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Old 08-03-2010, 08:20 PM
Location: Loudoun Cty, Virginia
738 posts, read 2,503,409 times
Reputation: 623


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!
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Old 08-03-2010, 08:54 PM
Location: Tempe, Arizona
4,511 posts, read 11,320,413 times
Reputation: 2178
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.
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Old 08-03-2010, 10:31 PM
Location: Chciago
721 posts, read 2,523,833 times
Reputation: 491
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?
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Old 08-04-2010, 09:04 AM
Location: Nebuchadnezzar
968 posts, read 1,742,863 times
Reputation: 345
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.
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Old 08-04-2010, 11:07 AM
2,658 posts, read 4,979,792 times
Reputation: 885
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.
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Old 08-04-2010, 11:26 AM
Location: Loudoun Cty, Virginia
738 posts, read 2,503,409 times
Reputation: 623
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.
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