How much does property management cost and how do I hire a property manager?

Published Date: May 9, 2023

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For many vacation home owners, hiring a property management company is a smart decision. Managing a rental property can be time-consuming when you factor in tasks like finding and scheduling renters, processing payments, answering questions, handling check-ins and check-outs, and fielding maintenance requests. These tasks are especially challenging if you don’t live close to your rental property. Most vacation rental property owners hire a property manager to take care of these ongoing tasks. And while using a property management company will undoubtedly save you time, it doesn’t come cheap. Here’s what you need to know about the costs of using a property manager. Then, read on for tips on how to hire one. 

Fee structures for property management

There are three ways that property management companies can structure their costs: by taking a percentage of the monthly rent, with a flat monthly fee, or with a guaranteed income model. 

Percentage-based fees

In this arrangement, your property management company takes an agreed-upon percentage of the rent your property generates each month. The percentage is usually between 25% and 30% of rent collected. There are many factors that affect the specific percentage you’re charged. For example, urban locations tend to have lower management fees than beach or mountain destinations, because they’re usually easier to access and have less maintenance. What’s included in your property management agreement will also affect how much you pay. One advantage of this model is that the property manager is incentivized to keep your property booked as many nights as possible. Because of this, however, they may want to set limits on how many nights you personally are allowed to use the home, since it is unavailable to rent during those times. 

Flat monthly fees

Also known as a fixed-rate fee model, in this arrangement you pay a flat fee each month, no matter how many nights your property is booked. If your home is located in a destination with predictable high and low seasons, you may go through periods when your property management fee only makes up a small portion of your monthly earnings and other times when it feels like a significant expense. The upside to a flat monthly fee arrangement is that it makes budgeting for your operating expenses easier and more predictable. It is important to note that some property management companies that offer flat monthly fees do have a wide range of surcharges for specific tasks, like responding to after-hours maintenance emergencies. 

Guaranteed income fees

In this model, the management company guarantees the owner a consistent amount of rental income each month, regardless of how many nights the home is rented out. The property management company will propose a rate based on how much rental income they think the property can generate. Any excess profits are kept by the property management company. The guaranteed income arrangement appeals to homeowners who want a consistent income stream. This may be especially attractive for homes that are in seasonal locations. However, it’s important to make sure you’re not overpaying. If your property generates year-round, consistent income, you might make more money with one of the other two models. 

Other expenses to keep in mind

When hiring for a property management company, look for a company that is straightforward about not only their fee structure but any additional setup costs or fees. Here are a few fees to be aware of as you interview potential property managers: 
  • Onboarding fees: When you first sign on with a property management company, they may charge a one-time setup fee to get your property rental ready. This includes things like installing a digital lock, taking listing photos and taking inventory of what’s included in the home. 
  • Cleaning fees: Some management agreements include the cost of cleaning the property between renters. Others separate this out as a separate, per-cleaning fee. In the case of the latter, you’ll likely want to pass this cost along to your renters. 
  • Additional amenities fees: If your property includes special amenities that require additional or specialized maintenance, you may be charged extra. This includes things like a pool, hot tub or garden. 
  • Maintenance: Most contracts cover basic maintenance in their fees, but often limit what’s included. For example, you may have to pay extra for things like snow removal and landscaping. Or they may be specifically excluded and you’ll need to schedule those services with your own vendors. 
  • Trip charges: Your manager may charge you a flat rate every time they have to go to your property to resolve a problem. 

How to hire a property manager

Just like any time you hire a service provider, it’s important to do your due diligence. After all, the company you choose will be responsible for not only keeping your property in tip-top shape, but making sure you have a steady stream of satisfied customers. Your first step should be to ask around for recommendations of trusted property management companies. You can ask friends and family members. Your real estate agent is also a great resource. If you can’t track down any referrals, start by checking reviews online. You should be able to find both reviews from property owners and guests who have stayed in the homes they manage. Once you’ve narrowed your options to a few top contenders, it’s important to get all of your questions answered. The right property manager should be patient and fully answer them. They should be clear and upfront with all answers, especially those related to fees and inclusions. Here are a few must-ask questions: 
  • What is your fee structure?
  • What services are included? What services are not included? 
  • Are there any setup or onboarding fees? 
  • Do you mark up maintenance and repair costs?
  • Is there a contract or can I cancel at any time?
  • Can I tour some properties currently under your management? 
  • How many staff are available where my home is located?
  • How do you handle maintenance emergencies and renter requests?
  • Where do you advertise your rental listings?
In addition to interviewing and reading reviews online, you’ll want to read the full property management agreement, compare fees among a couple of companies, and check each company’s licenses and any required certifications. 

An alternative to renting out your vacation home

Many second home owners use a property manager because rental income helps to pay for the cost of their homes. Pacaso offers another way to own your dream retreat. Our co-ownership model allows you to purchase from 1/8 to 1/2 ownership of a luxury second home in a sought-after destination along with other owners. Your home is professionally designed and maintained, so you can focus on what matters most: making lasting memories with your loved ones.

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