Property management companies vary widely for short-term and long-term rentals in their services and what they charge. A good property management company should be able to keep your property booked out, maximize profits, and handle most of the responsibilities of managing the property.
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Property Management Fees Explained
When researching property management companies for any rental investment, it’s essential to understand the details of their services.
Different management companies are available depending on the property owner’s needs. Understanding if the company focuses on long-term or short-term rentals will be the first thing to look for. Then learning what services they offer and how they collect fees will be a significant deciding factor on who the property owner uses.
How do Property Management Fees Work for Annual Rentals?
A property management company can structure fees on annual leases in two ways: Either by taking a percentage of the monthly payment or charging a flat rate for the year.
This is the most commonly used option. Paying a percentage fee means that when the rent is paid each month, the property management company takes a cut off the top before paying out the investor.
Percentage fees range between 8%-10% of the total monthly amount. For example, if the property rents for $2,000 a month, the investor can expect to pay the property management company $200 monthly at a 10% average fee.
As with all things in life, a flat fee service model has pros and cons.
Investors can expect to pay $100 monthly for a flat rate contract. This may be more affordable than a percentage fee depending on the monthly rent; however, some property management companies may not put forth as much work to get top dollar for the rental if the cost is the same either way.
Management Fees for Short Term Rentals
Short-term rentals, such as Airbnb or vacation rentals, have a wide range of fees that can be collected.
An investor can expect to pay between 10% – 50% for short-term rentals, depending on what the property management company is tasked with. A full-service property management company will charge more than a company that manages a few aspects of the home.
There are three different models for short-term or vacation rentals:
The property manager pays the rental owner a fixed monthly rate with a guaranteed income. This rate is paid whether there are bookings or not.
A benefit of this model is that the property owner receives a consistent passive income all year.
The downfall of the guaranteed income model is that the payout will not change during peak season rentals when the nightly fee may be higher.
Similar to annual rentals, the fix-rate model will charge the owners a flat fee for a certain number of services.
The property manager and property owner will determine what services are needed, and then a flat fee will be calculated. Any additional services throughout the year will be treated as an add-on and cost more money.
A commission-based model means that the property manager is entitled to a percentage of the monthly rental rate.
Depending on the services performed and the rental location, fees can range between 15% – 40%. The average commission fee is 28%, with a lower percentage for urban vacation rentals and a higher percentage for mountain rentals.
What Services does the Management Fee Cover?
There is no one-size-fits-all for the services that property management companies cover. When looking into a company, it’s essential to ask questions about what problems are covered, what structure they use, and to understand the fees if the owner needs the management company to do an additional service at any time.
One benefit of hiring a property management company is staying up-to-date on the rental trends in specific areas.
Count on local property management companies to know what to charge per night/month, where to advertise, and how to get guests into the property. Marketing might be included in your property management fees or an additional charge, so make sure to ask!
After each guest leaves, the property must be cleaned before the next one arrives. Some companies have the cleaning fees already worked into their rates, while others charge an additional cost.
Maintenance and Repairs
Upkeep and repairs are essential to maintaining any structure. Additionally, sometimes emergencies happen that aren’t converted by insurance or warranties.
Extensive repairs such as a leak or something breaking have to be addressed immediately, especially if a renter is in the home at the time. Many property owners don’t have the time or ability to rush to the house if something arises.
Additional Fees for Rental Owners
Many other fees can come up, so reading through the contract and understanding what is included is essential. Here is a list of additional services that can come up when renting a home.
Setup fee – this is usually a one-time fee that is charged when creating an account with a property management company.
New tenant fee – when it comes time for the property management company to find a renter, they may charge up to 100% of the first month’s rent. The company is expected to do tenant screening, deal with application processes, etc.
Booking management – The site will charge a booking fee if the home is a short-term rental or an Airbnb.
Vacancy fees – some companies don’t charge for vacancies; others charge an average of $50 a month for a vacant property.
Eviction fee – there is typically an hourly rate charged if a company has to present an eviction notice, work with attorneys, and potentially attend court.
The First Step
Hiring a property management company can save time and undue stress. It provides a barrier between the property owner and the renter and a sense of security that the renters will be screened correctly and the unit will be adequately cared for.
Managing an investment property or vacation rental can feel overwhelming, and hiring a rental property manager or company can relieve stress.
A rental property manager takes some pressure off the owner to focus more on their investments and less on their guest’s vacation. Managing a tiny home or traditional vacation rental has many moving parts; hiring a property manager can keep those parts from moving away from you.
Here’s everything to know about hiring a Property Manager for your Vacation Rental.
What Does A Vacation Property Manager Do?
