How Much Do Property Managers Charge For Vacation Rentals

When starting a vacation rental business, one of the important things to look out for is how much property managers charge for vacation rentals.

It’s important to understand what property management fees to expect and what services they cover. The types of fees that you will pay to a manager or property manager company will vary based on several factors.

To help you make the best decision for your rental business, we cover all the essential details about vacation rental property management fees in this article.

Read more: How To Start a Vacation Rental Business: Complete Guide

Vacation Rental Fees

Vacation rentals come with several management fees that a rental owner pays to a property manager to cover the costs for the management services they provide for your rental.

These fees are more or less unavoidable as they could include booking management, guest communication, onsite maintenance, onsite maintenance, and many more services that you as a vacation rental owner may not be available to handle 24/7.

These services This is usually a monthly payment made to the property manager, based on a certain rate.

Vacation rental property management fees could vary based on factors such as location, investment property size, property condition, number of units in each property, number of rental homes managed, and the services offered.

It also varies based on whether you’re hiring a property manager only or leveraging the use ofproperty management software (PMS).

The best way to know what you should be paying for your property management and if that price is worth it is by understanding what influences affect property management fees and how they will affect your profits.

What Are The Common Fee Structures for Vacation Rental Management?

As mentioned earlier, vacation rental management fees may vary based on many factors but, generally, there are three popular models that managers use to calculate their fees.

The three common vacation rental management fee structures are as follows:

Guaranteed Income Model

In this model, the property manager pays a fixed monthly amount of money to the homeowner irrespective of whether the property has few or no bookings.

This means that the property owner gets a fixed guaranteed ‘passive’ income all year round and even when their property makes an excess of the agreed rate, that excess goes to the property manager and not the property owner.

The pro of this model is that it is safe and as the property owner, you know you will be getting a certain amount irrespective of if your property is doing poorly for some time.

The con is that even when your property is flourishing, you’re stuck receiving the same amount, and if this goes on for long, one could even feel like they’ve played themselves.

Fixed-Rate Model

The fixed-rate model is the flip side of the guaranteed-income model. In this model, the property owner pays the property manager a monthly flat fee.

This fee remains the same regardless of the number of bookings the property has in a month. Whether business is booming or sinking, the property owner must pay the agreed-upon amount every month.

The pro of the fixed-rate model is that during the high seasons you will pocket all profits made and this profit is usually way more than any vacation rental property management fees you will have to pay.

The cons of this fee model are there are often additional management fees on top of it that push up the final price. Also during, low seasons, it can be difficult to maintain paying the monthly fee.

Commission Model

Perhaps the most common fee model is the commission model which works on a percentage-based commission that the property owner will pay to the property manager monthly.

The commission rate varies across property managers and while negotiating the percentage, make sure to confirm if the percentage includes or excludes any additional fees that you need to pay in the future. This could be the final determinant of whether this model will work for you or not.

The benefit of the commission model is that the monthly fee you pay will be directly based on the amount that your rental made for that month.

The only downside to this model is that as your business expands, so do your property management fees. This is something to take into consideration when deciding whether to pay by commission or not.

What Is The Average Vacation Rental Property Management Fee?

Based on your chosen fee model, your property type, location, and a handful of other factors, it’s difficult to pin down the average vacation rental property management fee to any actual value.

For commission-based, the more commonly observed range is between 20% and 40% of the monthly rental income.

Urban rentals tend to have lower management fees in comparison to other locations such as beach rentals and mountain rentals. It is usually as low as 20% to 25% of monthly rental income.

For the fixed-rate and guarantee-income fee structures, the average is mostly based on your property type, location, and monthly revenue. The fixed rate usually falls into the range of 30% to 40% of monthly income.

When Are Vacation Rental Management Fees Worth It?

The alternative to hiring a property manager is to manage your vacation rental yourself. For many vacation rental owners, hiring property managers has been beneficial and the fees have proven to be worth it but, the case might be different for you.

If you fall into one or more of these categories, then vacation rental management fees are worth it for your business

When The Value Matches Up To The Money

When considering whether to hire a property manager, you must compare the services being offered to the fees being requested. Also, you must evaluate how those services contribute to your net revenue.

