How Can a Management Company Succeed in Managing AirBnB Rentals?

Question

With the upward trending of AirBNB and VRBO, I am looking into finding out more about how a management company can turn the management of those types of units, and those types of investors, into a viable business model.

We currently manage 750+ single family units in the San Antonio, TX market and 200+ units in West Palm Beach, FL.  We have created numerous management plans that go from top to bottom - but focused on the traditional owner of 1+ single family homes renting them out to long term tenants.  If we can figure out and perfect the flow of operations (and the pitfalls) - we can possibly create a program to manage units designated for AirBnB and VRBO.

Questions:

1) What would a management company charge an owner / investor to manage the home for them?

2) Finding a long term monthly estimate in our market is fairly easy, but what pricing model do you use for a unit like AirBnB and VRBO where the turnover is constant?  In other words, what mark up is expected?  (Assumption is you price it in line with other AirBnB's)

EXAMPLE:  If a home goes for $1,500 per month as a "regular" rental ($50 / day) - what should that be for a weekend rental rate per day?

3) The staffing overhead to manage such constant turnover of units has to be tremendous.  When my family and I stayed in a VRBO two years ago in Ruidoso, NM - the company there was johnny on the spot awesome with service.  That level of service eats up a lot of time, and is very stressful long term for the company.  Constant churn = constant ways to screw up.  If outsourced with internal staffing - expensive!

EXAMPLE 2:  Your reliable maid service of several years fails to show up to clean a quick turnover rental home.  New VRBO resident shows up to a dirty unit.  Uh oh!  Owner gets wind - fires management company.  Imagine renting a home out 5 times a month for 3 days each - for 12 months.  That is 60 turnovers!!!  Clearly this would cause a lot of stress on the staff.

Would love to hear some dialogue or be pointed in the right direction as to where this concept of managing VRBO's and AirBnB rentals for 3rd party owners is working - and how it works!

Take care!

Timothy Church · Answer

Good morning,

I'm glad to hear about your success in managing properties so far. Doing STR can actually be about as passive as LTR if you set up everything properly.

Fees can vary depending on the manager. I know many here on the island charge between 15%-18% of gross rent and I know of one that even charges 20%.

As for finding market estimates, most people troll through VRBO and AirBnB data and compile a spreadsheet. Personally I prefer to let someone else do it form me. I use AirDNA for this. They collect data from AirBnB and help to provide reports to give you an idea of performance in the area. If you are planning on doing quite a bit of activity in one area, I suggest signing up for their Market Minder. It give up to date info on a target market. I have it for Galveston and it is pretty spot on.

Also for pricing, I recommend using a dynamic pricing tool. Both BeyondPricing and Wheelhouse do a great job. They will adjust prices based on seasonality and events. This goes a long way in getting the best returns from a  property. Obviously keeping occupancy up is important so adjust the base price weekly based on the performance.

As for the overhead for turnover, automate everything you can. I have an auto-emailer that updates the cleaners and myself every time there is a new booking. I also send out a weekly overview of all upcoming bookings. Set a wide window for cleaning (11-3 is what I use) and have the cleaners contact you to confirm cleaning has been completed. That way if you don't hear from them come 2 PM you know there is an issue and you can address it before guest arrival. I'd alway rather ask a guest to delay check in than to have them check into a dirty home!!

While the cleaners should update you on any apparent damages, I suggest a monthly inspection of the property. Use this time to perform and basic maintenance such as air filters and document the state of the home. This gives you an opportunity to see what furniture might have excessive wear or notice the small issues that guest won't mention.

You can continue this automation with self check in, smart locks, automatic contact emails to guest before, during, and after stay, and if you use a service like RingCentral even automatic touching base texts!! The key to it is automation. If you do things the old ways with call in bookings, in person key exchange, and physical keys you will create so much work you will pull your hair out. It is the reason older management companies have DOZENS of employees.

There is a smarter way to do things that will make your life easier.

Brad Larsen · Answer

@Timothy Church Hey Timothy - great advice.  I had a good long conversation with a colleague last night about this.  We are thinking we can create this as another program for management on top of the ones we already have existing.

"We Manage AirBnB and VRBO Rental Homes"

1) Charges:  TBD

2) Services:  Full Management, Accounting, Maintenance, Advertising, Turnovers, Leasing, Inspections

3) Fulfillment:  Design and dedicate one PM in the office to handle these.

Pitfalls:  Turnover and HOA's.  If the city or HOA gets pissy with the whole thing, it could rain down on us as the big and easy target.

Full Disclosure:  As we start to develop this, we will learn what all the numbers end up looking like for our market.  In a lot of cases, I would make the assumption that making a home into an AirBnB/VRBO rental versus a long term rental are near the same.  You have to factor in furniture, wear and tear, and all kinds of other factors.  Point being here is that we would tell everyone about all of the issues, and pitfalls UP FRONT in the effort to show them traditional renting may be better for them.  It takes a certain home and investor to put up with the constant worry of owning a home like this.

