Property Management Fees Exposed: The Real Cost of Hiring A Manager

Welcome back to the Short Term Rental Riches podcast. This week we're breaking down management fees. Management fees in terms of what a property manager would be charging you for your. For your property to professionally manage it. And they're all across the board and I've got 19 of them and we're going to just run through them one by one. I'm going to start with more specific to short term rentals and then kind of back it out into long term rentals. And some of them blend together and some of them are specific to each one. Then we're also going to just end with a couple questions that you should be asking yourself in regards to your property management or before you pick a property manager. And this really started after doing some market research in Destin, Florida. And I was pulling up random reservations just to do a bit of study on the, on the market there. And one of the listings I pulled up had a reservation for around $1,000. And when I broke down the detail, it was a lot of fees and there were some that I hadn't seen in there. Now this was a reservation, a direct book through a company. I'm not going to say the name, but I will say it starts with a V and it ends with an A and it rhymes with shma smasha. So maybe that gives you a little insight. They're one of the biggest property managers in the nation with around 44,000 properties under management, I believe. And now I'm sure their fees are different in every market. And I don't want to say anything bad. I know that a lot of people out there probably have a really good experience with this company, but I know that there are others that don't as well. So let's go ahead and just break down some of these fees. I think the most common one, and this is the same whether it's a short term rental or it's a long term rental. And that's just a base management fee. Although this management fee can really range, I mean, anywhere from 10 to 40 to even 50% in the short term rental world, especially in some traditional vacation rental markets that are dominated by short term rentals. And there's not a lot of traditional housing. Sometimes there's some management companies, companies in those areas that are really, they have a firm hold on the market and they're charging a lot of management fees. Although if you've listened to podcasts for a while, then you probably know that I don't think that's necessary to be working with one of those companies anymore. So if you missed our management series we did on virtual management, go back and check that out. Those were episodes 174 through 177. We did four different ones. A lot of things that we do with my personal portfolio just to give you a little idea. So that that's the first fee, that's the management fee and it ranges across the board. Sometimes if you're working with a co host, you might get paid automatically and then maybe you pay the co host afterwards. The traditional way that a property manager is going to collect this fee is to collect all your revenue and then send you a direct deposit. Hopefully it's a direct deposit. No one's sending checks or anything these days, but then they'll take their commission out of that. The next fee that very common on short term rental listings is a cleaning fee. Alth if you've been doing a lot of study lately, you've probably seen that there's quite a few people recommending not having a cleaning fee. And the cleaning fee is really one of those things that it could be a revenue source for some of us, or it might just be pass through as In I pay $100, my housekeeper and I charge $100 to the guest. But this is one place where you can work with your pricing and strategize a little bit to see if it affects your occupancy. To me, a just rough rule for charging a housekeeping fee is maybe half of the night's stay or the average daily rate. So if your average daily rates $400, you might be able to charge a $200 cleaning fee. Again, depends on the size of the property. And you really got to do some more study to kind of break it down. So I just want to talk about the general fees today just to give a quick overview. The third one is one that's not always charged on direct booking websites. But most of the big companies are going to see this. This is what they call their booking or the reservation fees. So of course Airbnb has this. This can be anywhere from 14 to 18%. Vrbo has this, booking.com has this. And direct booking websites like the one I referred to earlier, without saying their actual name, they charge for this as well, although it's a little more disguised and it might come.

