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I am a new property manager that is in a unique situation. The owner of the property lives in another state and only visits maybe 3 times a year for a week or two. He recently decided that he wanted to off set some costs and turn this very special place into a vacation home. It is a log home that has been converted into a duplex. Very private. I live in the loft of the home as a tenant but now also as an on-site property manager. I set us up on VRBO and am seeking other avenues for marketing as well. I do all the bookings/sales, shopping, housekeeping, and make all the calls to contractors ie home repairs and maintenance etc. I am doing all the work as he is a busy man who if had time or in the past, someone up for the challenge, would have done this a long time ago.
My question is: is there anyone else in my position? We are in the process of writing a legal contract between he and I and I am wondering what a fair percentage would be to split the revenue? Or better yet, if you are a property owner, what would be a percentage that would be worth it for you to sit back and let someone else handle the day in and day out of the business?
Quick answer -- our management charges $255 every month as a set fee for management overhead whether or not they take any bookings (but then they have a rented office and represent other homes) and then takes about 20-25% as commission on every paid rental. They keep track of the funds and arrange for any maintenance needed. We have a joint checking account with them in order to pay all expenses and they send us a monthly statement.
You should have a contract spelling out the responsibilities of both parties. Communication is the most important factor. Best wishes.
You have a unique situation since you are actually living at the site. For one, you stated it was private, but how private is it if someone is living upstairs. You could live elsewhere during rentals depending upon how moved in you are.
Although this may or may not be feasible. Some things to consider to help you make the right choice. How will the owner handle your current rent. What expenses do they expect from you. Will you book, clean and provide mant?
Will you be the one receiving payments and sending the owner a check against your rent? Utilities, and other expenses?
Cleaning materials? Upkeep and general mant? How will all of this be broken down. How good of a relationship you have with the owner is important. You don't want to get locked into a contract that becomes a headache. If the owner has done little with the property as far as renting in the past, then they will be very happy to receive a check each month.
If the rates are reasonable you may want to ask the owner to forward the utilities bills to you since you are living there and this would allow you to neg a higher cut. Though remember it is a matter of how comitted you are. Like I said you have a unique situation and much needs to be considered. But if you just went the normal property managers route you are entitled to 20-30% of the rental. In your case being basically a Super it could go as high as 50%. Take your time to find out as much you can about the demand in your area and consider your costs. Then decide how much you want to pay and go back to the owner with your proposal. Gl in your new business.
Thank you for the response! The way we have been doing it thus far is all the funds go into his banking account. I then invoice him once a month for cleaning, and supplies ( since we are yet to have a contract with an agreed amount) So far he has given me about 10-15% cut of the revenue from bookings. Once I gather information and write a proposal it will be a set amount. I keep all my rent and utilities separate to make for easier accounting. I do book, clean and provide maintenance by making service calls. However I have the contractors invoice him directly. This is of course if it is an issue beyond my abilities. I have put a lot of time and effort into getting the place ready to be a rental, upgrading bedding, organizing cabinets, painting and gutting personal belongings not to mention adding special touches. The place looks amazing!
You are right about being locked into a contract. I think we are both looking at the first year as a trial run. We may write into the agreement that we can end terms of the contract if both parties see fit. My initial thought on percentage was a 40/60 split. Myself being 40%. He asked me to do research as he was thinking moreso around 15-20%. He does keep referring to this as a partnership, I do however feel as though my time and efforts especially as a partner would be worth more. He is a very reasonable and fair man and I am sure we will come to an agreement we both feel comfortable with.
So thank you for the insight. This helps tremendously. I especially wouldn't want to be locked into a contract that I felt I settled for less than my worth. While I am having fun doing this I also want to see it succeed. I am extremely committed and excited to see what the future holds as we make steady progress. I am a hospitality/customer service specialist and truly feel I bring magic and uniqueness to this arrangement. While a managment company may ask a lower %, I feel I offer more personalized and attentive guest service.
Thank you and good luck to you!
Thank you for the insight. You are right about communication, without it, nothing can suceed! This information is very helpful in writing my proposal. Is it an industry standard for a managment company to charge a monthly fee? I am curious as I can use this in favor as it seems he woudl pay much more for this service, while I am sure the marketing and such make up for that cost.
