Management Percentage for STR

24 Replies

For those of you who that have your short term rental managed by another company, what do you typically pay in fees or a percentage for the management service? I have some family who are considering renting out their beach house on Cape Cod MA by the week during the summer and they want to get an idea for what they should expect to pay and what that fee gets them.

If they list on Vrbo and airbnb, get a great cleaning service, then they can easily self manage and pocket what they otherwise would have paid a PM.

With technology now you can self manage for less than 1/2 hour per week. I’d at least consider it when starting out. You can always bring a PM on if it doesn’t work out. Just get a good cleaner and decent handyman and you’re set. Especially if it’s just one property.

Contrary to what @Luke Carl is suggesting it is far from a "do it yourself or lose money proposition." Rates range from 20-35% depending on market. I'm in Atlanta so 25-30% is what I see. Of course everybody likes to bash professional management as some waste of money but none of these guys is apparently worth much or else they would value their own time and factor that in. I can also assure you that an STR will take more than 30 min. per week of oversight although that would be nice.

I'm clearly biased but I can assure you a professional can do it cheaper, faster and better than you can every time. The same reason why I pay someone to cut my grass and change my brake pads. They can do it cheaper, faster and better than i can do it. They have the tools, the know how and the experience. 

All that being said I actually agree that for one unit you probably should try and manage it yourself just so you get a full understanding of the business and all that it entails. There is MUCH more to it than it first seems.

Originally posted by @Robert Gilstrap :

Contrary to what @Luke Carl is suggesting it is far from a "do it yourself or lose money proposition." Rates range from 20-35% depending on market. I'm in Atlanta so 25-30% is what I see. Of course everybody likes to bash professional management as some waste of money but none of these guys is apparently worth much or else they would value their own time and factor that in. I can also assure you that an STR will take more than 30 min. per week of oversight although that would be nice.

I'm clearly biased but I can assure you a professional can do it cheaper, faster and better than you can every time. The same reason why I pay someone to cut my grass and change my brake pads. They can do it cheaper, faster and better than i can do it. They have the tools, the know how and the experience. 

All that being said I actually agree that for one unit you probably should try and manage it yourself just so you get a full understanding of the business and all that it entails. There is MUCH more to it than it first seems.

 I own 11 million in real estate and have 5 property managers. Just not on my short terms which gross 110k this month. But what do I know. 

@Kevin Hutchens

I’m very much not a one size fits all person. What works for me may not work for others and not everyone is wired the same way so personality plays a part.

That being said I self-manage. On average, we probably spend 30 mins per week on our property. We’ve built some great systems (by trial and error) to get it to that amount of oversight. There are weeks that we do nothing at all and don’t hear a word.

I don’t fully agree that a professional can do it better. That also is a generalized statement. We know how other owners in our area struggle with bookings, bad reviews and navigating STRs as they use “professionals”. I believe nobody will take the same ownership as …well….an owner.

I also don’t think you can’t make money using a PM, but you may make less. If you’re not wired to handle managing on your own, a PM is a great way to go. Another option to consider is partnering with someone. I’ve got 2 STRs where my partner does the day to day management while I’m boots on the ground to find deals, and check in occasionally on the property. All has worked well, we split profits and self-manage.

Hope that helps.

Before even considering a Property Management company for your STR, I would highly recommend leveraging a property management site such as YourPorter or SmartBnB, and then scale up your STR business based on how that works for you. If you find a solid cleaning service, they can be very a reliable "boots on the ground" team member and you can certainly spend less than 30min per week remotely managing that one property yourself.

-Ben Scarborough

I only own $2.3 million so I’m not on @Luke Carl level but I definitely agree with him. If you treat it like a business you can easily make up for the 20-35% property management fee even if you aren’t as efficient.

What's kind of lost in this debate is that not only do property managers charge their 30%, but they're unlikely to generate as much top-line gross revenue as a motivated self-manager.

We took over a cabin last year managed by property manager. It grossed about $3K per month, and netted $2K per month. The last owner was happy because it mostly covered her bills. With us now the cabin grosses $5.5K per month and also nets the same amount because we're self-managing. The difference in the net is $3.5K per month! 

The difference was we obsessed with improving lots of little details from the interior design to photography in a way that a manager won't (or can't because they don't own the place and are limited in their changes). All in the changes we made cost about $5K. Plus we're super hosts and the property management company is not.

That said, self-management isn't for everyone so I often recommend using a property manager if people are fine just getting a little extra income to cover property taxes and such. Self management takes a lot of mental energy and not worth it for everyone.

I hate that this has turned into another self management debate.  The pros and cons of each have been discussed ad nauseum and no one is changing someone else's mind. 

As for management fee splits, this is one of the most misunderstood concepts in this industry.   Even if you self manage, you are not paying nothing to do so.  You're probably paying 7-8-9 percent to VRBO or Airbnb for the booking, and another 3 percent for the credit card fees.  So you're pretty easily at 10-12 percent just doing it on your own. 

Many companies advertise seemingly low management fees - 15 to 20 percent, and you think you are getting a good deal.  What they don't tell you is that they are charging booking, reservation, and "marketing" fees to the tune of 10 percent or more of the reservation, and they don't share that with you.  This is called rent shifting.  Essentially, your rents are held artificially low, so that the management company can tack on their own fees and the total comes out to something that sounds reasonable.   This goes on ALL THE TIME.

If a management company is advertising an 80/20 split, THEY ARE GETTING A LOT MORE MONEY FROM YOU SOMEWHERE ELSE, GUARANTEED. 