There is a wide variety of tasks that a vacation rental property manager can tackle. Property managers typically manage items, such as bookings, determining rates, marketing, scheduling cleaning for the home, handling maintenance and repairs, and more. The manager can be involved as much or as little as an owner wants.
Market Your Vacation Rental Property
A property manager should be well versed in marketing and know what renters look for in a vacation location. They should also be knowledgeable about major vacation rental websites such as VBRO and Airbnb.
To market a vacation rental property, it is vital to have a well-written description of the home, calling out any exceptional amenities and what is nearby, plus clear photos of the rental space.
Pricing Your Vacation Rental Property
Prices generally fluctuate throughout different seasons for vacation rentals. Finding a property manager that understands the ebb and flow of pricing will create the best benefits for property investors.
There will be peak seasons when renters are willing to pay more to visit the area, but it’s essential to know when the slow months are so the nightly rate can be lowered to stay competitive with other rentals on the market.
Note: Some host share sites like Airbnb or VRBO will calculate your rental rates.
Manage The Calendar For Your Vacation Property
To keep the vacation property from being double booked, having someone keep an eye on the booking calendar and blocking out dates is a must. One thing no business owner wants is bad reviews on their site due to a last-minute cancellation.
Since one property is often posted on multiple channels, it’s essential to keep a comprehensive list of bookings; making sure that the calendars are in sync is something that a property manager will typically do.
Communication is huge in the vacation rental space. Not only will potential renters have questions about the property, but they also need to know how to access the property upon arrival and a contact in case of emergencies.
Potential guests want to book and expect a punctual response. If they have a question and don’t get a timely answer, they’ll likely move on to another property without a second thought. A property manager who communicates with those interested can make a difference in getting a 5-star review.
Coordinate Third Party Vendors
A property management company will be the middle person between the property owner and all the tasks needed to keep the rental in tip-top shape.
They will coordinate with cleaners to ensure the property is pristine before guests arrive. Property managers also work with maintenance companies to keep regular maintenance on track, ranging from changing light bulbs to landscaping.
When looking for a property manager, an interview is important to ensure they have industry knowledge.
A good property manager knows what to look for and how to keep the pulse on the rental business. They can suggest changes to the property to make it more desirable to renters, what the pricing should look like between seasons, and have tips on photos or amenities to make the property stand out.
A property manager’s primary focus should always be to make the vacation rental successful.
What to Look for in a Property Management Company
We recommend interviewing multiple property management companies to ensure you find a great partnership. Leaving the investment in someone else’s hands initially feels stressful, especially for those who like to do everything themselves.
An effective property manager should be able to show their experience and talk about the successes they’ve had in the industry. They should be local experts, familiar with the neighborhood’s rental market.
When are the peak seasons, and when is the slow season?
What are the laws and regulations specific to the area?
What do renters look for/what are competitors offering?
What are the going rates for similar vacation rentals in the area?
Evaluate Fees and Contract Terms
Property management fees can range from 15% to 40%, depending on the services offered and area of operation. Always make sure to do your research or consult with a lawyer to make sure that you’re satisfied with the contract.
Compare Management Services and Value
Renters want to know what they are getting when they book. They will keep looking if the information isn’t clear or the photos aren’t professional. Investing in photography, marketing, a well-written description for the listing, and hiring third-party management for cleaning and maintenance can significantly impact a vacation property’s success.
User-Friendly Booking Services
Vacation renters want to be able to find information quickly. Calendars that display available dates and rates created are essential.
Picture the renter scrolling on their Airbnb or VBRO app looking for a place to stay. They find a desirable location but have a question about something. The renter will send a question and then likely continue searching while they wait for an answer. How likely are they to find another property in that amount of time?
Punctual replies can make or break a booking.
Consistent Property Updates
The vacation property management company is the second set of eyes directly overseeing your investment. It’s vital to ensure they are trustworthy and transparent in their responsibilities.
Some questions to ask about property updates:
How will you be notified if something is broken?
What information will you be kept in the loop about?
How do they keep an inventory of items in the house – dishes, towels, bedding, etc.?
How do they handle big emergencies like broken pipes?
Will they do routine inspections?
Reference Contacts from Previous and Current Clients
Just as a property owner would get referrals about renters if they were managing the property themselves, it’s a good idea to contact past or current clients of the property management company.
ROI of a Vacation Rental Property
The average rental income varies by location and size of home. A one-bedroom vacation rental earns about $38,490 a year, while a three-bedroom brings in approximately $98,688.
Hiring a vacation property management company is worth it to create a seamless business for an investor. Outsourcing things like marketing, booking, maintenance, repairs, cleaning services, and more will remove the stress from the property owner.
