Making money with Airbnb rentals is becoming increasingly popular with many investors all over the world. Currently, there are more than 7 million listings worldwide, covering over 100,000 cities. Airbnb properties can be condos, single rooms, multi family homes, houseboats, yachts, and even tree houses. Since rent is charged on a per night basis, an Airbnb return on investment is usually higher compared to traditional rental returns.
In our video below we discuss 20 tips to optimize the ROI of your Airbnb property:
Speaking of return on investment, the costs of managing an Airbnb differ from those of managing a long term rental. So if you are thinking of investing in an Airbnb rental property, take time to consider the cost of management. Unless you are planning to manage it yourself, you will need to hire a professional property management company to do the work for you. To help you get started, we will break down common Airbnb property management fees and outline a few key points you should know. This will help you decide if they are worth it.
Property Management Fee Structures
When it comes to Airbnb property management fees, there are two common fee structures:
- Fixed-rate fees – Some Airbnb property management companies charge a flat rate for a specified set of services. This fee does not vary depending on the number of nights the rental is booked in a month. For instance, you could be charged $400 a month as the average Airbnb property management fee for handling cleaning and booking. The great thing about this fee structure is that you can make a good profit during the high season. However, these companies are also likely to charge you extra Airbnb property management fees on top of the fixed monthly payment for additional services such as maintenance, marketing, and check-in. If you opt for this kind of fee structure, be sure to read the contract carefully and negotiate to get some of these additional services included in the monthly payment.
- Commissions – In this model, the company will take a percentage of your monthly earnings. The charges will depend on the rental property’s location, as well as the services being offered. Generally, the Airbnb property management fees could be anything between 25-50% of the rent collected. Be sure to negotiate with the property management company to have as many services as possible included in this fee structure.
A Breakdown of Common Airbnb Property Management Fees
Here is a breakdown of specific property management fees to consider before renting out on Airbnb:
1. Initial setup fee
When setting up an account with the company, some property management companies will charge you a registration fee. This fee might include costs for paperwork, initial advertising, and inspecting the condition of your Airbnb rental property.
2. Tenant placement fees
If the property management company is responsible for finding tenants for your Airbnb rental property, they will charge you a tenant (guest) placement fee. This fee could cover advertising costs and tenant screening, as well as check-in and check-out procedures. This could be a percentage of the rent or a flat fee.
3. Vacancy fee
The Airbnb property management agreement could have a clause that says a fee will be charged for vacancies. This could be a fee per vacant unit or a one-time fee that is paid upfront.
4. Maintenance fee
Airbnb property maintenance involves tasks such as:
- Checking if the carbon monoxide detectors and smoke alarms are working well
- Ensuring that there are no bare wires hanging around the house
- Repairing anything that guests have damaged
- Ensuring the Wi-Fi is working
- Checking if the water system is working everywhere – in the kitchen, the bathroom, and the shower
- Making sure the heating and air conditioning systems are in good order
As an Airbnb property owner, you need to understand the company’s maintenance process. Here are some of the questions you need to ask the Airbnb property manager:
- Does the company have an in-house team?
- What is their turnaround time for a basic repair job?
- What maintenance issues do they have to outsource?
- Is there an emergency number that guests can call?
- When would they need to consult you as the owner?
Asking these questions will show you if the Airbnb property management fees being charged are justifiable.
5. Cleaning services
Your cleaning fees will vary depending on the size and location of your rental. While some property management companies include cleaning fees in their fixed rate, others charge it separately.
When analyzing cleaning fees, here are some factors you need to consider:
- What exactly is included in the cleaning fees?
- How long does it take?
- How good is the cleaning?
- Are there check-lists in place?
- Will you be able to get the rental cleaned between guests without losing bookings?
What Will You Pay for Airbnb Property Management?
Above, we have provided a general breakdown of fees. But the Airbnb property management fees you will incur in running an Airbnb business will be influenced by the following factors (among others):
- Size of the rental – It is obvious that managing a bigger Airbnb investment property is more demanding than managing a smaller one. As a result, the Airbnb fees charged will be higher.
- Type of property – Airbnb property management fees will vary depending on the type of property – apartments, condos, single family homes, multi family homes, boathouses, etc.
- Location of the rental – If your property is located in a neighborhood where rent is high, the Airbnb property management fees will also be high.
- Condition of the property – In case your property has many maintenance issues, you are likely to pay more in Airbnb property management fees.
- The extent of services – Airbnb property management fees will be determined by the number of services being offered. For example, if you only want the company to deal with check-ins and check-outs, you will pay less than someone else who wants the company to advertise the property, screen guests, collect rent, handle repairs, and keep financial records.
Are Airbnb Property Management Fees Worth It?
Before purchasing an Airbnb investment, you should have a way of determining how much of an impact property management fees for Airbnb will have on your cash flow and ROI. That is the best way to determine if Airbnb property management fees are worth it.
Mashvisor’s Airbnb profitability calculator will help you estimate Airbnb income and expenses. You will find Airbnb analytics such as Airbnb rental income, Airbnb occupancy rate, Airbnb cap rate, and Airbnb cash on cash return. In addition, the calculator will show you the recurring monthly expenses such as property tax, insurance, maintenance, and management. Best of all, Mashvisor’s Airbnb calculator will provide the expected cash flow from owning an Airbnb property.
To start your 7-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
Because professional property managers can help you earn passive income and even boost your Airbnb occupancy rates, if their fees also allow for positive cash flow and a high ROI, then they are definitely worth it!
Want to become an Airbnb host yourself? Check out our 2020 guide.