Airbnb Owners but non-operators- What do you pay your management?

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Airbnb Owners but non-operators- What do you pay your management?

Kyle Parks
Rental Property Investor · Lakewood, OH · Member since 2016 · 119 posts · 156 votes

I'm in the process of building out a management company in Cleveland, Ohio but have no idea where to start with pay structure. My wife and I are among the best operators on our 2 units and we are completely confident in our abilities (setting up, hospitality, management) but the $ aspect is difficult to pin down. I have seen figures ranging from 9%-30%. Please help! 

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Mark Miles
Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
5y
Originally posted by @Kyle Parks:

I'm in the process of building out a management company in Cleveland, Ohio but have no idea where to start with pay structure. My wife and I are among the best operators on our 2 units and we are completely confident in our abilities (setting up, hospitality, management) but the $ aspect is difficult to pin down. I have seen figures ranging from 9%-30%. Please help! 

I offshore my property mgmt for around $4/hr. I’m honestly not sure why anyone would pay someone stateside to handle property management when it is so cheap to hire someone offshore to do a high-quality job.

My offshore PM can set door codes, message (or call) guests, schedule cleaners, adjust the thermostat, monitor my cameras, & call a plumber just as easily as a local PM can, for 1% of the cost.

(more on that here: https://www.biggerpockets.com/... )

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  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    5y

    If I had to pay someone to manage my STRs, I would not be doing STRs.  But my STRs are full of refinery ruffians.

    1Reply
  • Kyle Parks
    OP
    Rental Property Investor · Lakewood, OH · Member since 2016 · 119 posts · 156 votes
    5y

    @Paul Sandhu

    I agree! But many people like the extra money a str brings but not the work. Also - I love reading your stories.

    2Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    5y

    The general rule of thumb is the management fees for a property manager are going to eat up your profits and you'll end with the same profits you would as a LTR.  So just go with the LTR option with the property.

    1Reply
  • Mark Miles
    Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
    5y
    Originally posted by @Kyle Parks:

    I'm in the process of building out a management company in Cleveland, Ohio but have no idea where to start with pay structure. My wife and I are among the best operators on our 2 units and we are completely confident in our abilities (setting up, hospitality, management) but the $ aspect is difficult to pin down. I have seen figures ranging from 9%-30%. Please help! 

    I offshore my property mgmt for around $4/hr. I’m honestly not sure why anyone would pay someone stateside to handle property management when it is so cheap to hire someone offshore to do a high-quality job.

    My offshore PM can set door codes, message (or call) guests, schedule cleaners, adjust the thermostat, monitor my cameras, & call a plumber just as easily as a local PM can, for 1% of the cost.

    (more on that here: https://www.biggerpockets.com/... )

    3Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Find companies that have been managing for more than ten years and you won't see any charging 9% unless they have a ton of add-on fees. You can model yourself after successful companies to get started but that's a lazy method that is unlikely to ensure your success. What you really need to do is understand what it takes to manage a property and the value of that time/effort. You define your costs, build in some overhead, and that's your fee.

    That's a very simplified explanation.

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  • Kyle Parks
    OP
    Rental Property Investor · Lakewood, OH · Member since 2016 · 119 posts · 156 votes
    5y
    Originally posted by @Mark Miles:


    (more on that here: https://www.biggerpockets.com/... )

     Because many people do not want to deal with managing their property, be it through managing someone in India or handling the calls themselves. There can be massive value in teaming with the right people. We outperform our market significantly. We turn people away due to being at capacity while most others struggle to hit 40%, and some of those are in more desirable locations. Bad layout, design and customer service makes them far less desirable and turns people away. If you add enough value your customers will have a smile on their face when they cut you that check every month.   

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  • Kyle Parks
    OP
    Rental Property Investor · Lakewood, OH · Member since 2016 · 119 posts · 156 votes
    5y
    Originally posted by @Nathan Gesner:

    Find companies that have been managing for more than ten years and you won't see any charging 9% unless they have a ton of add-on fees. You can model yourself after successful companies to get started but that's a lazy method that is unlikely to ensure your success. What you really need to do is understand what it takes to manage a property and the value of that time/effort. You define your costs, build in some overhead, and that's your fee.

    That's a very simplified explanation.

    Good points. We already have a client and are currently designing / building out his property. It is just hard to quantify the exact value of what we will bring our clients. I guess that would be measured in the potential for increased revenue. I was looking at this from the wrong angle. 

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  • Denise H.
    Member since 2018 · 40 posts · 21 votes
    5y

    We pay 30%, we could obviously be doing much better on our own but I don't have the time nor do I want to deal with the headaches. Our management company is amazing, handles absolutely everything, and we are booked almost 100% of the time. 

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  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    5y

    We charge 25%.  But just because you self manage, you aren’t pocketing that 25%.  You still have to advertise, pay AB&B commissions, etc.   So you might be saving 14-15 points at best.

    But when your guest calls on thanksgiving and says that the hot tub is broken, or they are locked out of the place, or the toilet has flooded out into the kitchen, don’t count on your off-shore $4 an hour dude to do anything.

    The reality is, without a mgt co that can address these items on the spot, you just lost a rental - or a chunk thereof, and may have a literal s*** pile in your kitchen come Monday to clean up.

    Most of our clients are former $4/per/hour self managers.  They figured out they make a lot more money having someone look after their place, and they get their lives back.