Well, I'm not sure about the monthly fee being usual. The rational is that even when there is no rental income the manager is still fielding inquiries, filing paperwork, paying taxes and utilities, supervising maintenance people as needed, checking on the house, etc., so their time would otherwise not be paid for unless they charge a set fee. They do charge that fee even if there are rentals and then they also take a commission of 20-25% of the rental income right off the top.
Given your situation and the fact that the owner will really be doing nothing aside from paying the outside contractors directly, I would assume you could ask for a higher percentage. We do visit our rental 3 times a year and do considerable work there ourselves as well as updating things like linens and furnishings. We also manage our own web site and both HomeAway and VRBO sites to keep them spruced up to a high standard.
Where my VH is located, I investigated the 4 property management company's in the area. Each one wanted the exact same amount. 24% of the rental amount plus $100 per quarter for advertising. I decided to hire my own property manager and it turned out very well for me and he is very happy with the added income. He gets 15% of what I rent the property for and $100 to clean the property. I buy all cleaning supplies. I do not rent for less that a week at a time, so my rental fee per week is $1,350.
This is how I would do it.
I would charge no less than 20% on each paid rental and make sure the owner knows they are responsible for all costs associated with marketing, upkeep, etc. I would charge a cleaning fee to the guest that would cover your time in cleaning the place and replenishing things like soaps and other amenities you leave in the home.
I would list it on VRBO, HomeAway and Craigslist. I've not had much success putting our properties anywhere else.
I would create an LLC and open a bank account in that LLC's name and accept all rent payments. At the end of each month I'd do an accounting exercise that breaks down how much I would get and how much the owner would get, how much goes to cleaning, taxes, etc. Then I would cut myself and the owner a check.
Make sure you're paying taxes on your income so you don't get nailed at the end of the year.
My guess is that you are not rising to the level of service that most PM that make 20+% are providing (such as accounting). I charge 15% and offer similar services to what you speak of, however I also have a comprehensive website, a faithful clientelle, am a licensed RE with funds held in escrow as they are required by my state law and great new guests in person. I would outline expectations clearly, but I'd count my blessings with 15% if you aren't generating the leads yourself.
Each area varies as to the 'average management commission' charged. Some are 20%; others 40-50%. If you are going to come in on the high-end with a 40/60 split, as you suggested, then you really need to be prepared to demonstrate/illustrate exactly what it is that you will be doing day in and day out to justify that type of a commission percentage. Being that the owner is thinking more like 10-20% it will likely become a tough-sell at that point.
However, if you contact other management companies in the area and find that nearly all of them are charging a 35-40% commission then you could go to the owner, let him know that and offer him a 'better' rate of 30% and you'll take care of everything. That still puts you in a good position to earn a decent commission on each booking and will incent you to do all you can to increase exposure for the property and the number of bookings you are able to secure.
The key to successful management is attention to detail; every detail. If you can do that, you'll do well. If you can't, it will be a frustrating experience for you, the owner and the guests.
Keep in mind, if you can do a great job for this owner there are likely other owners that would be interested in your services, if that is a direction you'd like to go with things.
'A better way to stay'
Perhaps your initial contract should be limited to one year so you can renegotiate if it is not working?
We as owners pay 20% of gross rent to our manager in Mexico. He greets guests, but subs out cleaning and repairs, guest pay the cleaning fee. We take care of all ads, bookings and finance. He charges other clients a flat fee per month rented or not.
We have just hired a manager in Maine who will come ecery Sat. for the summer to assist with turnovers. He will take trash, mow, sweep decks and change out propane tanks for the grill, he receives a flat fee of $165. The cleaners bill......get ready $35 per person per hour!!!! I am in the 4th year of trying to do this for less with horrible results, we shall see how this year pans out. We bill the guest for half of the cost, but plan an increase for next year. I bill cleaning separate so it is not subject to the 7% lodging tax.
To summarize I think you should receive one fee as the listing/marketing person 20% and then a flat fee for being the super. Keep in mind it may take a year or so to get your bookings up. We use VRBO, Homeaway and FlipKey. One booking more than covers the fee.
Wow. I am a property manager and charge 20% commis. I do all the web work, bookings, monies, cleanings, etc. Rentals pay the $100 cleaning fee. Clean and simple. I'd say 99% of the time, the cleaning fee more than covers the time it actually takes me to clean.
