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Hi all. This is our first investment property, and we bought a nice cabin in the woods that was already a successful STR in an area of the US known for its outdoor beauty. We went into the situation knowing that we wouldn’t be able to do the upkeep ourselves (no skills), and we live too far away to clean it. We found a property manager that seemed nice and very detail-oriented who said that they charge 30% of the rental income for cleaning, fixing small repairs, answering guest questions, etc., and that they handle the bookings. Well, after a month of being with them (and before any payouts) I went into the listing on their own website, AirBnB and VRBO and I see that the fees that they charge amount to between 65 and 80% of the total stay. In other words, the fees they’re charging are up to 80% of what guests will pay to stay at the place (not even including taxes). Check this out:
This is our first month and we haven’t seen a check yet or any breakdown of the rental income, but I’m about ready to cancel the contract.
However, the area where we live is well known for not being able to find any kind of home help, whether it’s contractors, plumbers, electricians, cleaners, etc. Nobody wants to come out this way. I’m thinking of trying to find a community college and recruit some younger co-hosts or something. Or maybe go the way of one of my neighbors and say “No cleaning fees, but bring your own sheets, towels, and everything and clean everything yourself as there is no cleaner.” Doesn’t seem like a good idea in these times, though.
Any thoughts on how to proceed? Thanks for your input!
It says in the contract “lessor agrees to pay a commission of 30% of the rents collected in each month (which shall be deducted from the rents collected).”
I haven’t said anything to them yet; I’m thinking I could wait and see how they first payout looks. If they don’t send me a detailed picture of the stays, which platform they came through, and what all the fees and taxes were, that might be another reason to just terminate the agreement.
It goes against my own personal values-I wouldn’t even consider a place that charged like that because it would seem to lack transparency or be an outright scam.
I think part of their approach is that by setting the cleaning fees and such very high, they limit the number of bookings they have to deal with, which I think goes back to business capacity. I imagine if I tried to find cleaners and handymen myself I’d get frustrated pretty quickly, so I’m kind of paying for the workforce.
I’ll take your word that the management expenses are up to 80% but I don’t see that in your spreadsheet because I can’t follow it. {For example, what is ‘MSG’? Are you comparing an Airbnb reservation for two nights with two-night income or $343 with a VRBO 2-night reservation of $316 of income? Why are the cleaning fees so different?}
How are you seeing the fees they’re charging when you haven’t received a statement yet? That doesn’t make sense.
I would think that the cleaning fee is in addition to the property management fee, though your post says it does include cleaning. Yet the cleaning fee on its face is more than 30% of the income. I’d be curious how the contract defines what comprises the 30% fee. Our cleaning fee on a two day rental would also be more than 30% of the income.
So, discuss this with your property manager. I’d ask if they have 30 mins to discuss and then I’d walk through the numbers. Based on how you’ve described this I’m skeptical that they are charging you 65-80% unless there’s a fixed fee or something else you haven’t mentioned. Chances are the confusion relates to the cleaning fee.
Yes, but you manage your own properties, and have many years of experience as an str host, right? Anything can be made to work if it’s managed well, but the OP seems to be a novice to str (unless I misunderstood), says they have no skills to do upkeep and live too far away to clean themselves, so I assume too far away to even keep an eye on the place.
My first year as a host, I used a property manager who claimed to take a20% fee. In 3 months of a beach rental I cleared $1,030 (low). At the time, if I were self managing, I would have cleared $500 per week.
They nickled & dimed me to death. Cleaning fee, linen fee (one guest said they brought own & never opened the linen bag & supposedly arranged to not have a linen fee with PM prior to arrival), charged for cleanings when there was no guest, and promoted last because they sold the reservations to the more expensive properties first (same % but since base higher their commission was higher). Plus charged for maintenance I don’t believe they did. Thieves.
They thought because I was not local, I wouldn’t be able to check on things.
Depending upon your contract, you may be stuck for a while with them.
Is there anyway you can pop in every 4-6 weeks to check on things & do maintenance?
Do you know any other local hosts who may can help with references for cleaners or maintenance or maybe do the work? You can handle the communication but you need someone there.
I’m happy to share how I manage remotely. It isn’t for everyone & it may not be for you but we can talk
I can’t imagine they meant they personally would do the cleaning as part of the 30%. I suspect they meant the 30% includes managing and scheduling the cleaners.
If you take out the cleaning fee of $133 (it should be the same for each platform), they are charging the guest $90 - or right around 30% of the total nightly rate - for their fee.
The other $20-$30 seems to be some combination of damage protection and linen fees that are probably pass-throughs to other parties, too and not included in their fee. It appears they put those costs into the nightly rate on AirBnB because there aren’t a lot of options for fees on AirBnB compared to VRBO.
