck with the smaller mom and pop shops than the big nationwide mega PMs.  People here have nothing but bad things to say about the latter of those.

Drew Sygit · Answer

@Billy Zhao Many advise to self-manage, which may work for some, but doesn't work for everyone!

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Ruth Blue · Answer

Hi Billy!

Property managers can be super helpful if you don't want emergency calls and maintenance to be handled by you or a family member. It really depends on how busy you are with your other investment as if you want to invest your time into managing. I have see some online managing companies at 10% but they won't be very hands-on to assist with issues. It is 100% normal for your manager to collect funds & then disburse them to you, we have had some owners that wanted to handle different portions like their own cleaning crew, so it depends on if they would be flexible to allow you control over different fees.

I would definitely make sure your cash-flow would be acceptable after hiring a manger to ensure it would be worth while.

Best of luck with your Vacation rental, I love mine!

Michael Baum · Answer

@Billy Zhao, we are 360 miles away from our lake house. We have been self managing for 5 years now with zero issues. I just use my phone and the AirBNB and VRBO apps. I use Zelle to pay my cleaner and handy person. I am more involved as I don't do instant bookings and vet each and every guest. This keeps us from getting an out of hand guest.

Still, I only spend about 5 hours a week working on the rental and most of that is making sure everything is stocked etc. All our bookings usually come in the year before with the rest trickling in late winter.

Barry Seidel · Answer

@Billy Zhao.....Do not pay more than 20% of Rent as the Management Fee

Remember with a PMC they retain the cleaning fee and pay for cleanng.

Understand which OTA's they will list the property on

Review their website for existing listings

Understand how they plan to price the property and what approvals you will have to provide for discounting

Call them directly as if you were a guest and test the quality of theuir customer service and responsiveness.

Obtain deirect refernces from a few of the owners of properties they are managing

Ensure that you have clear communication on what mainteance costs require your approval

Chase Hoover · Answer

As a former full-service PM, I'd encourage you to attempt self-management before dumping 20-30% on someone using these exact systems.  You can automate 90%+ of your operations by:

1) implementing a property management software with automated messaging (there are lots of options)

2) using a dynamic pricing software (Pricelabs)

3) finding a GREAT housekeeping company who is familiar with STR and can self-schedule with automatic notifications and live calendar access from your PMS

There is a lot of great info on the forum about self management and PMS recommendations.  For housekeepers, google "airbnb cleaner [your location]", ask for local recommendations, check out turnoverbnb, and search this site.  This is what you should be spending your interviewing efforts on, not property managers.

Billy Zhao · Answer

@Drew Sygit Thank you for the advice and link to the article. I am reading that right now. I am with you, screening PMs is just as important. As newbie, I don't know what to look for so most likely I will make rookie mistakes. My gut feeling is that I probably will try to find a co-host first but unlike PMs that are advertised all over the web, I am not sure how to identify a list of cohosts to interview from.

Billy Zhao · Answer

The amount of work involved in managing STR seems to be pretty significant. This is particularly true when you don't live in the town where the property is located. In addition, there is a lot of paperwork, tax related things I will need to handle as well. I'd love the idea of a co-host, or boots on the ground so-to-speak. If I found a co-host, what is a proper pay structure (10% 15% 20%)?

Billy Zhao · Answer

Thanks for all the great advice! I am surprised that most people not using a PM (as this is almost the opposite for long-term rentals - and STR is much more involved than LTR).

I'd love the idea of "co-host" but how can I find one? Thanks!

What Are The Things I Need to Know Before Signing an PM?

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