How to Start a Vacation Rental Property Management Business

How to Start a Vacation Rental Property Management Business

With Vacation Rental Properties becoming increasingly popular, running a successful vacation rental management company can become extremely lucrative. However, do not enter this industry thinking that it’s as easy as throwing up a couple Airbnb ads on behalf of your neighbors and letting the profits roll in.

Sure, it's lucrative, but it's also a fiercely competitive industry. A successful Vacation Rental Property Management Business will essentially require you to brush up on your marketing, research, and networking skills.

What Are The Key Factors You Should Consider?

Like I said, it is no piece of cake to run a successful vacation rental business. There are many factors to consider, including acquiring, maintaining, marketing and renting out these properties to travelers.

But most importantly, at the onset you will need to decide the approach of your business.

Approach 1 - Investing in properties of your own

Investing in properties of your own requires significant research into market demand for locations, seasons and other factors that will draw a steady flow of guests and ensure you get a fair price on the property.

Approach 2- Managing properties on behalf of their owners

Unless you have considerable funding in hand, this option is less demanding when it comes to start-up costs. However, you need to be extremely well-versed in vacation rental management operations, if you’re going to convince homeowners they should put their keys –and revenue streams – in your hands.

Seasonality

If you want a seasonal business that sees slower months during which you can catch your breath and work on business strategy, you could consider remote locations that have more appeal during certain times of the year.

If on the other hand, you prefer a venture that churns a consistent profit all year round, you’re going to want to open your doors in an urban location or an evergreen vacation resort that draws guests from January to January.

Demand & Supply

It is essential you choose locations that draw in lots of travelers. At the same time, you’ll want to make note of the volume of existing short-term rental options in the area.

Do your research to ensure you’re investing in an area with ample attractions and a flourishing tourist scene. You could also focus on types of rentals that are less common (like villas or apartments or Eco-friendly vacation rental) to differentiate yourself from current offerings.

How Profitable Is A Vacation Rental Management Business?

The vacation rental business is most certainly profitable, with the industry yielding over $80 million in revenue in 2019 alone. This places the average revenue per user at upwards of $100,000, which can, of course, fluctuate based on the quality of the property, the level of service provided, efficiency and effectiveness of internal operations.

Regardless of the size and shape of properties you manage, the key strategy for maximizing your profit is implementing a dynamic pricing model that reflects dips and rises in demand. Airbnb ownership guide will give you more insight into how profit works.

Do I Need To Hire Staff For My Property Management Company?

Of course, solo vacation rental managers can do very well for themselves as long as they have the right tools to aid them.

Having said that though, depending on the size of your properties you might choose to outsource operations or hire in-house staff for tasks like cleaning, maintenance or even for assistance with managerial responsibilities such as an airbnb virtual assistant.

What Software Is Available For Vacation Rental Management?

I believe that one of the best investments you will make for your entire journey of Vacation Rental Management Business would be to get yourself a reliable Management Software!

You may initially think that managing manually might be the way forward for your business model but you will soon realize that rising expectations of guests coupled with increasingly complex operations of vacation rental property management makes purchasing a Vacation Rental Management software a necessity, if not essential.

It’s best to do your research for reliable software that can help you facilitate efficient operations like balancing listings on multiple booking platforms, managing your staff, delivering quality service and experiences to your guests through automated messages, home automation, custom guidebooks and much more.

Perhaps you might want to read up on why hostaway should be your vacation rental software of choice.

How Do You Get Started?

Once you have the answers to all of the above key factors we discussed, starting a Vacation Rental Business will require following steps.

Step 1 - Decide on the Services you will offer

There’s quite a few roles to play as a Property Manager and it's entirely up to you to decide your level of involvement.

If you start off providing full-service management and handling all the work yourself without any help or staff -it can be challenging as you start taking on more clients. On the other hand, if you decide to offer only marketing services, you may be severely limiting your ability to scale.

Hence, it is important to find the right balance depending on your capabilities and capacity.

Step 2 - Figure Out Maintenance & Housekeeping

Generally, a management company offers scheduled maintenance and on-call maintenance separately, which are then outsourced to local plumbers, electricians, landscaping companies, etc. In fact, it might be helpful to Build your vacation rental team.

The rise of Airbnb created a number of parallel industries, such as vacation rental maid services, which comes complete with professional linen-cleaning, scheduled deep-cleaning, and even key deposit /recovery services.

As your business scales and grows, you might want to consider a dedicated in-house team.

Step 3 - Figure Out Concierge Service

This is a very hands-on role, tasked with welcoming guests for each booking and includes meeting them at check-in time, providing keys, and familiarizing them with the property.

Some management companies offer pick-up and drop-off services for guests arriving via airport or train station. This would fall under concierge services, but should come with an extra charge.

Step 4 - Get your Marketing Right

The backbone of your vacation rental management business will be your ability to secure a healthy flow of bookings for your clients. Your clients will typically be interested in marketing services like:

Step 5 - Get your Contracts in Place

Generally, rental management companies will have two types of contracts to offer clients: commission and guaranteed. The latter has become increasingly popular these days due to its simplicity and sense of security for property owners.

A commission-based model will usually involve flat fees for services like cleaning and maintenance, and then a percentage of booking profits and may be subtracted from the owner’s share of the profits paid out on a monthly basis.

Guaranteed models give property owners a fixed payout every month. Essentially, the management company runs a Rental Arbitrage scheme. Depending on your research and negotiating skills, this could be significantly more lucrative for management.

Step 6 - Get your Legal Documents, Liabilities, and Certifications in Place

In order to ensure your vacation rental business is protected, I highly recommend that legal counsel is sought when drafting client contracts, as you need to limit your liabilities as much as possible when assuming control over someone else’s private property.

In fact, both your client contracts and rental contracts for guests should be drafted by a professional to ensure you don't lose out on the deals.

Bonus: Some US states require a property management certification in order to operate vacation rental businesses. Make sure you are thorough with the rules and regulations such as airbnb subletting restrictions, prior to offering your services.

Step 7 - Start Onboarding Partners

Depending on the size of your business, you may only need a few independent contractors to begin – particularly when it comes to maintenance. Cleaning, however, is a more frequent requirement.

Regardless of your initial intentions, it’s thoroughly recommended that you do some research and make a rolodex of local businesses to contract to.

Ensure your current client agreements will sufficiently cover the expenses of either model. That way there will be no losses or need for re-negotiation with current clients when you decide to make changes to facilitate growth.

Ready to find out how Hostaway can transform your business?