Investing in real estate is a huge financial decision, one that you need to be confident is going to pay off.
Vacation rentals are becoming increasingly popular as a real estate investment strategy. Not only do they generate rental income, but if you buy property in a major tourist destination, there’s a strong likelihood that your home will appreciate in value.
On the surface it sounds simple, but there’s a lot of work that goes into managing a successful short-term rental. You have to find tenants (i.e., guests), collect rent, manage a full calendar of bookings, maintain the property, provide customer service, handle turnovers, etc.
If you already have a full-time job, you probably can’t afford to spend hours each day handling the duties associated with renting out your second home.
The good news? There are plenty of property managers out there who can help.
The bad news? Many are happy to take your money without working too hard to make your property profitable.
As long as their bills are paid, many property managers are satisfied with delivering status quo results. Finding a manager who’s actually committed to making you money is like finding a needle in a haystack. You really need to dig in and make sure they’re equally as committed as you are to maximizing your rental income.
Here’s what you should be looking for when you’re thinking about hiring a vacation rental management service:
Look for Low Commissions and Transparent Management Fees
Most traditional property managers charge a commission fee that ranges between 25% and 50%, which means you’ll be giving up one-quarter to one-half of your rental income every time you get a booking.
Depending on the services you’re looking for, it might be worth it to pay a premium. An all-in-one luxury property manager that handles all the marketing, bookings, cleaning, maintenance, guest services, and management will give you the freedom to be completely hands-off. If that’s what you want, the peace of mind may be worth every penny.
But if it’s not in the budget to hand over half of your earnings to a management service, don’t worry.
There’s a new generation of vacation rental management services, like Evolve, which charge lower fees and offer increased flexibility. With Evolve rental management, you pay a 10% booking fee and have the freedom to choose which on-the-ground service providers you want to use and how much you want to pay for them.
Also keep in mind that on top of booking fees, some property managers charge sign-up costs or add on additional charges outside of the booking commission.
Unexpected management fees are among the top pain points for vacation rental owners who use traditional property managers. Because the fee structure isn’t transparent, they end up receiving a lot of mysterious charges that eat into their bottom line and make their investment unproductive.
As you hunt for a vacation rental management company, it’s important to find out exactly what you’re paying for and why, so you can avoid paying for extras you don’t need or missing out on services you want.
Look for Flexible Contract Terms
It’s standard practice to sign a year-long contract when you sign up with a traditional property manager. That works out well if they meet your expectations for rental income, but it leaves you in an uncomfortable position if you they aren’t delivering the results you’re paying them to provide.
Seek out a management service that gives you the freedom to leave if you aren’t satisfied. Those are the kinds of companies that will continue to work hard to earn your business – because they need to.
Also inquire about any other terms that can affect your vacation rental’s bottom line:
- Are you allowed to use the property whenever you want?
If not, you might not be able to reap the benefits of owning a home in an area that you love.
- Are you required to purchase specific supplies for the property?
If so, you might end up having to spend a lot to stock up on expensive towels and sheets for guests to use. We don’t think you should skimp on these supplies, but you should have the freedom to choose what you want to save or splurge on.
- Do you have to use a cleaning or maintenance company that charges a premium?
If a property manager requires that you use their preferred cleaning or maintenance company, know that you might be paying a premium to have basic services performed at your property.
Flexible vacation rental management services let you choose housekeeping and maintenance services that work for you – as well as the freedom to leave them if they don’t work out. They understand that you have a bottom line to meet and will do everything in their power to help you make your investment pay off.
Look for an Impressive Marketing Approach
Bookings are how you make money with your vacation rental property, so they’re crucial to the success of your real estate investment.
To get as many bookings as possible, hire a management company that has expertise in vacation rental marketing.
A property management company that’s worth its weight will put your vacation rental on major listing sites like Airbnb and VRBO. They know it’s wise to invest in this kind of promotion because it makes it easier to reach guests who are looking for accommodations and greatly increases your potential to earn rental income. More money for you means more money for them.
Avoid property management companies that only list your property on their own websites and local listing sites. No matter how big of a following they have in the area, they’re going to struggle to get you as many bookings and rental income if they’re not on the major listing sites.
Beyond bookings, find out what they do to make sure you’re successful:
- Do they help you solicit reviews from guests after they check out, so your property performs better on listing sites?
- Do they offer a dynamic pricing strategy to maximize your rental income throughout the year?
These can be game-changers when it comes to your performance on listing sites and take your property from the break-even point to profitability.
Evaluate the Costs Before Hiring a Property Manager
The fact is that vacation rental management costs don’t have to drain your investment property’s value. As the vacation rental industry has evolved, so have the options for property management.
You can now find property managers that help you earn more money and pay for themselves.
But you’ll also find others that continue to play by the old rules and are happy to take your money while delivering sub-par results.
It’s up to you to find a property manager that pays for itself and helps you reach your financial goals. If you want to maximize the return on your investment, find a partner who has a fee structure that works for you, terms that enable you to leave if it’s not a good fit, a marketing strategy that’s going to generate the maximum bookings, and a forward-leaning approach to vacation rental management.
This article has been contributed by our friends at Evolve Vacation Rental Network.