With the wording guest service fee or something like that, but it's actually a direct booking fee just like what Airbnb would charge. So a lot of times these companies are charging a management fee to manage your property. Maybe it's 20, maybe it's 30%. And then they're also charging another fee on top of that for their direct bookings. And so you got to add those up and just make sure you know what you're getting. Really. That's what it comes down to. Down to. In the end, the next fee you might see. And again, this is going to be on more of these direct booking sites or with your, your property manager. Not through a direct OTA like Airbnb or vrbo, but it's an advertising fee. And again, there's different lingo going around in the industry. So these could be the same thing. You just want to make sure you check with your property manager to know what they're charging your guests for your property. But that's another one. Could be an advertising or some sort of marketing fee on top of a reservation. Next up, number five, we have a technology fee. And again, these might all be the same thing, an advertising technology fee, guest service fee. But it's just important that we know what they are and what fees are being charged. I do think it's very important to have the right technology in place. And of course you know that if you've listened to the podcast for a while, we've got almost 200 episodes now. I can't believe it. And if you've missed a lot of them, you're just tuning in. Well, welcome. You can head over to Strict. We've got a ton of resources for you there and we've got a lot of episodes on technology. You can just go to the little handy dandy search box and type in technology or you can see that we've even got it broken down by category. We also have the favorite tech stack that I use with my personal portfolio under our recommended resources, so make sure you check that out as well. Next up, we might have a furnishing or decor setup fee. So this is going to be more in the setup of your listing if your property is not already set up when you start working with a property management company. So just make sure you're thorough with your questions and you know exactly what the management company's providing you, what they're charging you, what your contract terms are and all those types of things. I'm going to get to a couple more specific questions you want to make sure you ask in just a second here. Next up, we have a maintenance fee or some sort of coordination fee. And again, this can really range too. So I know some of the long term property managers I work with, they can charge anywhere from 10 to 20% to purchase items on my behalf to coordinate them, to have them delivered to a property, to have them installed. Or maybe there's a bathroom remodel and they don't have their own in house contractors and so they outsource it and then they charge 20% on top. So you can see this range. I would recommend that you try to negotiate the higher ticket items with a lower rate. So maybe you need to buy a thousand dollar refrigerator for example, if you don't have the time to actually shop that yourself then I would try to negotiate some of those one time ticket items down just a little bit. So next up you might see this one's a little more rare but a seasonal rate adjustment fee. So a revenue manager, for example, the property manager that's going in and editing your prices. Some companies are charging for this on top of the management fee, on top of guest service fees and on top of all these other things. Number nine, we have guests communication fee. And this is pretty much what property management is for, right? Especially when it comes to short term rentals. We're not hiring a property manager and expecting to do all of the communication ourselves. Although there is another company out there managing lots of lots of rentals. Almost 30,000. Not going to say that name either, but.

I guess it rhymes with devolve or it has the name in the middle. I'll let you leave that one your imagination. But they're managing almost 30,000 properties. From what I understand they maybe aren't handling the communication the whole way through. So make sure that is something you're checking on as well. Key exchange fee. This one hopefully is becoming less and less common. But sometimes we have condominiums that don't allow us to install automatic door locks or they have a gate or there's some sort of common door and a key actually needs to be exchanged. Maybe it could be coordinated with the housekeeper. Number 11 we have an administration fee. Now this could be another name for management. It could be a name for backend office work, whatever it happens to be. But sometimes this is showing up on your statement as well. And number 12 is very similar, but I've seen this one show up too and that's a financial reporting fee or a monthly statement fee. So there's different names for all of these fees. Number 13, and this is a pretty common one for short term rentals is a credit card processing fee. As we know the credit card companies charge us to process payments. We use stripe and it's about 3%. That's one of the nice things about working with Airbnb is. We don't have that additional credit card processing fee, but this is a very common one that'll show up on property management statements. Something we charge for because it's something we have to pay for and it's a percentage off of the total amount. Number 14, inventory and inspection fee. So if you're working with a full traditional property manager, hopefully they're helping you out with some inventory and they're checking on your property from time to time. But you might see this show up as an additional fee in there. Number 15, a security deposit management fee. This one's a little less common, but we need to be taking security deposits depending on the ota, the listing site we're using. And it does take some work collecting and managing a deposit and charging a deposit if it turns out that there is some damage in your unit. So you might see this showing up in your statements as well. Number 16, late payment fee. Now this is one that's probably going to show up more with a long term rental. One of the nice things about short term rentals is that we get all of our payment up front, right? That means we don't have to evict someone for non payment, unless you're focusing more on medium term stays, in which case you might be collecting monthly payments. And then you might see this late payment fee show up as well. Remember, when a guest stays more than 30 nights, or some cities it's only 28 nights, they actually become a tenant. And so the laws change and that's something you want to take note of. Number 18, utility management fee. The more properties you add, the more utilities can kind of become a pain in the butt. And sometimes utility company doesn't let someone work on behalf of your properties without having notarized documents. And we don't want the lights to go out on a property, do we? So this is one we definitely have to check. It's definitely less common, but you could see this one showing up as well. And last but not least, we have some emergency situations sometimes, don't we? Things out of our control. And very common for a property management company to have an after hours fee, some sort of emergency fee for actually showing up to the property. Sometimes you see this with maintenance technicians where they have a normal rate, then an after hours rate is twice as much. It can be really, really high. So those are 19 fees that you're probably going to be showing up. It's a big decision working with a property manager, so you shouldn't take it lightly. One of the things that I like to ask, at least in regards to my long term rentals, which I work with a lot of property managers on, is are you investing in property as well? It's nice to have a manager that comes from an owner's perspective. So with that said, if you guys been listening to the podcast for a while, you know that we're managing other properties now. And of course we're coming from an owner's perspective. We're actually using my team to manage your short term rentals. So be happy to chat with you about that. If you're at all interested, you can go to Strict Property Management button there and we can connect over zoom, see if your property makes a good fit. Hope that gave you a little better insight into some of the fees that might be showing up and maybe there's some in there that you didn't know about. And until next time, I hope you have a fabulous day.

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