The 25% property management fee was killing my STR profits

Orlando, Florida
Short-Term & Vacation Rental Discussions
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The 25% property management fee was killing my STR profits

Luis Guerra
Member since 2024 · 7 posts · 12 votes

Hello everyone,

I've been managing my short-term rental (STR) in the Orlando area for a few years now. Initially, I handed over the management of my property to a company, giving up 25% of my earnings for them to handle everything from guest relations to cleaning and maintenance. This worked well at first, but I started noticing "ghost" charges for random repairs and services: $45 for a door knob replacement, $85 for wall repairs, $65 for a toilet leak, etc. It became too difficult to trust that the extra work being performed was actually needed.

So, I decided to take matters into my own hands. I opened a new host account to handle guest interactions myself, hired a local handyman for emergencies, and found a cleaning person who could also act as my eyes and ears for any required handyman services. I'm happy to report that this approach has been working out great! My total property management cost has dropped from 25% to about 10% per month, with $0 in extra "ghost" fees.

This success has inspired me to consider starting a handyman/cleaning business in the Orlando area to help other Airbnb hosts like myself. I’m seeking advice on how much to charge for these services. I was thinking that the cleaning fee could simply be covered by whatever the host is currently charging their guests, and the maintenance fee could be a set monthly amount to cover basic needs such as pool cleaning/maintenance, lawn care, pool deck cleaning, and minor touchups.

What do you all think about this? What would be a fair price to charge for this service? Please keep in mind that this business model assumes the host is willing to handle guest interactions themselves.

Thank you for your insights and suggestions!

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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2y

You might be surprised about the cost of running a business. 

Everyone thinks that replacing a light bulb should cost $5, meanwhile you have to send out a qualified person on payroll with benefits on a company vehicle, who has 30 minutes travel both ways and then Home Depot ran out of that special light bulb.. 

And then there is accounting, invoicing, marketing and advertising, legal expenses, liability, insurance...

Oh yes, and ideally you want to maintain a decent profit margin on top of all that.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    We pay $110 per month for routine maintenance.  They pay for and change filters, bulbs, batteries.

    They haul off the trash right after the guests leave so the cleaners don't have to.

    They handle maintenance and basic repairs.

    They have replaced things like door knows and toilet wax rings. We paid for the material.

    5Reply
  • Jacob Stevenson
    Insurance Agent · Sioux City · Member since 2020 · 83 posts · 41 votes
    2y

    I'm not in the area but all STR management around me are 15%. Do you have to be licensed in your state to manage STR's?

    We have always managed all of our rentals but 8 month ago I made a career change and it wasn't working. New career had less flexibility and I wasn't able to effectively do both anymore. We looked at full time management locally but decided to build out a team instead. We now have full time VA management and that has taken a lot off of our plate. We are still involved in the business, but way way less. The most impactful part, they monitor our STR's 24/7. Ever night I go to sleep not worried about what the night might bring.


    If you are going to go into management, I would suggest find some VA's and using on your own property ASAP. Then you could be full service.


    We are actually hosting a virtual meet up tomorrow, June 18th, about our systems if you are interested in joining.  

    2Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    You might be surprised about the cost of running a business. 

    Everyone thinks that replacing a light bulb should cost $5, meanwhile you have to send out a qualified person on payroll with benefits on a company vehicle, who has 30 minutes travel both ways and then Home Depot ran out of that special light bulb.. 

    And then there is accounting, invoicing, marketing and advertising, legal expenses, liability, insurance...

    Oh yes, and ideally you want to maintain a decent profit margin on top of all that.

    12Reply
  • Jacob Stevenson
    Insurance Agent · Sioux City · Member since 2020 · 83 posts · 41 votes
    2y
    Quote from @Marcus Auerbach:

    You might be surprised about the cost of running a business. 

    Everyone thinks that replacing a light bulb should cost $5, meanwhile you have to send out a qualified person on payroll with benefits on a company vehicle, who has 30 minutes travel both ways and then Home Depot ran out of that special light bulb.. 

    And then there is accounting, invoicing, marketing and advertising, legal expenses, liability, insurance...

    Oh yes, and ideally you want to maintain a decent profit margin on top of all that.


     Not sure what your advice is in this post Marcus...

    Luis, you will likely need to bid each project.  Track your cost, increase by a % and get one customer.  See how it does.  My guess is properties that are more active will have to be charged more.  Properties that are older, charged more.  You get the idea.  Not all properties are create equal!

