Beware! – Not All Vacation Rental Management Companies are Created Equal!

The vacation rental world can be daunting at first glance. There is a lot of information and lot more companies out there. If you are starting to look at vacation rental management companies, make sure you are comparing apples to apples. Services offered by management companies vary wildly. First, commissions vary wildly depending on where your vacation rental is located. If you are new to the VR world, you may be shocked at what an agency charges compared to a long term rental company. You can expect a short term rental company to charge 15-35% of the gross rent. A short term rental is very different than a long term rental with many moving parts. Trust me, vacation rental companies earn every penny and if you find a good one, they will make you much more money than you can make on your own.

Many companies will promise low commissions with excellent results but you often get what you pay for. In our highly competitive market of San Diego, we have high operating costs with exorbitant advertising costs, high salaries for employees, insurance costs, and more.  My rental company (Pacific Coast Vacation Properties) also contributes heavily to a legal fund  to fight ongoing regulations so we can keep using our homes as vacation rentals.

If you are looking at a company that is on the low end of the commission spectrum, make sure you find out about additional fees they may charge you the owner. There is a certain cost of doing business and companies that have very low commissions usually are cutting corners and may be here today and gone tomorrow. Remember, the lowest price isn’t always the best!

Many companies that have lower than average commissions are notorious for charging owners for additional fees that can really eat into your bottom line. Many companies will charge owners for credit card fees, listing site and advertising  fees, linen fees, one time setup costs, photos, virtual tours,  and more.  Some agencies will mark up repair bills, costs for stocking your home between flips, and technical fees for troubleshooting internet and cable problems.

That may seem a bit discouraging as you start your search but if you follow the guidelines below, you will have no problem choosing a great VR company.

First off, make sure you interview several companies when choosing someone to take care of one of your most important assets.  One of the key things that helps me differentiate companies is to call a company you are interested in and see if they answer a phone immediately or get back to you with a reasonable amount of time (The sooner the better). This is a good sign of how quick a company will get back to you when and if you have issues with your home.

When you do get to the person in charge of owner acquisitions, find out if you feel comfortable with the person.  This is an important relationship you are about to enter into and one you will most likely be involved with for years to come.

Does the company advertise on your behalf as part of their commission or do they pass on the advertising costs to you?  This is VERY important. Advertising can be very expensive and can really cut into your bottom line. Ask the company on which listing sites they advertise on, what subscription level they purchase, how much they spend on Search Engine Optimization, what they spend on Google Adwords,  and how they advertise on social media.  The more a company advertises, the better results they will have for you.  We typically spend several thousand dollars on each listing each year and advertise on dozens of listing sites and invest heavily on SEO and pay per click advertising (Google Adwords).

Does the company pass on credit card fees to you? This is a common practice for many VR companies.  These are the fees paid by the management company to the credit card company if a guest uses a credit card to book their vacation home.   These fees range from 2-3.5% or more of the total booking price a guest pays when coming to stay at your home. Many VR companies pass this entire fee on to you or may split the fee with you. This directly affects your commission rate by whatever amount the management company charges you.

Does the company charge a linen fee?  I have mixed feelings about this. Some companies charge this annually AND change out the linens as needed. If this fee is reasonable, it is a great way to make sure you always have great linens at your home. In my experience though, this fee is usually well beyond what linens cost a management company.

Are professional photos included as part of your package?  Many companies will hire a photographer and pass on the cost to you. Any extra such as virtual tours, etc are billed to you as well.  We include photos, drone video, virtual tours, and floor plans of your home at no cost to you so we can make sure you have all media needed to represent your home to its fullest potential. We also provide this to make sure we have the same quality and consistency for all our homes.

Does the management company charge extra for repairs? Most companies will setup repairs to your home for when inevitable damages occur. Many of these companies will mark up the repair and put the profits in their pocket. This may or may not be ethical as the company may be colluding with repair companies and recommend companies where they can get a bigger margin and not necessarily recommend a company that is the best repair choice for you home. You very often may pay a premium for certain repairs after the management mark up. This is especially true if you are an out of state owner and don’t know about local costs for repairs, etc.

Does the company charge a setup fee? Some short term rental companies charge an initial setup charge when you sign on with them. The fee can be anywhere from a few hundred dollars to a few thousand.  If a company charges a setup fee, make sure you are getting a substantial value for the money you are paying.

How do guests access your home?  These days, there are dozens of digital and WiFi locks out there. Does the company your interviewing use these?  Better question is who pays for the digital locks on your home.  We buy and install WiFi locks at all our homes at no cost to the homeowner.  This is key so we can tell who and when a guest comes and goes from the property.

How does the management company clean your home? The cleanliness of a home has gotten more and more important as vacation rentals have made their way into the mainstream. Make sure to ask your prospective management company questions like: When does my house get a deep clean?  Do they charge extra for cleaning windows, ceiling fans, etc?  Do they have any awards for cleaning?  Check the management companies reviews for mention about cleanliness of their homes.  More and more guests seek hypoallergenic stays and uber clean homes when traveling. The cleanliness of a home can make or break a management company in my opinion and is an area in which we spend a significant amount of time and money.

What does the company do to ensure that your home and your neighbors are taken care of?  How well does the management company vet your guests? Do they do drive by your property during holidays and in the summer? How comprehensive is the rental agreement a guest has to sign? Does the company your considering meet each guest at the house to set expectations and make sure the guests have represented themselves correctly?

Ask about their on-boarding process! A well organized company should be able to outline every step necessary to get your home vacation rental ready. We provide our owners a detailed checklist and timeline as soon as they sign a placement agreement.

Take a look at owner reviews!  All companies should have a testimonials page. Read these and look for reoccurring themes in the reviews. These will likely be the strong points of the company.  We encourage prospective owners to call our current owners as they are our best salespeople.

Lastly, ask the management company what differentiates them from other companies. For example, our company is obsessed with customer service. We build relationships with our guests and owners with gift baskets, holidays presents, shopping bags (Shopping bags have to be purchased now in San Diego), physical greeting cards, and more. All of our homes have the same amenities such as bathrobes, Kuerig coffee makers, beach toys,  and more. This goes an incredibly long way to get and retain guests which results in much higher occupancy for all of our owners.

After you have done all your due diligence above you will have a better significant interaction with several management companies. At the end of the day, make sure you like the owners and employees of whatever management company you may choose.  This will likely be a long relationship and you want to be sure your on the journey with people you enjoy. Owning and operating a vacation rental is very rewarding and profitable as long as you have all the right people on your team.

 

 

 

 

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About Greg

Greg is the owner of Pacific Coast Vacation Properties, a high end vacation rental management company located in San Diego, CA. He also owns a full service real estate brokerage company that helps owners buy vacation rental and commercial property. In his spare time, Greg volunteers for Habitat for Humanity and other charitable groups in San Diego.

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