Here’s when and how to hire a third-party service provider or property management company.
Syed Lateef was working in corporate finance at Allstate during the real estate boom when he decided to jump into Airbnb hosting in Chicago. Within two months of his first listing, Lateef was earning up to triple the rent he was getting from long-term tenants. Then he found a new calling: After quitting Allstate in 2017, Lateef launched his own property management company, Hostly, to take the hassle out of hosting.
Lateef charges his clients, including Airbnb hosts, 25% of their hosting fees to manage their properties, such as guest communication, check-in, check-out, cleaning management, pricing and guest questions. In Chicago, tech startups such as VirtualKEY sell software that promises to calculate an optimized listing price, while companies such as Hostly and Domain Homesharing Management provide a full suite of services from guest communication to search engine optimization (SEO).
As an Airbnb host, hiring a property management company may or may not fit your unique needs. Is it worth it to pay 25% of your daily guest rate for third-party services? Or is it more cost-effective to handle everything on your own?
Hassle-free is a compromise
Hiring a professional company could make the listing management process easier and more efficient.
Hostly’s team comprises vacation rental hosts and some super hosts, so they have data and the experience to understand how to maximize daily pricing, including seasonality, holidays and events, Lateef says.
But for hosts who are picky about maintaining a picture-perfect home down to the photos on the wall being straight, a professional management company may be less ideal.
In addition, the cost of professional management companies varies. VacayHome Connect, a Chicago-based company that helps property owners list on all major online travel channels in the U.S., takes 10% to 15% of the daily rates that guests pay to hosts. It then pays 3% to 5% commission fees to Airbnb, says Mike Montemurro, the company’s chief operating officer.
Hostly charges a higher rate of 25%, which has been met with complaints. But Lateef points to the company’s full line of services.
“Some hosts say things like ‘your fees are so high’ and ‘we could do a better job providing specialized customer service’,” Lateef said. “But the trade-off is you’re going to be spending your time providing that customer service. You have to put a cost and value to your time.”
If hosts put in the time and effort to learn the software and pricing tools, they can do just as well without a property management company, says Lateef. But if hosts have demanding jobs, the opportunity cost of managing the hosting business on their own is high.
“If you are a doctor, lawyer, engineer or anything of the case, you may consider having an onsite management company or … a second Airbnb to get some side passive income,” Lateef said.
Is it worth it?
A freelance travel writer who has been an Airbnb host for four years, Rebecca Holland spends only one or two weeks in Chicago each month. Having a management service allows her to book multiple guests while she is away, Holland says.
Holland uses AllSet Turnover, a property management platform that offers profile management, pricing optimization, cleaning and other services.
“I saved probably about 15 hours a month in cleaning and communication,” Holland said. “I earned around $5,000 per month and would have made about one-third of that if I couldn’t turn over the apartment while I was away.”
But Eric Howell, a host who started Airbnb hosting about four years ago and owns a two-unit building, never uses third-party services and does everything on his own.
“Most of those [hosts who hire third-party services] are people who have multiple properties,” Howell said. “I don’t have enough businesses right now to outsource management, but I wouldn’t say no to it.”
Hostly examines what service companies are charging on a national level to maintain a fair rate that still reaps profit for hosts, Lateef says.
For example, an Airbnb host can earn $4,000 from bookings in one month and dole out $1,000 to Hostly. Lateef says the opportunity cost of managing a property oneself is equal to that commission.
Syed Lateef, Hostly
“You may probably do a better job than us, but the trade-off is you’re going to be spending your time providing that customer service.”
“You have to give yourself an hourly rate,” Lateef said. “If your hourly rate is $20 per hour and you spend 20 hours a month managing your property, then that’s $400 a month. If you have us doing it all, you will save your time.”
Howell, a musician and vocal impersonator, says he is pressed for time between hosting and work. Managing his units requires 15 to 18 hours per week on average.
As summer approaches, Howell says he may outsource basic housekeeping and cleaning.
Montemurro says Airbnb hosts should also consider outsourcing if they want to list their properties on different websites. Without a professional management company, hosts may encounter challenges with double booking because it is hard to handle multiple calendars at a time.
What to look for in a property manager
Hosts who want to hire a third-party management service should find one with a reliable reputation and brand. The first steps are to read reviews about the service provider, understand its rules and check its social media activity.
When talking to service providers, hosts should confirm that they are experts in the market and can confidently describe the management process while breaking down the finances, Lateef says.
Holland recommends going with a service that has reviews. Hosts should evaluate their own rental situations, including daily schedule, number of listings, and booking frequency.
“If you’re only renting once a month or so, it might not be worth it,” she said. “But it will save you lots of time and make you more money if you’re renting regularly.”
- Airbnb Spawned an Ecosystem of Startups That Sweat the Details So Owners Don’t Have To
- Guesty, a tech platform for property managers on Airbnb and other rental sites, raises $35M
- The Pros And Cons Of Hiring A Vacation Property Management Company Vs. Managing A Rental Yourself
AllSet was created to provide flexibility for property owners and to enable lifestyles enriched by travel and adventure but free of worry.
Hostly offers a full line of services to create the best vacation rental experience
A leading connectivity and distribution partner for the vacation rental industry, partnering with property managers to enhance their visibility and capabilities to rent their properties.