U.S. CitiesCity-Data Forum Index
Happy Halloween!
Go Back   City-Data Forum > General Forums > Real Estate
 [Register]
Please register to participate in our discussions with 1.5 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Jump to a detailed profile or search
site with Google Custom Search

Search Forums  (Advanced)
Business Search - 14 Million verified businesses
Search for:  near: 
 
Old 08-03-2010, 08:20 PM
 
Location: Loudoun Cty, Virginia
732 posts, read 1,596,132 times
Reputation: 577
Default Commission Percentage to Rental Management Company

Hey Guys -

I know there are a few of you guys that own multiple properties, so I'm hoping to find some advice on property rentals. I'm looking into purchasing a small oceanfront condo as a vacation/investment property; with all the foreclosures going on, there are tons of properties going for sale at incredible prices, including some that have dropped right into my price range.

How much do property management companies typically take as a percentage of your rental income? We've been looking at a few resorts that have on-site rental management, but some of them take as much as a 40% cut from your earnings of the property. That sounded like a huge take to me, but I honestly have no idea what the going rate is for that (just starting my research).

The advantages I saw from on-site management is that they're 100% familiar with the property and maintenance, they'll book drop-ins for you if people show up without a reservation and you have a vacancy, and it's just easy since they're on-site and integrated. The obvious disadvantage is the 40% cut that they take. I've just started looking into this, so I haven't even made calls to off-site management companies.

We'll won't have issues swinging the cost of the condo/fees on our own, but obviously want to maximize any money we can earn from it at the same time. This is my first investment property (and it's out of state), so I wanted to get a management company for at least the first few seasons to test the waters. We plan to use it maybe a week or two out of the year for ourselves, but primarily renting the unit out throughout the peak seasons.

Thanks for the help and input!
Reply With Quote Quick reply to this message

 
Old 08-03-2010, 08:54 PM
 
Location: Tempe, Arizona
4,511 posts, read 7,220,812 times
Reputation: 2101
Typical managements fees are 8-10% for long term rentals. It sounds like your situation is more of a condo-hotel arrangement where the on-site management company handles bookings, cleaning, etc. They may also provide other services to guests normally associated with a hotel setup. That is how they try to justify such a large 40% fee. You may be able to find other off-site companies that offer similar services at a lower rate.
Reply With Quote Quick reply to this message
 
Old 08-03-2010, 10:31 PM
 
Location: Chciago
721 posts, read 1,519,209 times
Reputation: 441
Only concern would be if they are that cheap probably lots of other investors doing the same thing, how often or how much will your place actually get rented and how much will it bring in if there's so much available?
Reply With Quote Quick reply to this message
 
Old 08-04-2010, 09:04 AM
 
Location: Nebuchadnezzar
968 posts, read 1,158,795 times
Reputation: 331
We have a MGM Signature unit in Las Vegas. Management take is 40%. There are other alternatives but their rates are about the same. I know that some owners use VRBO, but it is unclear how successful. Also remember that there are HOA and other fees and sometimes you barely break even. However you are getting a condo in a location where you want, flexibility on when and how you want to use it, but some added rental income on the side. Good luck.
Reply With Quote Quick reply to this message
 
Old 08-04-2010, 11:07 AM
 
2,315 posts, read 3,183,627 times
Reputation: 587
Make sure you won't be counting on the rents to pay the bills. Vacation property is cheap but it may be hard to rent now also. It seems to go lower and higher in value then other property during the market ups and downs. Now it is definitely down.
Reply With Quote Quick reply to this message
 
Old 08-04-2010, 11:26 AM
 
Location: Loudoun Cty, Virginia
732 posts, read 1,596,132 times
Reputation: 577
Yes, this would be more of a condo-hotel type arrangement. We'd be buying a condo in a resort hotel, so rental tenants would have access to the pools and amenities offered by the hotel. The POA fees would cover access to those amenities, grounds maintenance, general maid service cleaning, and simple on-site maintenance items.

I think the on-site management company would handle all of the bookings, money collection, and additional maintenance (calling in a repair man if it's something more than a quick on-site fix). They would take their 40% on all tenants they bring in; after emailing a few owners in the area, some of them will find their own longer term tenants during the off-season and don't use the management company for those tenants. A few owners are still reporting that their properties are rented nearly every night for the high seasons, even in the down economy, but with slightly lower prices than previous years.

The plan is not to actually make money on the rental itself. Based on some research, the 1-bd condo rental income roughly breaks even after the POA/HOA fees and management company 40% take. It varies a bit, but I anticipate paying the loan principle on my own (we're aiming for roughly 60% down) and having the rental money more or less cover the management company and POA fees.

It's starting to sound like it's normal for a resort to charge 40% though, but they probably have the best chance at keeping it fully booked as well.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $84,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate
Similar Threads

All times are GMT -6.

2005-2014, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 - Top