    3Reply
  • Scott Esmail
    Investor · Orlando, FL · Member since 2016 · 162 posts · 125 votes
    2y

    How is $45 dollars for a door knob replacement alot. The cost for material would be $15-20 on the low end and that would leave only $$25-30 to go to the store buy a door knob come back and install. I thought the prices you mentioned were low. $65 to fix any type of leak in a toliet is cheap 

    7Reply
  • Jacob Stevenson
    Insurance Agent · Sioux City · Member since 2020 · 83 posts · 41 votes
    2y
    Quote from @Scott Esmail:

    How is $45 dollars for a door knob replacement alot. The cost for material would be $15-20 on the low end and that would leave only $$25-30 to go to the store buy a door knob come back and install. I thought the prices you mentioned were low. $65 to fix any type of leak in a toliet is cheap 


     Why is everyone blowing this guy up?  I don't think the price was the issue, it was that he didn't think the work needed done.

    4Reply
  • Luis Guerra
    OP
    Member since 2024 · 7 posts · 12 votes
    2y
    Quote from @Scott Esmail:

    How is $45 dollars for a door knob replacement alot. The cost for material would be $15-20 on the low end and that would leave only $$25-30 to go to the store buy a door knob come back and install. I thought the prices you mentioned were low. $65 to fix any type of leak in a toliet is cheap 


     the knob example was just for labor. In my experience these companies try to nickel and dime you as much as they can to increase their profits.

    1Reply
  • Luis Guerra
    OP
    Member since 2024 · 7 posts · 12 votes
    2y
    Quote from @John Underwood:

    We pay $110 per month for routine maintenance.  They pay for and change filters, bulbs, batteries.

    They haul off the trash right after the guests leave so the cleaners don't have to.

    They handle maintenance and basic repairs.

    They have replaced things like door knows and toilet wax rings. We paid for the material.

    Thanks, John. This is precisely the kind of answer I was hoping for. Everyone knows that starting a new business is a daunting task, and there are many reasons to hesitate. I was simply looking to understand the current rates for these services in 2024 to see if it's a viable business opportunity.
    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y
    Quote from @Luis Guerra:

    Your management cost is 10%? Are you accounting for the cost of your time? It takes time to answer calls, book reservations, coordinate cleaners, pay the taxes, build monthly statements, etc. If your time is worth $30 an hour and you spend 20 hours a month performing these tasks, thats $600 more in the expense category. So many owners do their own work and then fail to account for the cost of their time. I also know a professional property manager is more efficient, has better marketing, established policies to handle problems and prevent losses, knows and complies with the law better, and more.

    But maybe you can do it as well as the PM. Does that mean you can do it as well for others for cheaper? Again, you are not accounting for your time. If you start managing for others, do you really think you'll do it for 10% without paying yourself for your time?

    My PM charges 20%. I would pay a lot to market in all the places they do. I would have to pay my own taxes, find and coordinate my own cleaners, deal with phone calls late at night when the tenant can't figure out how to operate the A/C or a toilet is clogged, and so much more. After accounting for my time and trouble, I may save 5%. It's not worth it.

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    I think that you have no clue about what it takes to run a business nor should you attempt it. In my opinion you had zero success and should offer any services. Currently, you are not paying GL insurance, WC insurance, payroll, payroll taxes, or any overhead for an office, vehicle, supplies or marketing. To imply that you can save other owners 15% is pretty silly and shows your business acumen. Keep self managing as it has worked out for you but leave everything else to the business people.

    Also, “ghost charges”? Really…

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  • Alice Horn
    Property Manager · Kissimmee, FL · Member since 2019 · 446 posts · 266 votes
    2y

    @Luis Guerra the first step in starting any business is research and asking questions. I applaud you for doing that. You will find the property management/cohosting/cleaning business in Orlando is extremely competitive, and scaling your business will be tough once you need additional staff and are juggling more homes. I encourage you to do a Google search/competitive analysis to learn what others charge LOCALLY (commission and fees) before you make a decision. 25% is extremely high for the Orlando market. You will find many PM's who charge significantly less, and you will need to figure what your competitive advantage is. Best of luck!

    3Reply
  • Luis Guerra
    OP
    Member since 2024 · 7 posts · 12 votes
    2y
    Quote from @Adam Bartomeo:

    I think that you have no clue about what it takes to run a business nor should you attempt it. In my opinion you had zero success and should offer any services. Currently, you are not paying GL insurance, WC insurance, payroll, payroll taxes, or any overhead for an office, vehicle, supplies or marketing. To imply that you can save other owners 15% is pretty silly and shows your business acumen. Keep self managing as it has worked out for you but leave everything else to the business people.

    Also, “ghost charges”? Really…


    You sound like a disgruntled property manager frustrated with losing business to homeowners who prefer to manage their properties themselves. My question provided no insight into the success of my current Cloud consulting business or my general business knowledge. As a dedicated BiggerPockets member and an active participant in various real estate ventures, I was merely seeking to gather the necessary information to explore a potential new business opportunity. BTW, Ai is about to replace all real estates agents in the next 5 years, seek an alternative as fast as you can.

