What Percentage Do Property Managers Take for Vacation Rental?

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Why Have a Property Manager Handle Your Vacation Rentals?

Managing a vacation rental property entails tasks similar to managing year-round rentals but at an accelerated pace. Residential rental units typically turn over no more frequently than once a year, with tenants signing a 12-month lease. Vacation properties can turn over within a matter of days, or a couple of weeks, or in some cases seasonally, with renters staying for the summer beach season or the winter ski season. The increased burden of managing a vacation rental property is more than many property owners are willing to tackle.

Why Have a Property Manager Handle Your Rentals if You Do Not Live in the Area?

Geography is another key reason for having a property manager handle your vacation rentals. Although Palmetto State Properties does not manage vacation rentals, we can handle long-term seasonal rentals or long-term rentals in general, especially if you do not live close by.

It’s common for people who invest in vacation rental properties to purchase properties in popular vacation areas at some distance from their own location. Some of these property owners aren’t even full-time residents of the United States. Foreign investors or U.S. investors who have retired overseas or are working offshore aren’t likely to attempt to manage their own vacation rentals from their current location.

Laws Surrounding Vacation Properties

There are laws surrounding what property definition can count as a vacation rental. This could be a shared room, private room, or entire property in some cities or states. Sometimes you have to have a minimum number of rooms to be considered available for short-term rental. There are even laws surrounding the length of time a guest can stay.

Researching your area is key to staying within the laws and limits of what you can provide to guests.

What Vacation Rental Services Do Property Managers Provide?

The specific services a given property manager will provide will vary, depending on what the property owner needs, wants, and budget. Not all of the services discussed here will be involved in every case, so think of the list included here as a menu from which the owner will choose certain services to discuss with a potential vacation property manager.

• – Vacation property listing and marketing
• – Booking and managing reservations
• – Applying dynamic pricing
• – Providing pre-booking and pre-stay guest support
• – Cleaning services
• – Stocking services
• – Maintenance and repair
• – Guest communications
• – Collecting rent payments
• – Generating reports and financial statements for property owners

In some cases, the property management fee structure the property owner selects will determine the services provided. In other cases, the fee structure dictates what services are provided. In either case, the property owner may agree to pay extra fees for services not normally available with a given fee structure. At Palmetto State Properties we never markup vendor repairs, or sneak in hidden costs.

What Fee Structures Do Rental Property Managers Offer?

There are three basic fee structures, as described below.

Commission Fee Model

If you have experience using a professional property manager to manage a long-term residential rental property, the commission fee model may look familiar to you.

With this type of fee structure, a vocational rental property manager provides a specific set of services and receives a specific percentage of the monthly rental income as a commission. There is an incentive for the property manager to keep the vacation property fully booked because doing so maximizes the rental income it generates, resulting in higher commission income for the manager.

If you are choosing a property manager that works on commission, be very clear as to what services are included in the standard package and what additional fees you could incur for other services that might be needed upon occasion. You might be willing to pay a higher commission percentage if it is all-inclusive.

Fixed Rate Model

Some property managers prefer to work on a fixed rate, or flat fee, regardless of how fully the property is booked. The advantage to you is predictability, as you will know exactly how much your monthly outlay will be, which makes budgeting easier and more accurate. And you could end up paying less on an annual basis than you would under a commission-based model.

Again, it’s important to know what services will be provided and how you will be charged if the need for additional services arise.

Guaranteed Income Fee Model

Under this model, the vacation property manager pays the owner a fixed amount each month and retains any excess profits or absorbs any losses. This can be a good choice for a risk-averse owner seeking a consistent passive income stream—to supplement retirement income, for example—even in months with no or few vacation bookings. On the other hand, there could be months that yield higher than usual revenues, but the owner won’t share in the higher profits.

What’s the Average Fee Percentage?

The fees charged by property managers handling vacation rentals average 25 to 30%. But they could be as low as 10% or as high as 50%, depending on the specific fee structure and the property’s location. In urban markets, there is more competition among property managers than in more remote locations that are harder to reach and offer less competition. In the latter case, property managers may be able to charge higher fees.

As with any major business decision, property owners need to do some research and due diligence when comparing potential managers for their vacation rental properties. Making a well-informed decision will help ensure the best financial outcomes.

Working With Palmetto State Properties

Palmetto State Properties & Associates strives to provide quality management services for our client’s investment properties at affordable costs. Although we do not handle vacation rentals, we do help with any rentals that are longer-term. We are a full-service property management firm that does not charge any surprise hidden fees for our management services but does offer a wide array of benefits, such as tenant acquisition and repairs. We never markup vendor repairs and capture all of your expenses in an annual statement fit with a 1099.

Get in touch today to find out how we can help.