I am unable to provide a link in this text, but if you will go to youtube.com and type in the term "vacation rental companies exposed", the first video explains this in great detail.

I'll use an example of my most time consuming property.  I'll go ahead and factor in the roughly 30 minutes a week (probably a lot less actually) it takes to manage my 4400 square foot lake cabin (I mean last week I did have to text a plumber and hit a button to pay him from my phone so that was rough).  For the month of June I grossed about 15k.  If I were to pay a PM 35% of my gross rents that would be around 5k.  I agree my time is worth a lot, but I don't think I'm at a point where it's worth more than 2500$/hour.  

So no...a "professional" can not do it cheaper, faster, and better than me.  The every time quote is hilarious.  

I'm with @Luke Carl on this; I love my PM for my 75 long term rental units, but I'll just go ahead and bite the bullet keep losing money on my short term rentals self managing.

Seriously- get your systems up and running and it takes little to no time.  

Thank you everyone for your option on Self Managing vs PM for a STR, it wasn't the question I asked but still very interesting to hear everyone's stories. We are considering both and there are pros and cons for both and a lot to consider before we choose.

Does anyone else have any more information on what percentage they pay their PM for STR? From the comments above I'm seeing 15-35%. Obviously it varies by services offered and area. We spoke with a management company yesterday that charges 40% and that seemed high which is why I asked the question here on BP.

Does anyone have experience renting on Cape Cod or any beach community in the mid Atlantic / Northeast that would like to share who they use and roughly what they pay?

Originally posted by @Kevin Hutchens :

Thank you everyone for your option on Self Managing vs PM for a STR, it wasn't the question I asked but still very interesting to hear everyone's stories. We are considering both and there are pros and cons for both and a lot to consider before we choose.

Does anyone else have any more information on what percentage they pay their PM for STR? From the comments above I'm seeing 15-35%. Obviously it varies by services offered and area. We spoke with a management company yesterday that charges 40% and that seemed high which is why I asked the question here on BP.

Does anyone have experience renting on Cape Cod or any beach community in the mid Atlantic / Northeast that would like to share who they use and roughly what they pay?

 I was actually looking at a property on Cape Cod pre-COVID and the PMs that I talked to were charging 50 percent.  

Originally posted by @Kevin Hutchens :

@Collin H.

50% is way too much, we would self manage at that point.

Can't disagree with that.  Here is the rub with Cape Cod:  You basically have 13 weeks per year maximum to rent a place.  So unless you are buying a place there for other reasons - a family retreat or the hope of future price appreciation - the income numbers aren't too good - you simply don't have enough rent-able days in the year to view it as much of an income investment.  

That said, I absolutely love Cape Cod, and I love Cape Ann up the road even more!

 

@Kevin Hutchens

After 40 years in the real estate business, I can conclude this as a GENERAL statement (exceptions do exist)

A landlord will do better from a cost, efficiency and customer service experience to engage an INDIVIDUAL as a property manager ( one who is experienced, honest ) and take the time to train him well and provide him with systems you want him to use, rather than hire a PM company.

Most times I engaged a PM company my returns were below forecasts, my problems were more severe and handled in a less timely manner, and my aggravation level was high.

Most times I engaged an individual as a property manager, my returns were at or above forecasted levels, with only minor issues, and a lot less hassle.

I’m sure there are many exceptions and many quality PM companies out there, I have just not experienced them

Do you invest money in the stock market, retirement accounts, 529, IRA's, after tax accounts or just real estate? In the stock market, you can pay someone to choose your funds for you, "manage them" (hold your hand when it goes through its down cycle) or not. Or you can self manage and choose a target date fund. Or you can claim you don't understand any of it or don't have the time to manage it or the knowledge or the ability to learn (you can learn in under an hour how to pick high performing funds with low expense ratios). But people are …. unaware of how the game works, how easy it is, how much expense ratios cost and especially how much a seemingly small 1 or 2 % management fee compounds to really be, to the tune of hundreds of thousands of dollars over a few decades. Or, they don't care. Most of the time, they just want someone else to blame, other then themselves.
STR managers is know different, from what I'm reading. You have the lowest 80/20 split plus rent shifting and the higher 70/30 split. Both are designed because people are….unaware of how the game works, how easy it is, how much management is costing them and how the compounding costs add up. Or, they don't care. Most of the time, they just want someone else to blame, other then themselves.
In both cases, there is a willing customer and a willing service provider. Neither are right or wrong. Time spent managing is debatable but there is a cost for one’s time. The more you learn, they more you know. The more you know, the more efficient your systems are. The more efficient your systems, the less time it takes. The less time it takes, the less costly it is. 

Originally posted by @John Underwood :

If they list on Vrbo and airbnb, get a great cleaning service, then they can easily self manage and pocket what they otherwise would have paid a PM.

 It was pouring down rain last night at 11:30pm and I got a call from my guest.  Water was coming down through the ceiling fan in the bedroom.

Let's just say...a PM has its perks sometimes! ;)

Originally posted by @Alex S. :
Originally posted by @John Underwood:

If they list on Vrbo and airbnb, get a great cleaning service, then they can easily self manage and pocket what they otherwise would have paid a PM.

 It was pouring down rain last night at 11:30pm and I got a call from my guest.  Water was coming down through the ceiling fan in the bedroom.

Let's just say...a PM has its perks sometimes! ;)

 The PM isn't going over to fix it. They are just going to make a call. You can just make that call.