Vacation Rentals & Commissions

It seems like when the word “commission” is mentioned in ANY conversation, people get all defensive.  It is no different when it pertains to the vacation rental business. The most difficult thing to explain to a person is WHY you are charging the commission that you do! The standard vacation rental fee is 14% – 18% commission yet there are companies out there charging 30% & getting it all day long!  So let’s break down what these commissions pay for and exactly how a short term property manager earns their “keep”.  

The most important thing to a property manager is their software! It is the hub of our life and without it we can’t function properly. It is our lifeline between owners and renters. Everything we do and that happens is documented within this system! It is also our communication line with vacationers and owners! The price range of these systems start out as low as a few thousand dollars up to THOUSANDS OF DOLLARS. (20-30g). They can also charge a percentage of all reservations ALONG with a flat fee!  Then you have the infamous processing fee that allows us to accept credit cards or other online payment systems.  The average is between 3 & 5% with some companies charging both the company and the renter. Within this software is also a website that someone has to design & sync it to all marketing tools, make sure it allows direct online bookings, update it as needed and maintain it.  

Did you know that VRBO, Airbnb and any of the other booking sites charge a fee for companies to advertise there? These fee’s vary on how many properties the company has but the prices range is from 5% per booking (and up) to 500.00 per property and up. Many of the large companies that have been around for many years don’t use these companies as a marketing tool. Smaller companies, on the other hand, need them to fill as many weeks as they can especially for NEW properties. (PPSSSTTTT…..if you are not an owner but are looking at some of our rentals FYI they also charge you a ton of fees, book direct!) Some properties may also have challenges in getting completely full or even booked which requires us to dig down deep and come up with some unique marketing tools. This may mean buying adds on social media or perhaps spending marketing money in some type of tourism directory or company. Marketing per property can easily cost a few thousand dollars before the first check ever comes in.  

As you can see there is a lot that comes off the top of the commission &  the agent themselves hasn’t even lifted one finger yet! You can easily assume that 6-8% of has already been claimed by the software and marketing and that’s being very gracious. So, let’s see what the remainder of the commission is used for and what exactly does the manager do. Since  a GOOD/GREAT agent does so much, I am going to list their duties.  

1.  Put all new properties in software (this is a large task within itself as you have to be sure all pricing is correct, taxes, etc).
2.  Price all units.
3.  Either hire a pro photographer or take quality pictures for marketing.
4.  Learn the property inside and out so they can answer any question that renters may have.
5.  Make suggestions to owners on things to improve (one of the most difficult task).
6.   Market property to all the online sites which means making sure the software is functioning property, so their is no double booking.
7.   Vet all possible tenants & communicate your expectations .
8.   Send payment links and verify all payments.
9.  Make sure rental insurance is valid payments all made and contract signed.
10.  Payments & deposits made 30 days prior to arrival.
11.  Contract signed & all tenants name’s listed per MD law.
12.  Make sure all properties are ready for renters.
13.  Put trash containers on curb when renters do not.
14. Schedule cleaners & repairs.
15.  Owner statements.
16.  On call 24/7 during busy season to answer all calls no matter how small they are.
17.   Make sure all marketing complies with rental laws, license’s are displayed according to law & house book is on site.
18.  Check pricing often during off season.
19.  Inspect properties after check out.
20.  Communicate check in and out policies.

I THINK that may be the gist where you can see how much an agent actually does. I’m also pretty sure I forgot a few important things but I feel the need to move on. (Plus I’m getting hungry and need to eat).  

As you can see if an agency is only charging between 14-18%, they are making a profit but not a huge one compared to the work they do.  If you have an agency that is charging you the average commission, give them a pat on the back if they do an outstanding job! This business is not an easy one and there is a lot of Thankless nights (and days) when every PM wonders “WHY am I doing this”. In a world where everyone likes to criticize and complain, you may want to take the time to thank and appreciate your property manager and all they do.  My guess is they don’t get that often enough!  

KJ