My colleague mentioned several best practices I remembered.  If you have to furnish the home for the owner on their behalf - get an open checkbook and expect $10,000+.  Also, they are using the Rently system with their electronic locks to perfection.  We would establish an account with them just for those as we use Tenant Turner for all of the traditional homes.  Also, they take the income received in to THEIR account with AirBnB - so the flow of money comes into the management company accounts - they put those funds into Appfolio - and pay the owner with full accounting run through their software which would include a 1099 at year end.  (Genius!!!).

Thank you Tracy Streich in Oklahoma!!!

Timothy Church · Answer

When using a booking portal, they vary in fees. AirBnB and Flipkey charge 3% of gross rent for advertising, bookings, and charging cards. This is the same you'd pay for most card processing companies. VRBO charges 8% or $399/year. If you have a full time rental $399 turns into a rather low percentage and they still process payments for you. The only site that charges high fees is Booking.com at 15%.

I do account for the time I spend but I automate so many things in my management that I don't honest have to spend much time. Heck, I even have check in texts during a guest stay automated! Using these booking portals automated most of my marketing as well and cost me less than marketing them independently.

There will be the occasional call to deal with an issue but overall it's very little of my time. In fact the most time I spend is increasing the efficiency of my system through online guestbooks and new features.

Work on your systems not in your systems!

Nathan Gesner · Answer

It's my understanding that AirBnB charges 10 - 12% of every booking just to handle the marketing and booking process.

My services included (I don't do it any more) marketing, booking, paying taxes, arranging for cleaning and maintenance, paying utility bills, answering phone calls at 11PM on a Sunday night when the toilet stops up, inspecting, inventorying, etc. The services we offered were significantly more than AirBnB and take up a significant amount of time compared to marketing and booking. AirBnB is making a killing when their only service is to provide an automated platform.

Yes, you can do all this yourself. No, it won't require too much time as long as you have newer units where everything works and are proactive in keeping them up. However, it's not an honest assessment to say you are managing yourself for 15% less than what I charge because your time has value and does cost you something.

The properties I managed were in a smaller community and about half of them are outside of town, some up to an hour away. Out of the 70 properties I managed, almost all of them are still vacation rentals four years later (I sold the business to a friend) and they are still happy with the services.

Timothy Church · Answer

I have to ask. At that commission point, what all is included in your services?? I know through VRBO, AirBnB, etc. the cleaning fee is charged to the guest so that fee is gone. Utilities and services such as lawn care, while occasionally managed by myself, are taken care of by the owner. I don't see where the costs are that would warrant the fee.

I have my cleaners do basic issues such as light bulbs, batteries in smoke detectors & smart locks, and any minor things. They are more than happy to do this. I also go by my properties on a monthly basis so I honest don't get many maintenance calls. Most of the issues are treated proactively instead of reactively.

When it comes to market study, between AirDNA and pricing tools all I have to do is make a weekly adjustment to the price based on occupancy and we are good to go.

I'm just curious what all your services entails.

Timothy Church · Answer

@Richard White

I completely agree about fees. I'd love to get 20% but as an investor myself  I just cannot justify that. Personally I charge 10% for both LTR and STR. I have a few contingencies such as smart locks and automatic booking but I offer full around service. investors buy STR for the returns they can get. As a property manager it is my job to maximize those returns, not to take a larger cut of their pie!

Nathan Gesner · Answer

@Brad Larsen, I owned a branch company that managed about 70 vacation rentals and it's a different world from managing long-term.

The amount of work required is astronomically higher. I'm surprised to hear some are managing vacation rentals for under 20% because we charged around 25% and I know other companies around the country that charge as high as 50%. Imagine the sheer number of turnovers. You have to get them cleaned, inventoried, and ready for the next guest. Maintenance calls are significantly higher than what you'll get from a long-term rental. You have to maintain lawns, pay utility bills, handle complaints about how to operate the TV remote control or track down a wedding ring that was lost in the house. Noise and parking complaints increase dramatically. Municipalities are increasingly sticking their nose into the short-term rental game with regulation and taxation. You also have to deal with the increased competition of mom-and-pop users of AirBnB that are renting out everything from walk-in closets to entire homes, making the market increasingly difficult to remain competitive. Pricing is very fluid and you have to constantly study the market and adjust prices to maximize occupancy and return for your clients.

If anyone can figure out a way to make it work, I think you can. But it's a different animal and would require a lot of time and energy to establish yourself. Putting that same time and energy into growing sales or developing an investment group would probably produce better results in a shorter amount of time without nearly the risk.

Dave Foster · Answer

@Timothy Church, those are some of the most practical and helpful suggestions for building a VR business I've seen in a long time.  It makes me want to book one of your properties just for the experience - another great idea for someone looking to get in - experience it from the customer side.

Thanks for sharing!!!

How Can a Management Company Succeed in Managing AirBnB Rentals?

Most Popular Reply