How to lower property management costs on luxury STR vacation rental property

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The original post assumes "all other things being equal" with property managers, and that isn't the case.The cheapest shirts are at Dollar General, but that doesn't necessarily mean they are the best.When it comes to property management, it's not what you are paying, but what you are getting. If PM #1 is charging you 40%, but they are fetching $100K a year in rents, you are netting $60,000.If PM #2 is "only" charging you 20 percent but they are fetching $70,000 in rents, you are netting $54,000. So which PM is cheaper?Yes, the Property Manager's commission is important. But more important, what do their clients have to say about them? The same is true for self-management. The self-manager isn't paying a property manager, but if the self-manager is leaving out the "managing" part, then almost certainly (s)he is giving up lost revenues that far exceed paying someone to actually manage the property.Managing means you are responding promptly to all inquiries, monitoring rates and comps daily and making adjustments as necessary, ensuring that the property is safe and clean, that everything is operational, and quick responses and resolutions when something goes haywire. Most aren't up to the task.

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As a local PM here in Orlando, we analyze each home carefully to ensure we can set the fee at a competitive rate while also paying our cleaners fairly. Since we manage many large (8,9, 10 BR) homes onsite laundry is incredibly time consuming for so many beds. We have found that by laundering linens offsite in a commercial laundry, it eases the load for our team and gives them more time to actually clean. We have better results, happier cleaners and hotel-quality laundered linens = happier guests. Cleaning strategies get too little discussion and attention and are such an incredibly important aspect of our industry.

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Great advice. One thing we have done was to offer amenities that carry high value in the area and build these costs into our rental agreement. For example, in the Destin area golf carts rent for 850-900 a week. We’ve negotiated with a rental company to provide the same six seater golf cart for 300 a week and it becomes part of the rental fee and contract. This gives us an opportunity to adjust the rental fee based on area demand. The guest sees the relative value and we are able to protect our margins.

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Self management is a great way to cut costs and help owners put more money back in their pockets and back into their properties.

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There are times professional management makes sense, but let's look at high producing properties as this is the focus.If self managing a property you are able to gross $200k theoretically you would need a manager who charges 20% to bring in $250k for you to still have your $200k. Let's be honest and realize you need to pay not to have the hassle of managing and we say that cost is 10% of what you would gross self managing, $20k. Now your 20% charging manager needs to bring in $225k. My biggest complaint on most management companies is they charge guests extra fees (admin/booking fee) bur do not share it with owners. The owner sees it as reducing the rate while charging a fee to line the managers pocket. They give the appearance that they only want to split the rent not there extra fees. Not the type of partner I want in a partnership. Do not kid yourself as when you sign with a management company you sign a business partnership.Eventually I do not want to manage my properties and I will look for a manager who can get better returns than me, maintains properties and has fair terms on the partnership (charge a fee share the fee except logical fees like cleaning fees).

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I agree with @Collin H. We are always performing at the top 5% of our market per AirDNA/LSI Tools which means we are contributing to our cost. We have dedicated people on the ground cleaning, maintaining, as well as office staff handling the administrative and marketing tasks. I think when you hire a PM you have 3 choices 1) A very small local provider (<15 units) and they tend to me 1-2 person operations, they are the one unclogging toilets, answering guests, etc and it is tough to do everything, so things lack. 2) A large/nationwide provider where you are only a number and they usually lack local resources 3) A mid size local provider who have resources and you are not just a number.Through effective revenue management with a revenue manager, and being listed on 15+ sites including Marriott Homes & Villas, JetBlue and Allegiant Airlines, Hyatt and Amex Travel (coming soon) we are bringing in more revenue than most can self managing, offsetting our fee.One of the top questions I tell people to ask their manager is the fees, who keeps them? We make a +/- 10% margin on cleaning fees to offset the consumables.Since margins are still tight in the high rate environment, we are now also offering a limited service operation where we handle marketing, guest communication, and revenue management at 10%. The owner would handle their own cleaning and maintenance, which is a great options for some.

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I offshore my property management to virtual assistants at a fraction of the cost:https://www.biggerpockets.com/forums/530-short-term-and-vaca...

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It's not a complaint..it is an essential component of STR ROI and feasibility analysis. STR PM's absolutely earn their dues (vacation rental management is demanding!) I'd estimate 50% of my investor clients during the past two years utilize professional property management companies and are very satisfied. However particularly for high revenue or six figure producing properties, operators can theoretically employ a full time and designated manger for a lower total cost.

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@Brooklyn McCarty it goes without saying that if homeowners have the time and the know-how, it can be the most effective option. On the other hand, over the years we have seen many homeowners turn to us, or sell their homes because they got more than they bargained for when they decided to self-manage. They may find they don't have the pricing or the booking knowledge, and their occupancies are really low. They may also find it's challenging to manage cleaners, maintenance techs and contractors remotely. Or they simply get tired of being on call with guests, 24/7 (yes, there are co-hosts and VA's, but that is another person to manage).We just took on a home that was previously owner-managed - it had tons of deferred maintenance and the calendar was 50% empty. It also was not decorated up to the standards of our market, another reason it was under-booked.Again, it really depends on the circumstances. but new STR owners need to really do their research and be fully informed when thinking through the management strategy, especially for larger and more complex homes.

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Thank you