A property management company that offers value for money is most likely offering a plethora of services that normally would be difficult for just anyone to navigate. In truth, they are doing what you may not be able to do by yourself if you choose to self-manage. Some property managers can even help you earn more money than you would through self-management.

When You Are Unavailable

Managing a property is a full-time job on its own. If you have a full-time job, live far away from your property or simply have a busy schedule, you will most likely be unavailable to handle the day-to-day duties associated with owning a vacation rental property.

If you’re in this category then, hiring a vacation rental property manager to take care of your property will be worth it.

When You Don’t Want The Stress

One of the major benefits of getting a property manager is the peace of mind that it comes with. Think about all the daily struggles of managing bookings, maintaining the property, handling complaints and so much more.

If you want to be completely hands-off, the peace of mind that comes with hiring an all-service property manager may be worth every penny.

When You Own Multiple Vacation Rental Properties

If you own multiple vacation rental properties, getting professional property management is inevitable. It may be difficult to manage several properties on your own and you’d be spending a lot of time and money and probably losing out on a lot of potential profit.

In addition, vacation rental property management software like Booking Ninjas centralizes all the operations of your multiple vacation homes and helps maximize your profits.

When You Have No Property Management Know-How

Hiring a property manager is essential when you have no property management expertise. Insisting on self-management when you have little to no knowledge of how to manage your vacation rental property can lead costly mistakes that can reduce your revenue or even crash your business.

When You Are Unable To Work

For various reasons such as health challenges, disabilities, or personal circumstances, you may be unable to handle the property management duties. In this case, hiring a professional property manager will come in handy.

What Services Are Included In The Vacation Rental Property Management Fees For My Listing?

To determine if the amount property managers charge for vacation rentals is fair, it’s important to know what services are included in the flat management fee and what services are add-ons that come with extra charges.

The monthly fee may include the following services:

Marketing Services

Thanks to many years of experience and a deep understanding of how the market works, vacation rental property managers know the best way to market your property and attract ideal guests to your vacation rental.

Marketing services are usually part of the flat monthly vacation rental property management fee but, some managers may offer it as an add-on service.

Marketing could cost you a lot of money and it could be a wasted effort if you’re not marketing right. If this service is offered by your property manager irrespective of the additional cost it brings on, it could be a wise investment for your business.

Cleaning Services

Hiring a cleaning service for your rental is one of the basic things you deal with when you want tostart a vacation rental business. However, some vacation rental managers may include cleaning fees in their monthly rate meaning you won't have to pay for cleaning services separately or even have to directly relate with them.

Some property managers charge the cleaning fees directly to the guest or provide it as an add-on service. Make sure you enquire how the cleaning fee is structured and how it will be paid, before hiring the manager.

Maintenance And Repair Services

Maintenance and repair fees are usually included in the monthly vacation rental property management fees. This should not be offered as an additional service but, included in the standard fee unless you have alternate plans to handle impromptu repair needs coming up on your property such as fixing a broken pipe or repairing furniture.

If you choose to pay for maintenance fees as part of your vacation rental property management fees, make sure you find out if they have their maintenance team or if they outsource, and if the fee covers all necessary repairs for the month.

Keep in mind that a property manager might quote you a very low monthly fee, but then provide a list of separate fees charged on top of their rate thereby resulting in a high amount at the end of the day. Therefore, you should always find out if the monthly fees are inclusive of all services or not.

Should I Hire A Third Party To Run My Vacation Rental Business?

Regardless of the endless benefits of hiring a property manager to run your vacation rental, there are particular situations and the decision is not always best for every vacation rental business.

Your decision should also be influenced by how much time you can devote to managing the daily operations of your business. If your vacation rental is seasonal for example and you only have to think about management during the holidays in which you’d be present then, hiring a manager might be of less importance.

Your rental goals should also influence your decision about hiring a manager. What is the annual occupancy rate you are aiming for your rentals? If you have goals to have guests all year and yet, your listings are vacant, then hiring a manager to oversee all operations and help you maximize profits would make more sense.