I am also a new Property Manager of 3 homes, at the moment, in a coastal South Carolina community. At the moment I charge $250/home cleaning, $35 on arrival/check out, and $35/hr should the guest call me for any reason during their stay. This is the only service I provide for these 3. I have a meeting with a homeowner this week who is wanting me to do everything including provide the services I already provide to my other clients. I was thinking that asking for 10% commission of what the property rents was somewhat high until I read some of these blogs. I want to be resonable but at the same time not uncut myself based on the "market". Any feedback from you seasoned Managers will be greatly appreciated!
Just got a quote for cleaning the 3 br 2 ba house eceey Sat for $230, $35 per person per hr. The manager whomwill over see the cleaning, take trash, mow and sweep the deck and replace propane tank formthe grill gets $165. Xtra $25 for the linens to be washed. We are located in Maine.
I'd shop around! I'm on Sugarloaf Mt. and clean some big condos. Never takes me more than three hours to clean.
I have a friend in Old Orchard that pays the same.
Where are you located?
Square footage could differ greatly between a house and a condo, but it shouldn't take 6 hours to clean a 3Br 2 Ba ANYTHING. Everything is cheaper in the South, so $25/hr. is good money. I would say that it's hard to put a price on trust-worthiness though. It doesn't matter how much money you save if they don't clean the house properly, show up on time, or damage or steal something than you haven't saved anything.
I manage 10 waterfront homes for 15% and make about $30-35K/yr. I'm the only one in my area doing it and provide full-service. It probably takes about 15hr./ week so I really can't imagine charging 20% unless you had substantial overhead for some reason. I'm also in real estate sales and it compliments my business quite well delivering buyer clients and listings as well as steady stream of income to match the sporatic income of real estate. I have a very trust-worthy house keeper that cleans for a set rate for each home. It basically works out to be $25/hour and an hour per bedroom except for some of the larger homes which have more common area. I don't have to follow behind her and she reports any problems to me making my job a lot easier. All homes have 2 sets of sheets and she rotates each visit, but is able to wash all of the sheets on the premises about 95% and takes them home when she can't so she isn't sitting around waiting on laundry. But it should take one person long enough to clean the entire house as to wash the linens so that they don't need to charge extra. Owners pay someone else to mow grass, which I arrange and pay from escrow and I take care of piddly stuff like propane gas tanks and such and minor repairs or I arrange contractor and pay from escrow. Owners pay for additional marketing on homeaway and VRBO that benefits just them, but I have good search presence and do some outside advertising that brings in a good bit of leads for all homes.
Owner's take care of taxes and accounting. My CPA actually told me to 10-99 house keepers but not owners, so that's how I did it last 2 years, but now I'm hearing conflicting information. I provide monthly statements with gross and net income. I'm not interested in paying owner's bills, but can see how companies would charge more for those services. I would say that I provide better service that most of the large companies that just pass off a key. I deal 1-on-1 with renters and answer their questions and am a helpful resource to them from beginning to end and have a very strong repeat business as a result.
Thanks mcvl-realty. I manage my own vacation rental, now a fellow owner has asked me about managing thier property. I am new at this! How do you calculate the 15%? If rental per night rental is $2000 and Total (w/pass through expenses such taxes, cleaning, etc) is 2,500 - Do you take 15% of $2000 or $2500?
Everything is negotiable, but I make clear that I charge 15% on gross rental proceeds (minus refundable security of course). This means that I make $15 for every $100 cleaning charge, but I also arrange and oversee that cleaning and 15% of gross is still better than 20% of net. I present owners with a spreadsheet of estimated rental income I expect for the home. I break it down by month, with a guesstimate of how many rentals I expect for how many nights at the rate that I recommend and then calculate my management fee, cleaning, and taxes to give them their net earnings. I try to give them a realistic projection of the check they'll be getting each and every month and by doing this there is rarely any confusion when the first monthly statement comes (which also gives them a clear break down of what money came in and where it went. I started my company from scratch and have never seen how any other agents do it all, so I don't know if I'm the model to follow or not, but it's evolved over 6 years to be a pretty smoothly run operation.