Short Term Rental Issues with Property Management and General Consensus

[Cole Dobbs]

Good morning! So I am new to Real Estate investing and am looking into starting a couple of my first short term rentals, and I have some questions about the value property managers bring to the table. I have been quoted at 20% of revenue to manage my new vacation rental, and I have seen other property managers that charge up to 40% while also charging for maintenance and upkeep. Many that I have seen are nationwide firms that allegedly increase occupancy, handle guest issues, and keep properties in shape. However, I have the time to manage guest relations and I have a good cleaning crew that I trust to take care of the cleaning and damage control and I have handymen and contractors readily available. It seems hard to wrap my head around paying this premium for a passive service, but I do not have any real world experiences to shape my opinion so I am keeping my options open, especially as I expand. My questions are: Is it worth 20%-40% of monthly revenue to hire a property manager? Are they really more effective in increasing STR performance? What are other STR owners biggest frustrations for those that are using property managers, and for those people that are self-managing? I would love to hear from the community and see what the general consensus is and if there are any other great points you think are relevant please let me know!

Thank y'all!

-Cole

[Collin Hays]

I am a property manager, so I will give you the other side of the coin.

Self-management is always the most profitable way to go, if you have TIE.  Time, Interest, and Energy. But if you are missing any of these, self-management will cost you instead of save you. 

There are a lot of things that I can do in my life on my own and save a bundle of cash. Mow my own lawn, launder and iron my dress shirts, repaint the kitchen cabinets, change my oil, make my own pizza. Heck, if I really want to save some cash, I might even attempt to do my own car repairs and body work, or even build a fence for my backyard.  With each of these, we do some mental gymnastics on what our time is worth.  

We also tend to spend our time doing things we enjoy, or prefer DIY. I kind of like changing my own oil. It's fun. My next-door neighbor, he's more of a lawn and garden guy, couldn't care less about changing his own oil. And me, I hate doing lawn and garden stuff.  I also don't like to bathe and groom the dogs, give myself a haircut, or chop wood for my fireplace. I am happy to pay other people to do these things.

We don't try to convince our clients into allowing us to manage their properties. In fact, we try to talk them out of it to ensure it is going to be a good working relationship. Most are working professionals - physicians, lawyers, real estate brokers, executives, and so on. They hire us because they value their time and don't want to give more of it away, or complicate their lives. Most would rather watch paint dry than manage a rental.  

Our biggest frustration with clients is the ones that want to co-manage alongside us. I just fired a client last week - a prominent businessman with a wonderful cabin. But he wanted to second guess everything we did.  The rates, repairs, brand of the new coffee pot, you name it. I told him he's better of self-managing because he obviously has TIE.  No hard feelings, but we just couldn't continue with it anymore. He was driving my team crazy.

So to your question, whether or not a property manager is worth it, the answer is different with every investor. What matters is your personal situation.