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I was once in Paris and engaged a street artist to sketch my then fiancée, now bride. In perhaps 10 strokes of charcoal he captured her essence. I was indeed more amazed with the process than the image, it struck me as quintessentially, yet, unconsciously competent artistry.
Our business is tasked with overseeing roughly $100M of vacation rentals in Charleston and Palmetto Bluff. Over the years our team have settled in to the easy ways of unconscious competence. We see what an owner may not, we suggest improvements where others may see problems or indeed, nothing at all. It’s our version of that Parisian encounter so many years ago. It’s this trait that helps us stand apart from the crowd.
Our role in this is to aid them in exploring every avenue that might exist for increasing their revenue, whether it be simple updates to the interior decor, a renovation that modernizes the kitchen or baths, adding a pool, or increasing the size of the property to add additional bedrooms. Understanding the market data and the expected returns that come with the different enhancement scenarios allows us to develop a cost/benefit analysis and help to determine what is a valuable use of their money to maximize ROI.
Now words are easily crafted and certainly not costly to do so but how about a real-world example of what we can do and how it worked out? This exact scenario played out recently when we worked with owners interested in adding a bedroom to what had been a single-bedroom carriage house rental.
A 1-Bedroom/1-Bath Becomes a 2-Bedroom/1-Bath:
We have a one bedroom carriage house in our Palmetto Bluff portfolio. It rents well but based on feedback that we had received over time from guests, there would be high value to adding a second bedroom to this property to act as additional office space and somewhere for children to stay over, as previously there were only pull-outs in the living room. This being a 1-bedroom, 1-bath carriage house configured over a 5-bay garage, with no ability to add an additional bathroom, the expectation was a modest increase in rental return for a modest outlay and minimal disruption along the way. We sent our construction team over to look at the building and make suggestions. Now we can all do the math on this, i.e. cost of construction, potential increased rental rates, potential increased occupancy … but in this case, that’s not the whole story, please read on.
The Carriage House Interiors “BEFORE”
Bedroom was added where interior glass window overlooked the vintage car collection that was on display in the garage below.
This was to be a quick project for the owners as the loft space already existed. It could be easily enclosed and the new garage ceiling made suitably fire-resistant. A total of $15,500 was spent on the work, saving a few dollars by using building materials leftover from another recent project, plus the added benefit of an owner in the building industry. Seeing the opportunity that exists here is easy, and in this case, a seemingly straightforward update to be made, but important nevertheless to note that in any scenario, a market analysis is vital to understanding whether the addition will garner the expected returns.
The Carriage House interior “AFTER” new bedroom addition:
How we calculated potential ROI with increased rental rates for a 2-Bedroom/1-bath Carriage House:
$ 2,800 Project design and prep work
$15,500 Materials and labor (some work was done by the owner and reused building materials from previous project)
$21,600 Additional rental income @ $120 per night/projected 180 night occupancy per year. The project should be cash flow positive year one. Note: The carriage house was previously renting well with a nearly full calendar and a steady stream of return guests.
Potential ROI gained in overall property value:
As with any home renovation that increases the overall square footage of the house additionally, outside of the extra rental revenue, the owners will realize:
$156,000 Additional value to the house at 260 sq. ft. added @ $600/ft
That is a 700% return the minute the paint is dry, and before the next guests check-in!
Our Luxury Simplified Retreats team is a top 3 company in South Carolina for Average Daily Rate and Occupancy (AirDNA November 2020). With some of the top Revenue Managers in the coastal areas in and around Charleston, we aim to maximize our owner return and our renter experience, and our team is skilled at achieving both. Why not ask how we could help your own property achieve the same results? Contact our team and find out what we can do for you.
So you have invested in a second home, perhaps as an investment that doubles as a getaway for you to vacation with family and friends, or intended to be used strictly as rental income. The theory goes that you can use your home to generate income that offsets its cost of operations and pays the bills. That investment model can be one of great success, but who will be responsible for overseeing your property and just what should you expect? When you begin thinking about hiring a property management company for your vacation rental, whether for the first time, or your property is currently being managed by a company who’s performance you’re not happy with, there are some key criteria to consider as you evaluate property management firms.
WHY CAN’T I MANAGE IT MYSELF?
For the first time owner, the question naturally begins with, “why shouldn’t I just do this myself?” The answer may be as simple as, “you can, but how much time do you have?” Certainly there are owners who handle management themselves, but it can be incredibly time consuming to do so. The first hurdle may simply be one of not living in close proximity to your vacation property. Charleston SC is a top vacation destination, both the downtown historic district and along the beaches, and can often have fully booked calendars for much of the year. Vacation homes, when marketed well, will have consistent bookings, and in turn will have a tremendous amount of “wear & tear” so it’s important that you have the opportunity to put eyes on the property and ensure that it is in good condition between guests. This is doubly so in the luxury vacation rental space, as the luxury traveler has a heightened expectation of lodging and are generally paying a higher nightly rate to get it. Having the access to cleaning vendors and a reliable maintenance team is vital, as well as staff that can quickly solve issues that may arise between guests checking out and those that will be checking in next.
Additionally, in order to generate and maximize your income potential, you need ample time to promote your rental, take quality photos, write and revise the listing, field traveler inquiries, answer questions about your property, vet potential guests, juggle service providers like cleaning and maintenance, follow up for reviews, manage local permits & licensing, and remit transactional taxes where applicable. That’s a lengthy job description for anyone. Hiring the right vacation rental management company for your home can take the stress, endless tasks, extra time spent, and marketing responsibilities off your plate.