I agree they didn’t explain this well, but I don’t think they are ripping you off.
It looks like the fees are per reservation, not per night, so unless you have a 2-night maximum stay, the 30% might be based on an average stay length. If the average stay length is 4 or 5 nights instead of 2 nights, then their fees are closer to their claim of 30%.
The way they’re doing the fees might look bad to some because they’re taking a fixed commission per reservation due to the fixed costs that are associated with each reservation. However, this is really the fairest method for guests compared to rolling in a fixed cost/commission into the nightly rate. Personally, I wouldn’t worry about it as long as your occupancy is reasonable, but it’s probably too early to tell.
That might mean they’re going to also take 30% from the nightly rate and if it does, then I would say you’re really getting screwed.
Sounds like you didn’t understand the figures clearly before you signed up with them @mccarras
The 30% is the management fee for managing the property and all other costs are additional such as cleaning.
Was that not made clear to you in your contract with them.
Did you take up references with previous hosts?
The listing should be set up in your name and the cohost set up as a cohost on your listing so you retain access to your listing .
One alternative is to advertise for a local experienced cohost and hire a local cleaner. Please don’t try and get a local student to cohost - likely they won’t know how to vet guests, manage problem guests, manage cleaners etc
@mccarras - You asked for advice on what to do. Here’s mine:
Get with them (in person if possible), and have them walk you through what a couple of months would look like assuming you get several bookings, starting with the data you have in your table.
You need a clear definition of “rent”, a definition of “rents collected each month” (cash or accruals?), and an explanation of the line items in the data you have. And what they do and what they hire someone else to do. You need to understand when they collect their 30% compared to when they collect the cash (at time or booking or later, in one payment or more), and how they charge the guest on their site.
These people are managing your business for you and you have the right to know what they are charging and what they are doing. But don’t be antagonistic at this point or accuse them of overcharging. Just tell them you want to understand how the process works. You don’t have a backup right now so you’re screwed if you piss them off and they drop you.
If you don’t like what they have to say and think they are charging you too much, then you need to do it on your own or find someone else that won’t charge you as much. At that point others on this forum might be able to help you.
I don’t understand any of that spreadsheet. I was a PM for a few years for a couple and I charged 20% of their rental fee. There were no extraneous charges - if we needed new towels, they went and got them and mailed them to me. This spread sheet is a mess.
I think also that the OP is looking at fees like cleaning fees and damage protection as a property management fee. But they’re not in any usual sense of how that term is used.
The OP can ignore fees like damage protection that typically goes to a third party and usually is a ‘wash.’
The OP is understandably concerned that much of the gross income is taken up by various fees, but this is the nature of the STR business. Guests, too, lament how much more they pay than simply the daily rate.
@mccarras Welcome to the forum! Here we can explore together options to increase revenue and manage costs. Most of us cannot afford to hire property managers and need to ourselves be involved in managing our properties. Managing remotely is a challenge and a costly one especially where the daily rate fees are modest.
Yes, your spreadsheet makes things clear. The spreadsheet the management company gave the OP is a poor one.
One thing that makes no sense is why the cleaning fee would be $100 more if booked on Airbnb, than VRBO. It certainly wouldn’t make sense to guests who were checking on both platforms.
The only reason I can come up with for the managers to do this is if they prefer dealing with VRBO, so are trying to get more bookings through them.
It’s only $90 more, not $100 more. AirBnB does not give a lot of options for fees (Vrbo does). So the PM has included the $90 fee you see on the other platforms in the cleaning fee.
I don’t understand the difference in cleaning fees either.
I also missed (did I?) that the management firm gave the OP the spreadsheet template.
The spreadsheet does show how challenging it can be to make money on an STR when paying today’s cleaning fees and a 30% property management fee. I’m not saying that these fees are excessive or unfair but they they can put pressure on the bottom line if the owner cannot command a high daily rate at some reasonable level of occupancy.
I would think that to earn a reasonable profit with those costs you’d need to be a ‘unique’ kind of property or otherwise in a ‘hot’ market that provides a high daily rate, high occupancy rates and an ‘ecosystem’ of support that suggests adequate supply and suggest cost-competitive prices for support. Or maybe ‘reasonable profit’ is not truly the objective; it could be an eventual retirement home or a family get-together venue today, where offsetting costs is the true objective.
As people consider ‘investing’ in an STR it would seem essential to run a spreadsheet under various scenarios, with some sense of what the local market conditions are, and some ‘stress testing’ if the spreadsheet’s assumptions are not met, as when the supply of STRs swells or legislation/regulation limits it.