    3Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    Cost of labor
    Cost of material
    Cost of risk/insurance

    The world is expensive. If those prices are getting you, you aren't fit for this. Go find the hourly rate for someone to install a doorknob, the price of a doorknob, then insurance at scale divided by 30. Doubt you 'll do better, if you can then manage those same price points for you see where you are at. 

    With that said STR management rates are coming down, as a lot of things are. We have a contract in place that's scaling from 15-25% of rates and we're re-negotiating it to 12-20% with several management companies that we have mutiple STRs with. They were initially resistant to it when first proposed in april but as revenues are coming in every quarter, lots of pockets in the economy are suffering and this is one for sure.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y

    If you were paying 25%, and you got actual costs down to 10%, with your own labor as free, and no insurance.....when you add in the cost of your own labor, insurance, then add in profit, and increased costs as you grow in a variable priced model....you're going to be right at the same price of the competitor you fired. 

    Crunch those numbers again.

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    2y

    Property management always was, and probably always will be a difficult business.  If I find a good property manager I try to retain them for life…/

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  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y

    Posts like this are always humorous to me.  When a guest calls because the door lock is broken, I have to pay our person to 1) Travel to the site to assess, 2) Go to Lowe's or HD for the part, 3) Return to the site, 4) install the part, 5) travel back home.

    In the mountains of Tennessee, that can be a 4 or 5-hour process really easily.  Do the math.  

    If you don't trust your management company, do them and you and favor and manage it yourself. 

    And remember, AI won't fix broken locks, get snakes out of the basement, or bats out of the fireplace.  Nor will it clean the house for today's arriving guests when your trusted housekeeper is hungover and no-shows.  

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y
    Not at all disgruntled… we don’t even manage STRs. I just don’t like when uneducated folks make declarations that are false or uneducated. Good luck self managing!
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    1Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    Wow, lots of opinions in here and some personal attacks. No the usual kind of responses.

    @Luis Guerra, I am glad that you are doing well self managing. We also self manage and save quite a bit on PM services.

    In our area, a PM wanted 35% to handle all the stuff I do. Plus maintenance. No way we could make it on that kind of cost.

    We have been self managing for 7 years now with zero issues. I have a great cleaner plus a handy person I can call to handle any job. They also do appliance work. They have been out 2x. Once for a frozen up fridge (guest left the door ajar and ice built up) that cost $75 including trip.

    A guest broke a toilet seat and that was also $75. I keep a few toilet seats in the storage for just such an emergency.

    Our place is 36 miles downlake from town so it is more important to have supplies of all kinds of things most won't want to store.

    8Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    I have a sneaking suspicion this is a thinly veiled advertisement for services.

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  • Leah Smith
    Member since 2024 · 18 posts · 10 votes
    2y


    Sorry to hear that! That's the thing, whenever you use a management company to manage your rentals, whether they are long-term or short-term, the fees cut a big chunk of your profits. I would highly recommend adding a cost. I have friends who self-manage, and they do everything remotely. I think they recently had their AC and water heater changed without even being present.

    0Reply
  • Alex Zweydoff
    Property Manager · Orlando, FL · Member since 2024 · 49 posts · 28 votes
    2y
    Quote from @Luis Guerra:

    Hello everyone,

    I've been managing my short-term rental (STR) in the Orlando area for a few years now. Initially, I handed over the management of my property to a company, giving up 25% of my earnings for them to handle everything from guest relations to cleaning and maintenance. This worked well at first, but I started noticing "ghost" charges for random repairs and services: $45 for a door knob replacement, $85 for wall repairs, $65 for a toilet leak, etc. It became too difficult to trust that the extra work being performed was actually needed.

    So, I decided to take matters into my own hands. I opened a new host account to handle guest interactions myself, hired a local handyman for emergencies, and found a cleaning person who could also act as my eyes and ears for any required handyman services. I'm happy to report that this approach has been working out great! My total property management cost has dropped from 25% to about 10% per month, with $0 in extra "ghost" fees.

    This success has inspired me to consider starting a handyman/cleaning business in the Orlando area to help other Airbnb hosts like myself. I’m seeking advice on how much to charge for these services. I was thinking that the cleaning fee could simply be covered by whatever the host is currently charging their guests, and the maintenance fee could be a set monthly amount to cover basic needs such as pool cleaning/maintenance, lawn care, pool deck cleaning, and minor touchups.

    What do you all think about this? What would be a fair price to charge for this service? Please keep in mind that this business model assumes the host is willing to handle guest interactions themselves.

    Thank you for your insights and suggestions!


     Have you considered moving portfolio to long term? I am a property manager here in Orlando and I am seeing this a lot right now. 

