At Pristine Properties, we are straightforward and transparent as glass with our owners regarding the fees they have to pay when partnering with us. Unfortunately, that's not always the case with many vacation property managers.
Only recently, we spoke to owners who realized they were paying an extra 14% of the total booking, including taxes, as a 'booking fee' to their property manager — and that was on top of commission! (Nope, we're not naming names here)
Some companies prefer to conceal fees and employ other hidden methods to increase their profits, leaving owners with less profit than they deserve from their properties. This practice is known as rent-seeking, and, frankly, even some of the industry's major players engage in it while their clients remain unaware.
That's why we consistently advise owners to do their homework, and carefully review terms and conditions before signing with a vacation property manager (including our terms and conditions), as we want owners to be fully informed.
This advice is particularly relevant when encountering companies charging lower commission fees than us. We understand the local numbers, so we become suspicious. Again, we encourage owners to scrutinize terms and conditions in such cases, as they often contain clauses that offer no value to owners and only benefit the property manager.
Wondering how to avoid rent-seeking and hidden fees from your property manager? In this blog, we'll provide a guide to avoiding rent-seeking and hidden fees. We'll cover:
What is rent-seeking?
How do property managers engage in rent-seeking?
How to avoid rent-seeking and hidden fees?
How can property managers help?
Let's get started!
Vacation property managers in Cape San Blas, Port St. Joe, and Mexico Beach, FL, are undoubtedly a great help. They'll take a lot of the workload off your shoulders and boost your revenues. Still, any vacation rental owner should keep their eyes peeled for hidden fees and charges that might affect their bottom line. Pictured: Desoto 1.
What is rent-seeking?
In a nutshell, rent-seeking occurs when someone tries to increase their profits by imposing additional fees without providing any extra benefits or value to those paying them. Rent-seeking doesn't add value to owners; it's a transaction that benefits only one side—the manager. In our property management industry, rent-seeking typically translates to 'hidden fees.'
Some vacation property managers will use hidden fees to claim a larger portion of your profits than is deserved. It also happens that sometimes these fees are not even that hidden; they might be clearly stated, but they still fall into the same category because they are just unfair—and owners are oblivious to that fact.
Let's see what some of these fees are and how property managers engage in rent-seeking.
How do property managers engage in rent-seeking?
In the Florida Panhandle, owners will likely pay local vacation property managers 30-40% of their gross income for full management services. Larger national vacation property managers are often slightly more affordable, though. Without pointing fingers in our region, in this blog, we'll focus on the national players.
Let's explore some of their openly declared fees*:
Vacasa: 15-25%; fully managed.
Turnkey: 15-25%; fully managed.
Evolve: 10%; partially managed.
These fees usually include services like booking, guest communication and care, marketing and promotion of your listing, and maintenance services.
These fees might vary depending on the size, type, condition, and location of your property, but we can use them as benchmarks for industry analysis and for the purposes of this blog.
As we're about to see, these fees are not all owners will be paying with these companies. There are hidden fees involved that they shouldn't have to pay, but they still do.
Here are some examples*:
Booking fee: Evolve and Vacasa charge a 3% and 10% booking fee, respectively, while Turnkey, on the other hand, has no booking fees.
Damage insurance: Vacasa asks for $30 per stay, while the others charge nothing for damage insurance.
Guest supplies: Evolve's fee is $225/month, Vacasa has a $90 hot tub fee, and Turnkey VR's fee is $90/month.
*Note that these fees might change or vary depending on the date you read this blog.
Other hidden fee examples include repair and maintenance fees, business tax fees, and credit card fees, all of which can add up quickly, causing owners to lose from 10% to 15% of their revenue.
How to avoid rent-seeking and hidden fees?
By now, you probably have a rough understanding of how rent-seeking and hidden fees work, so now let's talk about actions: what should you do to avoid them?
The best way to go about it and avoid unpleasant surprises is by asking the right questions before signing with any property management service.
Here are some questions you should ask:
Can you explain your fee structure?
Could you please explain the full criteria that determine your nightly rates?
What property management services are covered in your fees?
Do you also charge extra management fees?
What are your cleaning fees?
Is there anything I should know about general maintenance and urgent repair fees?
Are there any extra fees for things like parking, hot tub and pool maintenance, and overall booking management?
Are there any extra administrative fees I need to know before I sign?
In general, are there any extra fees I should be aware of on top of your management fee?
The goal is to be exhaustive with the information you extract from the manager. The last question alone is important if you really want to avoid hidden fees. It's pretty straightforward, and it will be very hard to avoid a simple and honest answer from potential managers.
Use your business intuition.
Still, depending on their level of honesty, managers may not be willing to disclose everything upfront, so they might beat around the bush. That's when you have to sharpen your business acumen.
Get the fees down in writing.
It might also be a good idea to get these questions answered via email and archive their replies. This way, you can have a record of the information they are providing in case you need it in the future.
Ask to chat with some of their clients.
Also, some vacation property managers might be willing to share the contact information of other owners who work with them so that you can ask about their experience. This is a common practice in this industry. At Pristine Properties, for instance, we are happy to do so. In case they refuse to do so, you can see it as a red flag.
In the Florida Panhandle region and across the country, vacation property management services may hide fees to boost their profits. This is a common practice. With that in mind, it's essential to keep your eyes peeled for anything unclear and ask the right questions. Pictured: Brise Del Mar.
How can property managers help?
We couldn't end this blog without making a huge disclaimer: despite some of them practicing hidden fees and rent-seeking, property managers are still a huge help to your rental business, and they will take a considerable amount of the workload off your back. As a rule of thumb, the benefits of trusting them to manage your property or properties will outweigh the risks.
If you have been self-managing your properties, you probably know the substantial amount of work that's involved. Having a professional property manager taking care of your rental property means fewer burdensome tasks for you and also an increase in rental income.
If they are good at what they do, property managers do a really good job of keeping your vacation rental booked and at the best rates possible. They'll also handle urgent and unexpected issues that can arise and maintain your real estate property in good condition through regular inspections.
Their help is indeed much welcome, and it's only natural that it comes at a fee. There's no such thing as a free lunch, as they say. It's just that, like with anything else in life, you need to stay alert and find a company you can trust.
When it comes to finding a company to do it for you, you just need to stay alert, find someone trustworthy, and learn how to avoid hidden fees. With a smart approach, the benefits and profits will surely follow.
Finding a trustworthy property manager in the Florida Panhandle
At Pristine Properties, we're entirely guest-focused, and we have absolutely no hidden fees. In fact, we invite potential owners who are thinking of partnering with us for an in-depth discussion about fees, as well as how we can help their properties excel in the vacation rental segment in the Florida Panhandle.
Guests are the ones who pay for cleaning and taxes, and as an owner, you won't be charged for bookings, guest supplies, or any of the other items mentioned above. We want to make that very clear right from the start!
Read the testimonials of our owners and learn more about our services on our website — you can even get a free rental revenue estimate.
