Is there a Rule of Thumb for STR property management % of gross?

Question

I'm looking for a general rule-of-thumb for estimating the percentage of gross income used for paying for a management company to handle an STR.  I realize this is likely very location specific, so I'd look at somewhere like Orlando, FL where the market is hyper-competitive as a "worst case" scenario.

As background, I am very new to the idea of STR properties as an investment option and am trying to wrap my head around how best to evaluate properties.

I tried searching for this topic but had mixed results on the site, not sure if there's any simple tips/tricks to it as i'm guessing this is only the 1,000,000th time this question has been asked...

Thanks!

Mike

John Underwood · Answer

If it is hyper competitive I would shop around to find the best bang for the buck.

Of course the best solution is to manage your property from your phone without a PM.

Mike Shulman · Answer

The property manager I use in Orlando changed 20%. They are a mid sized organization and do a great job. I don't care for the big companies but I want a professional organizations.

Greg Moore · Answer

@Mike McKeown it varies by market. The standard in Orlando is 20%. In the Smokys, it’s 35%! I prefer to self manage STRs to optimize pricing and guest experience. In this scenario, I budget 7.5-10% for PM and pay it to my business.

Ryan Moyer · Answer

Best solution is to do it yourself.  It's not hard.

If not doing it yourself you can expect the rates to be anywhere from 15%-30%.  15% would be the smaller type shops, most likely something similar to someone here that is already managing their own and can take on another few as a manager.  30% is going to be the bigger shops with big staffs that charge a big markup and often (not always) do a worse job.  It's going to be hard to cashflow well giving up 30% off the top.  Remember it comes out of gross, not profit.

Depending on the area you might even see some as high as 40% though that seems crazy to me.

Mike McKeown · Answer

Just wanted to quickly say THANKS to everyone for the insight!  I'm new to the game and even newer to this website and community.  I'm very grateful to have found you all and look forward to growing and learning.  My desire is to be able to also give back to this community once I get my bearings!

Peace!

Jim Hudelson · Answer

The short answer is No.  Regional variations play a big role in what companies charge (competition).  I've worked in the short term rental business for most of my life (and I'm pretty darned old).  What I have learned is that

all rental companies need to make a similar amount to stay afloat.  It is not an inexpensive business to operate.

The business can be broken down different ways but I think the 4 main areas where a property management company benefit you are housekeeping, property maintenance, marketing, and accounting.  You will find different companies providing different levels of service with these four areas.

So, it comes down to how much help you need or want.

Some companies are down right unscrupulous and are mostly looking to make money off of you (from you).  Most companies are fair and do their best to provide a quality service.  Look for a company that has been in business for a minimum of 5 years and has a mostly favorable reputation.  Good companies have good employees.  Having that kind of expertise on your side has value.

The majority of people on this site are people who self manage.  There is nothing wrong with that, it is for sure how you can keep the most for yourself.  There is a learning curve to self managing so if you are new to the business, hiring a PM company is actually pretty smart.

Your contract with the rental company is the alpha and the omega.  Talk to 3 or 4 companies and have them provide their owner contract.  After reading 4 of these you will start to see the subtleties for how they operate.  Go onto their website and work through booking a few properties.  See what fees they are tacking on.  This is how they can siphon off a chunk of revenue without sharing it with you.  If they charge a 15% commission and are providing all 4 services, or even 3, they are making money elsewhere or they won't stay in business.

I could go on and on but I won't.  Good luck with the journey.  If you have the right mindset it's a fun business to be in.  You have to be able to take some lumps along the way and not have it ruin your life.

Connor Cushman · Answer

This isn't what you're asking for, but you should self-manage. Very doable. All the tools are out there to do it well. The reasonably priced property management companies out there will charge somewhere between 10% to 25% depending on what they offer. Check out Evolve or Vacasa.

Yancey Sanderson · Answer

What are the essentials needed to manage a property yourself?

My wife and I recently purchased our first STR. It was an off market deal from a property manager. We agreed to use him through the rest of the year, but we are interested in finding a better deal or doing it ourselves.

We are very new to this. Any guidance is appreciated. Thank you.

Joseph Velez · Answer

Mike,

My understanding is that STR property managers will charge around 20% in Central Florida which is much higher than Long term Property managers. That does not include all other fee, keep in mind that STR property managers deal with the high turnover, maintenance, repairs, cleaning, dealing with all the furniture, appliances, services like cable, internet,  and all other amenities including pools if you have one. let me know if you need a referral to a STR property manager or if you have any other questions.

Alex S. · Answer

Hey @Mike McKeown, you'll find a wide range of % of gross for PM.  They don't all offer the same services, so that is important.  Evolve is 10% usually, but they provide very little.

Do a search on this forum and you'll find tons of data on STR PMs.

Is there a Rule of Thumb for STR property management % of gross?

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