Property Management for Short-Term Rental Properties
With over $57 billion in earned revenue expected in 2019, the short term rental industry continues to grow at an impressive rate. For instance, short-term vacation rental nightly rates can range anywhere from $186 to $978 in the most popular vacation spots across the United States. Even in less desirable locations, short term rentals provide a valuable alternative to hotels for travelers seeking a more unique, home-like and private environment.
Key Point Module
- 1 The quality and skill of property management companies can make a huge difference in how many guests are motivated to book your short term rental.
- 2 Property management companies can save a short-term rental investor hours each week, but also require communication and oversight to ensure your needs are being met.
- 3 Fee structures can be fixed or by commission, and it’s important that an investor ensures they understand exactly what services are included in their upfront fees and what may be additional costs down the line.
- 4 Property management companies can allow investors to expand their short term rental business into more than one property and allow them to travel while earning higher returns than with a longer-term rental.
Unlike longer-term rental properties where tenants typically sign a lease for a term of several months or more, short-term rental properties involve fast turnover rates and, therefore, much more hands-on upkeep and constant management.
For those interested in investing in short-term properties for the first time or expanding their rental inventory, a property management company may be the key to saving time, keeping guests happy and optimizing bookings and investment returns.
In this guide, we cover everything you need to know about property management for short-term properties, from what to look for in a property management company to the services they provide, how to find one and typical pricing structures.
What to Know About Investing in Short-Term Properties
With many investors throughout the United States catching on to the short term rental craze in urban cities, coastal vacation spots, rural getaways and even suburban neighborhoods, travelers are also becoming increasingly familiar with and comfortable using sites such as Airbnb, HomeAway and VRBO to book accommodations for leisure or business travel.
Unlike with a typical hotel, short-term rentals are often available in the form of a single apartment unit, a house, duplex or townhome. This means they often include full kitchens, shared living space and multiple bedrooms so families or groups traveling together can stay under one roof. This is often a win-win situation for both renters and property owners, as renters can often save money by not paying for multiple expensive hotel rooms, and property owners can make more money per night than they would leasing to a longer-term tenant who pays a monthly rent.
The option to turn one’s second home, vacation property or long-term rental property into a short-term rental business provides real estate investors with more flexibility and the possibility for much higher returns than long-term rentals. For a property to be considered a short-term rental, the unit is typically rented for a length of time between one day and one month. This generally gives owners more control over how often their property is booked, so that they can still use the property for their own personal use throughout the year as they please. Additionally, with a market growth rate of 6.9%, the short-term rental market is projected to soon overtake the traditional hotel hospitality industry.
Short-Term Property Management Services
To keep a short-term rental business running, investors must complete regular tasks and stay on top of operational logistics. They must advertise the rental online through sites like Airbnb or VRBO, manage communications with guests, oversee the booking calendar, clean the property between guests and attend to guests’ needs and any issues that may arise. They must ensure any local laws and regulations are followed, that they pay any necessary taxes and collect payments from guests.
With all of the tasks that come with running a short-term rental business, property owners wishing to keep their investment as passive as possible may consider turning to a property management company.
Services provided by short term property management companies include:
- Using online platforms and their own marketing and advertising strategies to attract renters and secure bookings. This can include taking professional photos of the property, writing property descriptions and adjusting nightly rates to keep up with market demand.
- Communicating with potential guests, accepting reservations and serving as the point of contact for booked guests from the moment of booking until after the guest leaves. A property management company can ensure guests are aware of house rules, check-in procedures and respond to any guest complaints or issues as they arise. They can also provide valuable information by seeking feedback from guests after they leave
- Performing housekeeping and cleaning tasks before each new guest arrives and restocking inventory such as linens and other household goods
- Property and lawn maintenance
- Keeping the booking calendar up to date
- Performing property walk-throughs to ensure guests did not cause any damage and that appliances, plumbing and electrical features are in proper working order
- Providing lawn maintenance
Cost of Managing Short-Term Properties
Fees for short-term rentals can come in one of two primary types. These include fixed rates and percentage structures that vary based on how much income a property brings in.
With fixed rates, property investors pay their property manager a set, predetermined fee each month, regardless of how much cash or bookings the property brings in. Services included in this rate are predefined as well, but may not include everything the investor may need. It’s important to ensure that at least the most important management tasks are included in the fee and that the property owner is aware of the costs for additional services they may need the property management to perform.
The second type of payment structure is through commissions, where the property management company makes a set percentage of income received through managed bookings. With this fee structure, investors can rest easy knowing they’ll pay less out of pocket on slow rental months. Commission rates can vary wildly, typically anywhere from 10 to 50% of monthly income plus costs for repairs, depending on factors such as the property’s location (properties in more desirable areas may incur higher costs) and the actual property management company hired.
How to Know if You Should Hire a Property Management Company
Property owners will need to recognize that while they’re handing off the tasks of managing the actual short-term rental property to an outside party, they remain responsible for managing the property management team they choose. They must still be able and willing to communicate their vision for the rental business and preferences in terms of booking rates, guest rules, decor choices, maintenance and cleanliness standards.
A short- term management company may be the best solution for the following types of investors:
- Those who travel frequently
- Those who live in another town, city, state or even country than their rental property
- Those who would like to sometimes use the property as their own personal residence or vacation spot
- Those who have multiple properties and can’t easily manage them all
- Those who would rather spend their time finding new properties to invest in or working on another business
On the other hand, hiring a short-term property management company may not be a good idea for:
- Investors with only one or two properties who enjoy hospitality and property management and want to avoid paying a third party to perform these task
- Those who don’t feel comfortable delegating tasks to an outside party
What to Look For in a Short-Term Property Management Company
When searching for the right short-term property management company, an investor should keep a few things in mind. As an investor, you are ultimately liable for any injuries or issues that arise on your property, so be sure the company you hire is reputable, communicative and adheres to a high level of quality. You want to be sure they are familiar with local laws and regulations, which can vary from city to city, and that they have systems in place to communicate any issues with you in a timely manner.
Short-term property owners should take their time to research and interview more than one property management company before making their final decision of who to share their business with. Just as each property is different, every investor has their own unique preferences and values when it comes to taking care of their business and home. For some, keeping costs low may be of the highest priority, while for others, quality of services and a high level of communication and involvement may be best.