At Turn Key Fabrication, we build individual rooms, a great addition to land that already has a traditional home. Our Turn Key Rooms can be used for wine cellars, cigar yoga rooms, rentable rooms, guest houses, or any single purpose.
Finding Land for Sale
Once a decision has been made on a tiny house style, financing has been secured, and zoning and regulations are understood, land should be secured.
Whether you want undeveloped land or a vacant lot that has power and septic, these are some of the best sites to look for land.
Farm and Ranch
Farm & Ranch allows for searches by state, price, and acreage and has property all over the county.
You will also find unique and historic properties like old businesses (wineries, farms, etc.) on Land.com.
Rural Vacant Land
Vacant land is available in residential areas or acres out in the county; this is a great site. You can run searches by state and county, making RuralVacantLand one of the most useful sites for finding properties in specialized areas.
LandFlip has land for sale, land auctions, leased land, and for sale by owner listings across the US.
Create a land buyer profile and get notified when things come up for sale that matches your requirements.
You know Zillow as the popular home buying site, but did you know that Zillow also gives you the option to search for land and lots?
If a package deal isn’t in the cards, Turn Key would love to work with you to create your dream home to put on that perfect piece of property. Contact us today, and let’s discuss options!
What Sites not to Use
Some sites should be avoided and most of them are big-box retail chains. Stores like Home Depot, Lowes, Walmart, and Amazon sell tiny home DIY home building kits.
Here are just a few reasons not to use these sites
Most of these kits only include shells, meaning blueprints and the bare minimum needed to build a tiny home. Things left out of DIY kits include essentials like insulation or finishes like door knobs.
If you need help with troubleshooting or just have a quick question, who will you call? Big retail stores don’t set aside time or resources for helping you, their only goal is to get you to buy the shell.
Customization is not included, and customizing later can cost a fortune.
If you’re not an expert builder, constructing a tiny house from DIY home kits can be time-consuming, frustrating, and extremely difficult.
Have a question that wasn’t answered here?
Let us help you! Talking tiny homes is what we live for. Contact us today.
Buying a tiny house comes with several financial considerations. There are fully built homes, or you can purchase a shell or even build from the ground up, just to name a few.
Tiny homes continue to rise in popularity, with an estimated worldwide growth of $5.80 billion from 2020 to 2024. Whether in it for the financial freedom that comes with tiny living or trying to reduce the eco-footprint, there are still ongoing costs for owning a tiny home to consider.
With so many possibilities, investing can feel overwhelming, so let’s break this down.
Buying a new tiny house
A tiny home can cost anywhere from $10,000 to $100,000, depending on what all is included.
When buying a tiny house that is fully built, the price tag will be higher than buying in pieces. In addition to the base price, you can select trim packages, extended porches, added lofts, or other customizations. Add in delivery fees, a trailer (if the home will be moved often), upgraded appliances, and the cost could increase significantly.
Purchasing a fully built tiny means nothing needs to be added:
The house will have sleeping space, living room, kitchen, bathroom, and everything needed to move right in. This is the ideal option for someone who isn’t skilled in the construction area or looking to start earning income on a tiny house quickly.
If you want to customize the interior of a tiny home, purchasing a shell is a great alternative.
There are still options to choose such as how many square feet, lofts, and porches, but beyond that, the investor builds out the interior.
Shell-built is the right choice for someone who is confident with their construction skills, has the necessary tools, and is trying to keep costs lower. Going this route is vital to consider timelines and research the availability of appliances, flooring, and other necessary materials.
Some builders also offer DIY blueprints or packages.
If purchasing the blueprints, you’re responsible for buying all the lumber and other materials needed to build the home. This can get tricky during item shortages. Also, make sure to price out the materials needed vs. purchasing one of the done-for-you options because the pricing on lumber has hit an all-time high.
The next option is to buy a package from a builder, which typically includes the building structure materials and blueprints, and the customer builds the home on their own. While you can save time going this route vs. acquiring the materials on your own, the price is typically higher with a builder.
Buying pre-owned is a great alternative as well, as the price can be less expensive, and any additional costs outside of land needs are likely based on transporting the tiny house to the new location.
The Tiny House Listings website has thousands of tiny houses for sale (or rent) and is a great place to start looking for a completed home. A pre-owned home works well if there is no customization required and if the purchaser likes the idea of a more turnkey solution.
Always make sure to look at the house, the seals around windows and doors, the materials used, and check for a builder’s warranty.
