Vacation Rental Guide / What is Vacation Rental Property Management? / Breakdown of Property management fees for Vacation Rentals

Property management fees for vacation rentals

Some hosts opt to hire a property management company to run and look after their property or properties, whereas some hosts decide to handle everything themselves. Homeowners have to take expenses into account when managing one or several properties. When going through a company, property management fees are charged to cover the costs of the specific property management services provided to the homeowner. These fees depend on what kind of services the company offers, property type and amount of properties, and also on the company, region, and state.

property management fees - how they work

To understand your budget and spending on the property or properties you’re renting out, it is important to calculate the property management fees and have a good understanding overall. 

The different Property management fee structure models

Whilst the average is anywhere between 25% and 30% of the rental cost, the fees charged by the vacation property management companies differ. They vary based on the location of the property and the company themselves. These costs can range from 10% to 50%. While this is just an estimate, all fees should be covered and finalized with the company prior to working with them.

Fees depend on the size and type of property, whether it’s an apartment, house, or luxury villa. Location is also an important factor, because if the rental is situated in a city or area where there is a high demand for rent, then the fees may be higher. Fees also depend on the services the property management company provides. This can include advertising, cleaning, local taxes, check-in and check-out procedure, paying utility bills, legal services such as taxes, financial accounting such as making mortgage payments, etc.

Different types of vacation rental property managers need to know what fees best work for them. Having an idea of how much property management companies charge for vacation rentals will give you a heads up when hiring one.

Initial fees

Much like having to pay registration fees when you sign up for something, there are initial set up fees that come with working with property managers. These fees are general fees to get started. They could cover marketing, promoting, or the paperwork needed to start listing and advertising the properties to clients.

Sometimes there is no joining fee, but when there is, it can go up to $500. This setup fee helps you started with your vacation rental business by setting up your account and listing. 

Some property management companies offer the option of terminating the agreement within a certain period of time from signing the agreement. For example, a 30-day risk-free guarantee means that if you are not satisfied with the company and service, you can terminate the agreement. 

Management fees

Management fees that are charged for services, such as cleaning and maintenance, payment collection, deposit, handling keys, guest arrivals and departures, advertising, 24/7 availability in case of emergencies, contact with the guests throughout their stay, etc. If there is damage done to your property or a leak, the company could take care of it straight away. In this case, it will be added to the final. Same thing goes for repairs, especially if they are urgent. 

Fees can be anything from 12% to 50%, or even more than the average monthly rental revenue in some countries. Management fees are typically paid every month. Some management companies come with a premium cost. If homeowners are satisfied with the premium cost then they continue to work with the company, however, some homeowners prefer to maximize their profits.

The overall well being of your rental business can be covered by these management fees. Furthermore, these fees will ensure that the property continues to be taken care of by the company. 

Flat-fee pricing structure

Some property management companies prefer to work on a flat-fee pricing structure which gives only one price for the management of the property throughout the year. The price is agreed upon by both parties depending on what they feel is the best solution. There are advantages to this type of structure, as the fee stays the same during high-occupancy times and in high seasons and peak season.

Additionally, the flat fee has a lot to do with the type of property and where it is located. The vacation rental property management rates on a flat fee are often based off of the rent prices and what fair market value is.

Average vacation rental Property management fee calculation

In order to effectively do a property management fee calculation, you’ll have to consider a number of factors:

  • The kind of property management fees they’re offering: flat fees, percentage-based, etc
  • The fee model they work with: whether they use commission or guarantee models
  • Extra fees: like cleaning, maintenance, and advertising fees

We recommend that you are aware of all the costs and hidden fees before signing a contract with a property manager. Research all the companies available in the area and find the one that best suits your needs. The majority of professional vacation rental property managers will provide you with a list of all the fees and will go through and clarify each one. Also be well informed of the property management tools, such as books to help you out.