DO THEY HAVE EXPERIENCE IN REVENUE MANAGEMENT?
Successful property management companies are those that, in a robust rental market, can consistently deliver revenue to owners while maintaining their asset and providing exceptional service to their guests. Revenue management is a big part of that, and requires a combination of both a team of skilled revenue managers and the use of a comprehensive Property Management System (PMS) software. Day to day oversight means continuously monitoring and measuring KPIs, market conditions, competitors, events and customer data. To maximize earnings for owners in our luxury portfolio, our revenue managers start by performing an in-depth review of comparable rental properties in the area. Our dynamic pricing strategy means that we continually monitor and adjust rates on a daily basis by accounting for factors that influence rates including occupancy, seasonality, and fluctuations in demand. Additionally, every manager should be fully aware of the status of local short-term rental regulations. In a city like Charleston SC, the regulations are strict and the penalties are substantial should you attempt to rent your property illegally.
WHAT SHOULD I EXPECT TO PAY IN FEES?
Before hiring a local property manager, do the math to determine whether you can afford to pay a fee and still meet your rental income goals. Many vacation rental property management fees range from 20-50% of your rental income. Just how much property managers charge depends on the company and the services you can expect in return. In a commission-based fee structure, a property manager will take a percentage cut of your overall monthly earnings. This is a popular fee structure since your expense is directly linked to the income generated. Bear in mind, that the property management company has fixed costs of their own, including many of the services in place that exist for the care and promotion of your property, including PMS software, site-based inspectors and maintenance teams, and marketing staff. Above all, make sure any fees and agreements you undertake are those that prioritize guest experience over short-term profit. You should want this to be the goal for both you and your management company.
WHAT SERVICES ARE INCLUDED IN MANAGEMENT FEES?
Specifically ask whether the fee covers marketing, professional photography, writing the listing description, updating and optimizing the listing, observing market trends, cleaning, maintenance, inspections prior to guests checking in, or site-based team support for any issues that arise during a guest’s stay. It’s important to closely understand any services/fees that may be assessed to you outside of your commission arrangement. If your management company covers everything from marketing to maintenance, the agreed upon fee structure may be worthwhile for the peace of mind that your property is being well-managed and you are maximizing your return on investment.
HOW WILL YOU MARKET MY PROPERTY?
This is an important one. Marketing is a big word that includes the photography of your rental, a high-converting property listing, framing your rental for current trends and the market, and how it is promoted. Make sure you understand their marketing plan. With the predominance of travel search and planning originating on the web it is vital that your property is marketed to all of the top, major rental sites with highly professional listings. At Luxury Simplified Retreats your rental not only will appear on our website, but also some of the top syndicated marketplaces for vacation rentals including Airbnb and Vrbo. We also employ powerful tools for garnering exposure including paid search, display ads, social media and our growing database of travelers.
A vacation rental manager’s 20-50% fee ought to cover the cost of marketing your property as well as any marketing efforts they make to raise the profile of their own site. Words like “search engine marketing” or “higher search results” are good indicators your management firm has put effort into raising and maintaining their website’s profile online. In addition to dedicating marketing dollars to maximize the exposure and promotion of listings on our own custom-designed website in order to increase the amount of bookings that are generated for our owners, we know it is still vitally important that we ensure our properties are receiving maximum exposure on the major online travel sites like Vrbo or Airbnb. Your manager should also actively solicit reviews from happy guests and follow up with guests who have already stayed at the property to see if they want to book again next year. Ask your vacation rental manager what they do to ensure repeat business and 5-star reviews to entice new guests to come and stay at your property.
WHEN AND HOW ARE GUESTS ABLE TO BOOK MY PROPERTY?
If you have ever tried to book travel online yourself, you know the things that are most important to you: listings that are easy to find and accurately represented, calendars that are easy to navigate, rates that are quoted quickly with additional fees clearly displayed, and the ability to easily pay online and complete your reservation. Management companies that have optimized their websites to accommodate online e-commerce transactions and are supported by PMS systems that are continuously syncing the calendars for to-the-minute availability can handle all of this seamlessly.
The vast majority of guests prefer to book online, and very few are willing to get on the phone or send a paper check in the mail. Making an online chat feature available to quickly answer questions is another benefit from a well optimized website. The ideal response time for inquiries is 15 minutes, so the bar is pretty high for providing the kind of service that turns into bookings.
WHAT SHOULD I EXPECT ON THE CARE & UPKEEP OF MY HOME?
A successful, well-run property management company should have a vested interest in the care & upkeep of your rental home. You’re looking for a manager who performs a post-stay walkthrough after every guest leaves, takes photos of any damages for your records, and quickly handles issues that will affect the experience of the next guest who have booked a stay. Be sure to ask your potential vacation rental manager how they handle issues like broken or missing items after a guest’s stay. You shouldn’t expect your property management company to pay for damages out of pocket – that cost will come from the guest’s deposit, however, the property inspector or cleaning service provider should note the damage, report it, and then alert the guest about retaining their deposit to cover the damage if necessary.
THE ONLY PROPERTY MANAGEMENT COMPANY FOR YOUR LUXURY HOME
We know you didn’t purchase your vacation home to spend all your time worrying about the upkeep. You should be focusing on the memories to be created there for you and your family & friends and the return on your investment. Let us create a pro forma for your property, and help you to realize the full potential that awaits when you partner with the top property management firm in Charleston. Visit our property management page for more information to find out why we’re leaders in the property management industry and learn more about working with us.