    PS - all three of these things happened this thanksgiving, and all were addressed by a real person, in person, that day.

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  • Andrew HaneyPro Member
    Rental Property Investor · Buckley, WA · Member since 2020 · 76 posts · 14 votes
    5y

    Collins points are one major reason we opted to hire a management company.  We pay a 25% fee.  

    1Reply
  • Nancy Bachety
    Rental Property Investor · North Fork, NY · Member since 2016 · 1k+ posts · 631 votes
    5y
    Originally posted by @Collin Hays:

    We charge 25%.  But just because you self manage, you aren’t pocketing that 25%.  You still have to advertise, pay AB&B commissions, etc.   So you might be saving 14-15 points at best.

    Can you clarify for me please. Say I charge $100 night on Airbnb and $100 cleaning fee and it’s a three night stay. Airbnb adds on taxes and subtracts host fee of 3%. I get $400 minus 3%. They collect another about 12%  from guest who pays the taxes and cleaning fee. Airbnb gets 15%. As a property manager, where is the 25% management fee entering in this scenario? Or do you skip Airbnb entirely and book off platform only? 

    I believe property managers earn their money, and you are right- self managers “pay” in terms of their time. And you didn’t even mention the automation costs we incur for messaging, pricing, etc. I would think that’s all included in your 25%. 

    Thanks for your insight. 

    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    5y

    The biggest thing you get for your 25% is time.  Time often translates into dollars gained, or dollars lost.

    We just added a former self manager to our program.  He has a property in pigeon forge TN and lives in Indiana.  He’s actually done a good job with his property.  But time is money:

    His hot tub quit working the first week of October.  So call the hot tub repair people, right?  Well, those guys are completely overwhelmed.  In December, he finally told them “Look, I’m losing my shirt in lost rents...I’ll just buy a new hot tub if you guys will just bring it out.”  

    They said “sure thing...you’re on our list and you’ll have your tub in May.”

    Well he joined our program, and within 48 hours, our repairman had his hot tub going.

    So...how much did the self manager save in the two months that he couldn’t get his hot tub fixed?  And how many hours did he spend trying to find someone to fix it, explain the problem to guests, issues refunds, etc.?

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  • Chris Gottshall
    Rental Property Investor · Portland, OR · Member since 2017 · 92 posts · 80 votes
    5y

    I was quoted 15% by someone in my market recently (someone that is managing a few other units in my complex and comes recommended), but at the end of the day, I decided to keep up DIY management for another year because that 15% would be 100% of the margin I get on operating costs. If I had a bunch more money into the deal and had lower costs, I’d probably do it just to get my time back; but not when it’s potentially going to make it a negative cash flow situation. If he was willing to do 7-10% instead of 15%, I would have looked at it more seriously. But he acknowledged that I was already more savvy with using Airbnb’s basic technology than he was; so the upside was only going to be maybe some extra low season bookings via referral from his other properties.

    2Reply
  • Chris O.
    Member since 2018 · 69 posts · 11 votes
    5y

    I sent you a PM with some more detail - but there's really two schools of thought

    1) - Low initial price (10-15%) and owner pays for everything.

    2) Higher all in price - (25-35%) - but you cover payment processing, consumables, photo/listing setup, pass through maintenance work, remote lock service, welcome books, etc etc etc.

    You can combine the two to meet in the middle etc - but you really need to think about what kind of service you want to provide owners - nuts and bolts admin or white glove

    1Reply
  • Andrew HaneyPro Member
    Rental Property Investor · Buckley, WA · Member since 2020 · 76 posts · 14 votes
    5y
    Originally posted by @Chris Gottshall:

    I was quoted 15% by someone in my market recently (someone that is managing a few other units in my complex and comes recommended), but at the end of the day, I decided to keep up DIY management for another year because that 15% would be 100% of the margin I get on operating costs. If I had a bunch more money into the deal and had lower costs, I’d probably do it just to get my time back; but not when it’s potentially going to make it a negative cash flow situation. If he was willing to do 7-10% instead of 15%, I would have looked at it more seriously. But he acknowledged that I was already more savvy with using Airbnb’s basic technology than he was; so the upside was only going to be maybe some extra low season bookings via referral from his other properties.

     Chris. 
    When comparing did you factor the additional rents an agent may bring in?  For me I know an agent has a better pulse on the market through the year that allows me to maximize rents high demand times.  I also feel they have a better system for maximizing my exposure to potential guests.  

    0Reply
  • Chris Gottshall
    Rental Property Investor · Portland, OR · Member since 2017 · 92 posts · 80 votes
    5y

    @Andrew Haney Yes, I did consider that. My high season was booked solid this past year. The most I could expect from him would be more bookings in the low season, maybe. During our conversation, he acknowledged that my annual revenue was already in line with what he’d expect to see for a place like mine. So, I wasn’t going to get enough upside to offset the expense. That being said, you raise a good point for those considering a manager to consider. If you can get 20% more revenue, and pay 15% in fees, it’s probably a good deal because you also get your time back.

    0Reply
  • Wendy Schultz
    Property Manager · Wisconsin and Florida · Member since 2017 · 346 posts · 227 votes
    5y

    Hi Kyle. I can teach you everything you need to know and be quite profitable. Reach out to me if you'd like help. On here you're not going to find a lot of support for property managers because there are a lot of DIYers but out in the world, there are a lot of people willing to pay for your services.  

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