If you're new to the vacation rental industry, one of the first decisions you'll need to make is how you plan to manage it from afar. There really are just two primary ways to do it- hire a professional vacation rental management company or do it yourself. In most vacation destinations, there will be no shortage of professionals waiting with hands out to take your money and control of your property.
If you're looking to be pretty much hands-off and let someone else do all the work, your best bet is to hire a management company so you can just sit back and collect the checks. You buy the property, hand it over to a group of vacation rental "professionals", let them do the advertising to get it booked, and you get paid. They'll handle all of the guest communication and any issues that arise during the guest stays. They'll also coordinate the cleanings and restocking of supplies, i.e. paper towels, toilet paper, soaps, etc. You won't have to worry about maintenance and repairs either. Because the management company will take care of that, too- but at an additional cost of course, and usually at an inflated rate so they make money.
Do the benefits of professional management outweigh the cost?
All of this sounds pretty good, right? Just sit back and get paid! But like momma says, anything that seems too good to be true, probably is. And in this case, the truth is that you'll end up paying upwards of 40% or more for this level of service. So if you get a weekly booking for $2,000, the management company could take as much as $800 or even more, leaving with you just $1,200 or less in your pocket. Let's take it a step further and look at this cost over the course of a year. If you have one vacation rental property and it grosses about $50,000 per year, using the 40% scenario, management will skim $20,000 right off the top. And that's before you factor in all of the additional expenses. Hiring professional property management will really erode your profit margin and in some cases, you may not even break even after paying the mortgage, utilities, and other expenses associated with owning a vacation home. But the bright side is you literally do nothing except sit back and collect the money.
Just sign on the dotted line. Everything will be fine.
Another thing to consider is that the management companies generally want you to commit to an annual contract. They'll ask you to set your calendar in advance which means if you plan on personally using the house, you'll need to plan ahead. Most companies like to have the calendar availability set at the initiation of the contract to have as much opportunity as possible to rent the property in advance. Some may actually limit the amount of time in which you can use your own house because it represents an opportunity cost to the management company, meaning lost revenue for them. So, you better plan way ahead for when you want to use your house. Or should you?
I recently reviewed a contract from a management company in Jackson Hole, WY. The contract stated that the owner can only reserve the property (block for personal use) within two weeks of the intended date of use. Planning on spending Thanksgiving with the family next year at your vacation home? Too bad! You'll have to wait and see if it doesn't rent and make last-minute plans. They obviously do this because it is unlikely the property will get rented inside of two weeks anyway, so potential losses are mitigated.
Here's another problem. Let's say you decide to cancel your one-year contract in November (giving them the 30-day notice that's required prior to the end of the agreement). If you have future bookings at your house, say through July, you still have to work with the management company and pay them for those bookings. I'm sure the company will still be delighted to go above and beyond for you and your guests after you've terminated your contract, right?
Do you really care who rents your vacation home?
If you do, then you shouldn't allow a property management company to run your operation. Aside from some minimum age requirements and I.D. checks, they'll let just about anyone book the property so they can get PAID! First, let me say that I would never discriminate against anyone from a protected class based solely on their race, gender, sexual orientation, or other things like that. Quite frankly, that would be illegal and just flat out wrong. However, I have no problem with discriminating against groups of college kids or others that are looking to party in my properties or whose intentions may be less than genuine.
We set a strict minimum age requirement of 25 years for the primary renter which pretty much helps us avoid the college groups. Our area of Sapphire, NC is not really a popular destination for those groups anyway so that helps, too. We also do not allow parties of any kind. We've received requests to host groups for bachelor and bachelorette parties and have turned them away. I've been to bachelor parties (including my own) and usually, nothing good comes from them.
Sometimes after talking or messaging with potential guests, you just get a funny gut feeling that there is something just not right with their intentions. We do accept instant bookings from the major Online Travel Agency (OTA) platforms like HomeAway/VRBO and Airbnb which can cause some minor heartburn at times. However, we always personally interact with the guest immediately after the reservation is made so there's an opportunity to bail out if necessary. To date, we've never had a problem with an instant booking. With that said, if you've contracted with a professional management group, you're completely taken out of the decision process. That means you won't have the opportunity to vet people and won't have any interaction before they check in.
Is your competitive strategy to be different than the rest?
If you've gotten to know us at all, you recognize that our entire business model is centered around differentiation. It's pretty hard to be "different" if you are completely out of the loop when it comes to renting your home. It also makes it hard for you to build rapport with guests in hopes that they will return again in the future.
We firmly believe that our personal connection with each and every guest has contributed to our impeccable reputation over the past four years. We go above and beyond to help guests plan amazing vacations by offering our personal recommendations for places to see, things to do, and our favorite restaurants. This personal attention is praised in our countless five-star reviews and is the primary driver for returning guests. You may not want to do this which is fine- professional management is probably the best route for you. However, we take great pride in doing so and it wouldn’t be possible without direct communication with our guests.
Another con for full-service management- your property is merely a number. Shocker, I know. Your home will be just one of the dozens, or maybe even hundreds, of vacation homes under management. All they care about is putting heads in beds and they really don’t care which property gets rented. There is absolutely no incentive for the manager to push your property over another. By managing your own property, you can be very nimble with how you approach your business. For example, if there are outside factors such as a festival or concert affecting rental demand in your area, you can increase pricing accordingly and on the fly.
Along with our concierge approach to serving our guests, we also leave a welcome note and gift. We also proactively follow up with them periodically during their stay to ensure that all is well. It just makes more sense to take a few minutes to confirm that your guests are delighted than to learn that something wasn’t right via the post-stay review. Unlike the customized and personal attention we provide for each guest, most full-service management companies take a canned, one-size-fits-all approach to customer service. I just don’t think that’s the best approach.
Do it yourself for the win!
In summary, if you are looking to be hands-off with your vacation rental business, then full-service management is probably the best option. However, if that was the case, I doubt you would have taken the time to read this post. In my humble opinion, the benefit just does not outweigh the cost. You CAN do it yourself! Managing your own vacation rental property from afar is entirely possible and probably much easier than you might have thought. It's all about building a great team so you have boots on the ground to take care of things when you're not around. We'll talk about building your team in a future post. For now, good luck getting started and I wish you great success! As always, I welcome your comments and questions below.
Comments