Dump Your Management Company and Put More $$ In Your Pocket
When I bought my first vacation rental property in North Myrtle Beach, the thought never entered my mind to turn it over to a property management company. Trust me, there have been many days since then that I felt like hand delivering the keys like they were on fire to all of my rental properties. Vacation rental management is NOT for the faint of heart or weak stomach for that matter.
As I talk with clients about buying an investment property for short term rental, the question always comes up…usually in a hushed tone…can I manage it myself? This is normally after they’ve been given the jaw dropping fee structure for the management company. PM’s can take between 10-50% of your gross rents and that’s not including maintenance charges. The numbers are staggering and will soak up your profits like a thick spa towel.
Back to the initial question, can I self manage? Well, it’s not rocket science or brain surgery, but it IS a job and WILL require actual work. I see many owners in my area that either fail or just do a pitiful job….this is when I start thinking about starring in my own reality show-Vacation Rental Rescue. To answer the question though, here are ten key points that any property owner must consider and resolve before deciding to self manage:
1. You must, must, must treat your rental as a business.
This is probably the most important concept that owners must grasp and will get you into trouble the fastest if you don’t. Develop a rental contract (hint, get a lawyer to draw it up) and decide on your rental policies for deposits, cancellations, damages, age limits, pets, etc. These policies will determine how your rental operates. If you aren’t sure where to start, check the policies at one of your local PMs and start adjusting them to fit your needs. If your guests don’t have a clear, written set of policies you can not expect them to abide by them. This is what a guest thinks….No cancellation policy, oh well we’ll cancel for July 4th week a few days before arrival and get our money back. You will be left with no rental revenue for the week and an open property with no hopes of re-booking at the last minute.
2. Check your local and state laws.
Can you manage your own short term rental, do you need to be licensed to do so? Also you will likely need a local business license in order to collect rents and pay hospitality taxes. Ensure that you follow the law.
3. How are travelers going to find your rental?
You will have to advertise online, on at least one site. The more exposure, the more you pay. Sites like Homeaway, AirBnB, and Tripadvisor offer subscription fees (up to $1400 per year) or “pay per booking” models (up to 10% fee). Ensure your listing provides as many photos as possible and give potential guests a complete view of what your home offers. Spend some time on social media. Add a Facebook fan page and manage it, potential guests want area information and updates about the property.
4. Show me the money!
How are you going to allow guests to pay for their bookings? Payment methods are important to guests and it’s a commonly asked question when guests are deciding on a rental. If you want to accept credit cards, you can easily obtain a merchant account, but expect to pay up to a 3% transaction fee, more for international payments. Checks are an option but carry a bit more risk and are difficult if you intend to accept last minute bookings. Most guests will want to pay by credit card because of the increased consumer protection that the card provides.
5. How do guests check in?
Embrace the concept of “keyless entry," there is simply no reason to have keys. Many locks now have wireless capability and codes can be changed online. Guests will need arrival instructions including the check in time, property address, and how to enter the home. You will also need to provide property information such as WiFi codes, how to use televisions, where to park, etc. Just remember, these people will know nothing about your house and it’s up to you to inform them. You will also need to make sure that the group that checks in fits the description of the group you were expecting. Exterior security cameras are great for self management. If you were expecting an extended family of six, but 15 teenagers show up instead, you will know about it.
6. Cleaning….this one key point alone will make or break your rental.
This will also be the hardest variable to nail down. Honestly, if you can’t get this right then nothing else matters. Most owners think, easy I will just get a cleaning service. Cleaning a vacation rental is entirely different than cleaning your own personal home. The property has to be “reset” for new guests and should look like a sanitized hotel room. Your cleaning service or individual will need to understand how you want the property to be presented on each turnover. Expect to hire and fire “cleaners” until you find the right fit. Nothing will ruin your business like lack of cleanliness. It will lead to complaints and an overall bad reputation.
7. Maintenance.
Multiply the amount of wear and tear you have on your personal residence in a year by 10 and that’s what you should expect from your rental. You must have a plan in place to keep everything working. Someone has to do basic weekly or monthly minor repairs-if you think your cleaning staff will do it, you are mistaken. Small items like tightening bolts on chair legs, replacing ceiling fan pulls, changing batteries in remote controls, and caulking all represent minor issues, but will make your home look uncared for if not fixed regularly. Owners should be on site at least once a quarter; if you have a heavy season once a month may be more appropriate. No one will care for your investment like you will.
8. Are you providing linen service?
You wouldn’t think this would be a big deal, but it is. Do you provide them or hire an outside service; do guests bring their own? Much of it will depend on the norm in your market. If you do provide them, who cleans then (and it’s hard to keep sheets in pristine condition) and remakes the beds? In a larger home with four plus beds, it can take and hour or more to reset bedding during a property turnover.
9. Guest Communication-remember when I said that managing a vacation rental is work?
Much of it is answering emails and some days I get stuck at my laptop for hours. Several hours of the day will be used to respond to guest inquiries, send out quotes and completing bookings. Much of it is handling paperwork-using a reservation software service can help! There is also the issue of invoicing and collecting payments due. Normally, rental balances will be collected in two or three payments; automatic invoicing can help manage due dates, etc. You should also expect to have questions that come in regularly from booked guests.
10. Last but certainly not least….Complaints.
Yes, you are going to get them and how you handle them means a lot. My recommendation is to do everything on the front side to AVOID a complaint is the best practice. If you can’t take care of any complaint that would arise in a satisfactory way to the guest, then this would be the second deal breaker of self management. What happens when guests complain that something needs additional cleaning, or that something is broken? Many times, you as the owner have done everything right, but the guest is still upset. Your customer service skills will be put in to overdrive and as I mentioned, you have to have the stomach for it. Dealing with the general public will bring all types of people that you will have to interact with. Be ready for anything!
By now, you are probably either firmly in the I can do this! camp or forget this, get my a property manager. Self management is certainly not for everyone. Property managers provide a valuable service for those owners that either don't have the skills, time, or desire to tackle the points above. My final key point would be to maximize the return on your investment. If you can put in the work and do it well, then do it! If you are trying to save the management fee, but do a lousy job, forget it. It will cost you in the long run.
You can take a peek at my little collection of vacation rentals in North Myrtle Beach, South Carolina here Blanche's Beach Bungalows.
Happy Renting.....
Blanche Welborn, licensed SC real estate agent serving the "Grand Strand" of South Carolina
Click anywhere on the site to search all Myrtle Beach listings!