All Forum Posts by: Collin Hays

VRBO’s market maker is a wonderful tool for self managers!

Disclaimer:  I think the Corona Virus thing is a bunch of fake news.  It's no more deadly than the common cold.

That said, with all of the media hoopla about it, are you seeing any impact on your STR reservations? We are not; in fact, March is shaping up to be a record month for nights rented.

25% is fair.

We have been in business for since 2011 and manage approximately 30 properties.  I can count on one hand times that we have needed to charge a guest extra for things missing.  That's tens of thousands of guests.  Deposits and insurance do nothing but chase prospective guests off.  Yes, you might get $50 from VRBO (although unlikely) if they break a lamp, but how many reservations did you discourage in the process?   Guest don't like these fees.  They add significantly to the cost of the vacation and there is an underlying suspicion that they will lose their deposit.

The whole concept of deposits and insurance with STRs is penny wise, pound foolish. Quit focusing on the little things like dunning someone for a replacement key and spend your energy trying to rent your STR. Your bank account will appreciate it.

This was very likely a fraudulent claim, but if an insurance company has potential unlimited liability and is afraid the matter might go to court, they will settle almost always.  Juries don’t treat insurance companies kindly.  They are always the bad guy.  

A $250,000 check was cheap.  

As we found out, lawsuits are very real, and very expensive.  

Oops I forgot that small detail.  ;)

Our PM commercial insurance paid.

We just settled a claim for $250,000 on a slip-and-fall at a property we manage near Gatlinburg.  A guest claimed that she slipped on one of the stairs leading up to the cabin, fell down, and broke her leg.  It was all highly suspicious, but here are a few nuggets that I can share from this 18-month ordeal:

- Initially, the claimant sued the homeowner and my management company, but they later dropped their suit against the homeowner.  I suspect it is because the homeowner didn't manage the property and/or the claimant's counsel felt that my property management company had deeper pockets.  Who knows.

- You can put anything you want in a rental agreement, but you can't indemnify yourself by saying "you're on your own at my house, tough luck."  That just doesn't work in the courts.  I don't care what you have in your rental agreement, if it appears that you may have been negligent in some way, that rental agreement isn't worth what it's written on.  MOST LAWSUITS ARE GOING TO CLAIM EITHER NEGLIGENCE OR GROSS NEGLIGENCE, AND A RENTAL AGREEMENT DOESN'T CHANGE THAT.

- This slip and fall occurred during the rain supposedly, and the steps were wood.  Wood gets slippery when wet.  Not sure what we could have done, other than those strips of sandpaper tape you put down for traction.

- This was an arduous and stressful ordeal. Yes, we had insurance and the insurance co., settled and paid, but heck, you never know what could happen in the courts system - we could have been sued for everything we own.

If you are self-managing, here are my takeaways:

1.  Yes, a rental agreement is important, but don't count on it saving your arse.  It won't.

2.  Do a thorough risk management analysis of your home. Check the obvious things.  Smoke detectors, carbon monoxide detectors, well-lit stairways and entries, timer switches on fireplaces, updated outlets in the bathrooms and kitchens to prevent electrocution, etc.   It would be worth your while to have a risk management person come out and do a walk-around.

3. Carry the maximum limits on your short term rental policy. And that has to be a commercial policy. If you are managing a STR with a standard homeowners policy, you've got lots of hiney showing. Get that fixed asap.

4.  Carry an umbrella policy on you personally.  These are cheap and add a layer of protection.

5.  If you have a claim, get the insurance co. involved IMMEDIATELY.  Anything you say or do before then can and will be used against you, I assure you.

6.  Using a property management co. reduces your exposure significantly, at least it did in this case!! :(

7.  Your insurance might or might not cover the claim.  Trust me, they will do anything in their power NOT to cover the claim.  If you are found to be guilty of gross negligence, you might be getting ready to write a check.

We outfit our cabins with the luxuries folks are used to back home, plus some extras for novelty and entertainment.

Generally, we stick with full-grain leather in the seating areas.  It is expensive for sure, but it's the easiest to clean and most sanitary, and lasts for a very long time. 

Most of our kitchens are stainless steel appliances, and we always have a full array of cooking utensils.

Large, flat-screen TVs, WIFI, full cable, and board games.

A pool table is always a bit hit, but a cocktail table "multicade" will probably do just as well.  One of our cabins has a 900 square foot basement game room with pool table, ping pong, and air hockey.  Guests love it!

Hot tubs are a must. 

We also have wood floors and persian rugs.  Again, pricey, but they look good and last virtually forever.

 I agree.  It all depends on what your time is worth.  I used to change my own oil and mow my lawn, as well as iron my own dress shirts.  There is certainly extra yield in self-managing, although I think it is overstated.

Today, I spoke on the phone with a gentleman from Miami FL about his cabin in Gatlinburg.  It's 2700 square feet and sleeps 8, and quite luxurious.  He has been self-managing for several years and he said he didn't want to give up 25% of his proceeds.  But as it turns out, his cabin is only yielding about $31,000 a year, about half of what it should.  He said he had zero nights rented in January or February. I said "tell you what, would you rather pay me $15,000 to manage it and put $45,000 in your bank account, or would you prefer to keep making your $31K on your own?   

Easy decision for him.  I have no idea why his cabin is under-performing - he may have it priced too high, he may be slow in responding, the name may be a poor one - any number of things. But he's not managing it as it should. Every now and then, we have a homeowner client calling in to express concern over "how cheap" or "how expensive" their rental rate is online, or some other operational concern.  I tell them "Look...this is all that we do.  We've rented cabins for 10 years now and know what works and what doesn't. Relax and let us do our job."  

Whether you want to use a PM is really about whether you want a part time job. If you are going to manage your own STR, it's a part time job.

I own a PM, yet I encourage folks to self manage for maximum returns.  On the other hand, most of our clients have previously self-managed. We usually far outperform their results, simply because we have the time to respond to inquiries, questions, and calls for repairs within an hour.  

If you are not quick to respond as a self manager, then you are likely giving up far more in lost rents than what you are keeping in saved management fees.  

And if a PM is charging 25%, you aren’t saving all of that 25% to self manage.  You are going to give up at least 3 points for Airbnb commission.  If you advertise on VRBO you’ll be giving up a minimum of $599 a year for that.  And the CC fees charged by Airbnb and VRBO are atrocious.  

So your savings is probably more like 18-20 percent to self manage.  If that amount is worth your extra time and you are committed to being available for fast responses, you should go that route.