A Guide to Vacation Rental Property Management Cost Calculation

Are you thinking about hiring a property manager for your rental property? Stick around to learn how to calculate the costs and understand how outsourcing the day-to-day operations will impact your revenue.

It’s important to know that there are significant pricing differences among companies and property managers. The costs depend on whether you get full-service property management or not. Estimate your property management cost to see how it will impact your net profit.

Let’s find out how much property managers typically charge and how they structure their fees.

How Much Do Property Management Services Cost?

It depends. A long-term property manager charges 8-13% of the monthly rent plus a lease up fee. However, short-term rental property managers have a much broader scope of work, so they typically charge anywhere from 10% to 40% of rental income.

A full-management service should include:

• Listing Management – Creating and optimizing rental property listings on various platforms, high-quality photos, competitive rental rates 
• Guest Communication
• Booking Management
• Housekeeping and maintenance repairs- Scheduling and supervising cleaning services, coordinating maintenance and repairs, managing inventory of supplies
• Legal and regulatory compliance
• Financial management 
• Marketing and promotion
• Handling emergencies 24/7 – Such as plumbing issues or power outages, providing immediate assistance and solutions to guests
• Vendor and contractor coordination

Whether you hire a property manager, a co-host, or you self-manage your vacation rental, many tasks like guest communications, channel management, and scheduling cleaners can be fully automated with iGMS, our short-term rental management software.

Property Management Fees for Short-Term Rentals

A property management company charges property management fees that can vary depending on the tasks they handle. The most common full management service fee is around 20%-30% of your gross income. Keep this optimal range in mind, as some property management companies may take as much as 50% of your earnings.

Fee Structures

Companies calculate property management fees in three ways, so we have three fee structures. Let’s break them down.

Percentage-Based Fee

A percentage-based fee or a commission fee is the most common and it just means property managers take anywhere from 10% to 40% or even 50% of your rental revenue.

Since the earnings of a property management company are tied to the rental property income, they have a vested interest in maximizing rental income and maintaining high occupancy rates. That’s why this fee is considered the most transparent and most effective.

Flat Fee Rate

A flat fee rate is a fixed fee arrangement where a property manager receives the same amount every month, regardless of the monthly rental income or whether the property is vacant.

The downside of the flat fee rate is that it doesn’t cover all property management costs, so owners often get charged additional fees on top of the flat rate.

Guaranteed Income Model

Unlike flat fees, a guaranteed income model is when a property manager pays the property owner a flat monthly fee, regardless of bookings. This model is less popular since it gives priority to the manager. If the income exceeds expectations, everything goes to the property manager.

Additional Costs

A property management fee often doesn’t cover all expenses. Property owners might face additional fees and costs like these:

Maintenance and Repair Costs: Costs for routine upkeep. A property manager can charge repair markup fees for contractor services.

Booking Fees: Charges for processing direct bookings outside of vacation rental platforms.

Marketing Fees: Listing the property across multiple sites, professional photography, and other marketing activities to attract guests.

Customer Service Fees: Guest communication beyond just check-in and check-out.

Property Management Cost Calculator: Total Management Costs

The property management fees calculator for short-term rentals is different compared to long-term rentals. You need to include the fee structure, seasonality, estimated annual repairs, monthly and annual maintenance costs, and vacancy days.

Let’s take an example:

Monthly rental income: $3,000

Property management fee percentage: 25%

Property management fee amount: $3,000 * 25% = $750

On Airbnb, a cleaning fee would be paid by the guest, but you still need a fund for regular maintenance, minor repairs and restocking, additional property management fees, so the final picture might look something like this:

Property management fee: $750

Cleaning fees: $O (Paid by guests on Airbnb and Vrbo)

Maintenance costs, repairs, re-stock, additional fees: $120

Total Monthly Property Management Costs: $750 + $120 = $870

Property Management Companies and How Much They Charge

There are numerous property management companies out there, but some of them operate across the US and in other countries. Let’s look at some of the well-established names: Vacasa and Evolve.

Vacasa

Vacasa is a full-service management company that operates in the US, Canada, Mexico, Belize, and Costa Rica. They fully manage over 24,000 properties. While they don’t publicly disclose property management fees (it depends on the property) host reviews indicate their average percentage management fee is around 30%.

Evolve

Evolve is a half-service management company, meaning they won’t handle full property management for you, but they will take care of marketing and guest communication. Additionally, they charge less, around a 10% property management fee, which is one of the lowest management fees in the market.

Local Property Management Companies

If you opt for a local property manager, it could be beneficial for a few reasons:

• They know the local market inside out, including local regulations and seasonal trends.
• Personalized service and greater flexibility.
• Established relationships with local vendors, contractors, and service providers.

How to Choose the Right Property Manager

Rental property owners need to be well-informed before starting a collaboration. Pay attention to a few things:

Understand Property Management Contracts

A transparent contract clearly outlines the expected property management fees, allowing you to understand precisely what the property manager charges you for and help you figure out what your annual property management fees will amount to.

Check Testimonials

Word of mouth is often the best marketing, so make sure people are already praising your prospective property manager.

What Software They Use

Sometimes property managers will have a software tool they already use, or you can propose one.

If you choose iGMS, you can not only automate most of your daily tasks like guest communication and cleaning schedules, and set up a booking website to skip OTA fees, but you can also generate reports on your business results within minutes.

Cross off those time-consuming, repetitive, and error-prone tasks from your list and have full control over your business at any moment.