Some areas do not allow tiny homes, so learning your area’s zoning and restriction laws is essential
It is also crucial to ensure that the land being purchased has access to water, septic or sewer, and power. While there are options to live entirely off-grid with a tiny house, you will still need to consider the additional costs of a generator, solar, water tanks, etc.
An alternative to purchasing land is renting. Tiny home communities, mobile home parks, and someone else’s land are great places to start looking.
All these options should come with water, power, and sewer, one less thing to worry about.
Tiny homes come with the same maintenance requirements that a traditional home has.
Keeping up on paint, servicing heating and cooling systems, checking the doors and windows for leaking, and following a regular maintenance schedule for all the appliances in the home are critical. Initially, using higher-grade building materials may increase the cost of the house; however, it can save on the longevity of the house. Make sure toask the builderabout their warranties!
There is a lot you can do to reduce monthly costs such as using SIP panels to help with heating and cooling or choosing appliances that run off propane, or using solar panels. Insurance for natural or unforeseen emergencies is highly recommended.
No matter what direction you want to take, Turn Key Fabrication takes pride in working with customers to make sure they leave with their dream home in mind.
A traditional 30-year mortgage is unlikely for a tiny home since they generally cost between $30,000 and $80,000. The best avenues to research are looking into a personal loan, a home equity loan if this is a secondary residence or investment property, or financing through a lender partnered with a tiny house builder.
It’s important to ask questions about what the lender will require when researching which loan is best:
Does the loan require a permanent foundation?
Is there a square footage requirement?
What are the minimum and maximum amounts for financing?
These loans are typically unsecured, meaning the bank doesn’t hold anything for collateral. A personal loan has an annual percentage rate between 3-36%, with good credit. Personal loans usually have a length of seven years to pay off.
Some builders can offer in-house financing for tiny homes.
In-house financing is done through a builder’s partnership with a third-party lender, so requirements and qualifications will vary.
Purchasing a THOW (Tiny Home on Wheels) opens up the option of an RV loan since it won’t be placed on a permanent foundation and can be moved around.
The Tiny Home will need to pass an inspection to prove it meets the standards set by the U.S. Department of Transportation’s National Highway Traffic Safety Administration and get an RVIA tag (Recreation Vehicle Industry Association).
One benefit of an RV loan is that they are often financed for 20-30 years so that the payment will be smaller than a personal loan.
RV loan rates are also lower, usually around 4%-8%. A con of this type of loan is that the tiny home will be used as collateral for the loan, so if it is defaulted on, the tiny home can be repossessed.
Operation Tiny House is a matching grant program, which could be up to $12,000 of the down payment.
To qualify, someone in the house must be a community hero or struggling with hardship. Check with Operation Tiny Home to see if qualifications are met or get on the waitlist for the next round of grants.
Examples of past Grant Qualification includes:
Military / Veteran Status
Pre-K – 12th Grade Teachers
Lives in an area affected by hurricane, wildfire, flooding, or other natural disasters
Aging out of Foster Care
It is essential to secure proper insurance on a tiny house like any home.
Natural disasters and other tragedies (fire, flood, vandalism, etc.) are always a possibility, it’s essential to make sure the investment is covered.
There are a few options to obtain insurance:
If financing the tiny home via an RV loan, this would be the best bet for getting insurance. RV Insurance is also great if your tiny home is on wheels and will be moved frequently. Extra insurance coverage that is included with RV that isn’t from traditional insurance are:
Mobile Home Policies
Mobile Home Insurance is an excellent option if the home will be on a foundation or rarely moved.
A comprehensive mobile home insurance policy, similar to homeowners insurance, will cover:
If this route is taken, get a transit endorsement, so the tiny home is covered while transported.
Tiny House Insurance Specialists
With the tiny home boom that keeps growing, we will likely see more and more tiny house insurance specialists come on board.
Insurance Specialists usually offer coverage for traditional and alternative living structures, such as off-grid cabins, micro homes, storage containers, and Tiny Homes.
American Family Insurance covers everything someone would need insurance for – life, business, homeowners, and auto. AFI can help find the right category for insurance coverage on your tiny home with their different policy types, including RV insurance and manufactured home coverage.
Foremost offers specific coverage for tiny homes for full-time tiny home dwellers. Insurance is available through its Travel Trailer Program if the tiny house meets RVIA standards or is certified by NOAH (National Organization for Alternative Housing).
If the tiny home will be an investment property, such as an Airbnb, Liberty Mutual is a great option to look into, with options for short-term rental coverage as well as mobile home insurance. Liberty Mutual builds the insurance policies to fit each individual’s needs so that you can add on to the policy as necessary.
Taking the Next Steps
At Turn Key Fabrications, our passion is helping you customize your tiny home, and that includes financing and insurance.
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