Read more: How To Manage Vacation Rental Property

Vacation Rental Management Companies

Vacation and short-term rental management companies handle all the logistics associated with renting out your property. Most property owners get their property managers through a property management company.

A typical breakdown of services looks like this:

• Customer Relationship Services
• Marketing and Promotions
• Booking guests
• Collecting payments and deposits
• Staying up to date on and ensuring compliance with local legislation and community bylaws
• Operations services
• Managing cleaning service/housekeeping
• Scheduling maintenance, landscaping, pool cleaning, and other vendors
• Security oversight
• Customer experience, from check-in/key handover to handling emergencies such as storm and food preparations.
• Property Inspections, pre-and post-stay

Putting your property in the hands of a vacation rental management company with years of expertise and tools is safer than hiring a stand-alone property manager especially if you own multiple properties.

Hiring A Vacation Rental Management Company

When you are looking for a management company to hire, there are effective ways to begin your search and locate competent companies with ease.

Rather than just looking up companies on your search engine, you can:

• Ask your local tourism office or chamber of commerce.
• Ask other landlords for the name of a company they like and trust.
• Ask your homeowners' association (HOA) for recommendations of companies that they trust
• Ask neighborhood business networking groups or local Facebook groups for what companies are doing business right in the community.

Here is some vital information to find out from the companies to determine if they are indeed right for your rental:

• Ask them for references from existing clients.
• Ask for specifics of their marketing strategy such as which travel agencies (OTAs) and platforms they advertise on
• Ask about their pricing strategy.
• Ask them about their standard packages and pricing structure. Understand what is included and what is deemed an add-on.
• Review standard contracts to see what you'll be locked into if you engage a company.

Heading 3: How Do Vacation Rental Management Companies Charge?

Vacation rental management companies' charges can fall anywhere in the 20% to 40% range, with the industry average ranging between 25% and 30% of rents collected.

Management companies with a range of services that include CRM and operations may offer a combination where they get paid a flat minimum plus commission on bookings they secure.

Many management companies require that an agreement/contract be in place engaging the management company for one year, with a clause to terminate within 30 days if services are not satisfactorily performed.

The contract allows owners to see a breakdown of what they're paying for, including commissions on bookings and how those are calculated. Getting familiar with the terms of your contract will save you from getting stuck in a contract with a bad property manager that loses you money.

Keeping Vacation Rental Management Fees Low

In recent years, the vacation rental industry has seen a surge in activity with the development of new software. According to research conducted in 2020,81% of property managers use a PMS to take care of their day-to-day operations. Homeowners are gravitating towards the use of property management software (PMS) and they are reaping the financial benefits.

The most effective way to keep vacation rental property management fees at a minimum is by using vacation rental software to handle your properties for you. Even the vacation property management companies you hire still use these applications anyway.

Vacation rental software likeBooking Ninjasmakes managing properties easier, especially for owners with multiple properties. These applications sync all your property bookings and reports, offer a channel manager for managing your listings, automate check-in/out, and many more.

Through this vacation rental property management software, you can manage your vacation rental from anywhere in the world with your mobile phone or your computer.

Conclusion

As the property owner, you should understand all the recurring fees that might be associated with hiring a property manager or a management company to run your vacation rental.

Whether you choose to hire a third party to manage the day-to-day operations of your vacation rental or you choose to handle it yourself, we hope this breakdown of vacation rentals management fee structure will help you feel more confident and in control of your money and the well-being of your property.

If you decide to manage your property yourself or with your current staff, our vacation rental PMS can help make management easier and put you in further control of the operations of your vacation rental.

Schedule a demowith us today to find out more about how Booking Ninjas PMS can work for you.

References

1. “Property Management Fees For Vacation Rentals.” Lodgify Blog, 14th March 2022. Accessed 07 April 2022.
2. “How To Start a Vacation Rental Business: Complete Guide.” Booking Ninjas, 03 Apr 2022. Accessed 07 April 2022.
3. “How to Find the Best Vacation Rental PMS for Business Growth” Rentals United, 22 October 2020. Accessed 07 April 2022.