    0Reply
  • Jon Martin
    Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Another vote for self managing. With the proper systems in place it shouldn't require more than a few hours a week most of the year. If you do your job on the front end with preventative maintenance then you shouldn't have too many surprises going forward. With a few cleaners, a handyman, and Costco or Instacart account you should be able to manage 98% of issues in a timely manner. The exception to this would be if you are in a rural area where services are sparse, in which case a management company would make sense. 

    0Reply
  • Chris Grenzig
    Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes
    2y
    Quote from @Luis Guerra:

    Hello everyone,

    I've been managing my short-term rental (STR) in the Orlando area for a few years now. Initially, I handed over the management of my property to a company, giving up 25% of my earnings for them to handle everything from guest relations to cleaning and maintenance. This worked well at first, but I started noticing "ghost" charges for random repairs and services: $45 for a door knob replacement, $85 for wall repairs, $65 for a toilet leak, etc. It became too difficult to trust that the extra work being performed was actually needed.

    So, I decided to take matters into my own hands. I opened a new host account to handle guest interactions myself, hired a local handyman for emergencies, and found a cleaning person who could also act as my eyes and ears for any required handyman services. I'm happy to report that this approach has been working out great! My total property management cost has dropped from 25% to about 10% per month, with $0 in extra "ghost" fees.

    This success has inspired me to consider starting a handyman/cleaning business in the Orlando area to help other Airbnb hosts like myself. I’m seeking advice on how much to charge for these services. I was thinking that the cleaning fee could simply be covered by whatever the host is currently charging their guests, and the maintenance fee could be a set monthly amount to cover basic needs such as pool cleaning/maintenance, lawn care, pool deck cleaning, and minor touchups.

    What do you all think about this? What would be a fair price to charge for this service? Please keep in mind that this business model assumes the host is willing to handle guest interactions themselves.

    Thank you for your insights and suggestions!

     @Luis Guerra We just went from managing our own long-term rental properties to start managing properties for other owners too, so here's what I did and what might help you. The best thing you can do is survey your market and see what others are charging for similar services. If you're in Orlando, call or connect with people like @Alice Horn who manage a ton of stuff and probably know what competitors charge, and see what it's like. There are probably several if not dozens of other management companies you could ask, as well as call the service providers and ask them. You even have properties they could service so you could use them as real-life examples. 

    Then figure out what software they're using, find out what insurance & licensing you'd need, how much in-house our outsourced staff costs, and try to come up with some figures for revenue and expenses at different stages. Also, figure out different marketing techniques including referrals. Then see if the money you might make is worth all the effort, money, headaches, etc. to build out. 

    2Reply
  • Alex F.
    Investor · Plymouth, MN · Member since 2020 · 157 posts · 102 votes
    2y

    Another vote for self-managing here.  Once you get everything set up, such as message workflows, guidebooks, pricing engine, etc, the questions and misc are not that time-consuming.

    The hard part is getting a good cleaning team/person and a reliable handyman.  

    3Reply
  • Account Closed
    Investor · FL · Member since 2016 · 332 posts · 388 votes
    2y

    I am sorry most people didn't answer your question on what to charge for services to STR owners. As for what to charge, call around to see what competition charges. I am not in your market so I am not sure what to charge. In both my markets Lowes and HD is over an hour roundtrip and my maintenance people costs has to cover thier time.

    As for the off topic responses on management, it appears those in the management business are more sensitive on this. For me the military has taught me everyone is replaceable. I don't say that in a demeaning manner to anyone, but a true honest reflection on "service/solution/goods" businesses (which is most businesses). In the military as I visited different units as the chaplain, most would voice the same sentiment in a round about way, "the only way the mission succeeds is based on what we do and without us their would be mission failure." While in Afghanistan during the prep for withdrawal we started getting rid of certain career fields on base and the rest of us started doing what they did. We had to figure it out and we succeeded...sometimes better than those replaced and sometimes worse depending on the person who left and the person picking up the responsibility. As for STR management it is the same. Some professional managers are great and some are not. If a self manager replaces a bad professional then they are making a wise decision for them. Could they have searched for a better professional manager? Maybe, but that is their decision and depends on their current goals (cashflow/networth vs time recapture). I have 9 properties and always have self-managed for 8 yrs and even while in Afghanistan. It is hard to find managers who can get: 1) the same of better gross/net 2) care about individual properties 3) Treat you as a business partner and doesn't charge fees (admin/booking) that are not shared to pad their pockets and not both of ours. Trust me I eventually want to turn everything over (9 properties and growing) to a manager for time recapture, but it is hard to find a good one in which I would want as a business partner (management should be considered a business partnership mentally). For the professional managers I recommend they take an honest look at their business and make the adjustments to make it harder to replace them and make everyone want them. I know of cleaning companies with a wait list because they are that good...managers do you have a wait list? If not, why and what changes do you need to make to become the most desired management company for your area? Remember growth (number managed) does not equal success and look at Vacassa as the prime example of this...they manage alot but are poor at it.

    4Reply
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