Property management companies (PMC) help owners manage their properties for a price. However, fees paid to the management company vary based on some factors such as property type and services provided by the company.
What will have an influence on the revenue generated?
Let’s take a look at why hiring a PMC can be very beneficial for your property or unbeneficial if you hire the wrong company. As mentioned, fees as well as what an owner can earn depends on several factors. First, let’s take a look at the factors that will have an impact on the revenue generated:
- Size of the property
- Capacity of the property.
The capacity of the apartment is of course critical. The bigger the apartment and the more people it can welcome, the higher the revenue will be. However, the fees associated with it will also grow because it will require more cleaning time, and likely more maintenance work.
- Condition of the property
Depending on the state of the property the fee changes – older properties may have more maintenance problems in a comparison with a newer or renovated property.
- Location of the property
Location is crucial for the property – the better the location, the higher the rental price of the property.
- Services provided
The property management company usually offers different types of services and contracts, therefore price depends on the chosen service.
Variable vs Fixed contract
There are as many types of contracts as there are types of owners. It depends on how an owner wants his property to be managed. The options vary as follows:
When you hire a company to manage your apartment, you want to be sure that they are going to do a good job and are going to be totally honest with you. The best way that you can be sure of those things is to actually know what they charge for.
In most cases hiring an apartment management company for your holiday rental means that you want your property to be fully managed. There are two options:
- Variable contract – the PMC is charging a certain percentage of the total revenue generated, the average in Barcelona is of 20%. In this model, the PMC has an incentive to perform and to exceed expectations, as it will have a direct impact on its results. For the owner, the revenue will vary with the season, giving better results in the summer, or during major events, like the Mobile World Congress for example.
The revenue estimate is communicated in the beginning and is made for the whole year depending on the property.
- Fixed contract – for the property owners who want to know exactly how much they are going to make in advance. There is no more uncertainty for what the future will bring, and it makes planning for the future easier. The monthly rent is agreed on before signing the contract depending on the characteristics of the apartment.
In both cases, the PMC can take care of everything related to the property. Before signing a contract, property owners get a visit from the company to evaluate the apartment which is sometimes followed by a proposal for making it better – e.g. changing some furniture so it will be more adapted to short stays.
Once the contract is signed and the apartment is ready, the company takes care of creating the apartment listing on several booking channels as well as optimising the prices of the apartment for the different seasons, holidays, and special events. And of course taking care of the guests – welcoming them and communicating with them throughout their whole stay.
Basically, the company is taking care of everything and if the owners want, they should be able to check on a dashboard all the relevant information connected to the apartments. How many booking does it get, the prices, etc.
Management of the VAT
If you choose a variable contract, you will also have the choice on whether you will be charging the guests or if the PMC will be charging the guests. The difference? The VAT and the taxes paid.
With the PMC charging the guests, you will have to pay taxes, but no VAT. When you charge the guests directly you won’t have to pay taxes but you will have to pay 21% VAT for every fee.
However, If you pick a fixed contract, it will always be the PMC charging the guests.
Both ways of doing have their advantages and disadvantages, so make sure that you do understand the distinction between both ways of doing things.
Associated costs to managing a touristic apartment
Last but not least, let’s look at the fees apartment owners will have to pay for their touristic properties.
The case described is the case where the apartment is managed and the guests are charged by the PMC.
The following example shows an estimation of the associated costs that would come with an apartment generating €65.000 per year, and where the guests are charged by the holiday rental management company.
- Tax – €6.500
This is a 10% tax paid to the government for the apartment.
- Channel costs (10% average) – €6.500
Channels like Airbnb, Booking.com and so on have a commission fee, the
average cost of these platforms should not exceed 10%.
- Cleaning – €?
The cleaning fees depend on the size of the apartment. On average we calculate that touristic apartments have 6 check-ins per month, therefore, 6 cleanings to pay. How much is a cleaning working hour? What will be the yearly total? Those are figures that you should know before choosing your PMC.
- Maintenance - €?
How much will your property management company be charging you? Do they charge you per intervention, or do they have a more economic system? Everyone knows that a plumber, locksmith, or electrician can be very expensive, so you really should know what is the price system for maintenance.
- Laundry costs – €?
Just like cleaning, with an average of 6 check-ins per month, any PMC should be able to give a precise estimation of how much laundry will be.
- Property management services – 20% - around €11.818
To hire or not to hire a PMC
After seeing what the apartment can earn and knowing what are the main costs to look closely, a question might arise - is it actually worth it to hire a PMC?
A short answer could be yes. A longer answer would be that working with a PMC means that they will take care of everything. From making sure that the apartment is well maintained and follows the highest cleaning standards, to delivering the guests a fantastic experience, but also managing the pricing to extend the length of stays and maximize occupancy.
But most importantly, hiring a PMC will make your life easier and completely forget about the 24/7 job that is managing a holiday apartment.
If you want to know how much YOUR apartment could generate and what would the associated costs be, fill in the form below.