Ahh, the million dollar question! Well... maybe not "million"... but the ten's-of-thousands-of-dollar question! (doesn't sound as good). Alas, let's dig into some numbers so you can expect how the dollar flows and what you can reasonably expect to make!
First off, what we're looking at is how Gross Revenue leads to Net Revenue. These rentals homes are a business, one in which that we manage for you (i.e. we're running your business for you), but there are costs that go into operating this business.
Gross Revenue - This is the overall amount received from the guests before any expenses.
- Ex: Guest stays for three nights @ $300/night and also pays a $100 cleaning fee. This Gross Revenue = $1,000 ($300x3 + $100).
From there, we do have standard expenses that go into facilitating this rental, which includes...
Platform Fee - this is the fee paid to Airbnb (3%), VRBO (8%) or Direct Bookings (2.9%, credit card processing).
Cost of Cleaning - this is different than the cleaning fee (above). The cleaning fee is what the guest pays to you, the cost of cleaning is the amount you pay to have your home cleaned. We have our own in-house cleaning team but can also work with external teams. Our manage fee oversees the facilitating of cleaners and making sure the home is cleaned but does not cover the cost of cleaning, which is why this is listed as an expense here. This cost may be anywhere between $100 and $300.
Material Restocking - We require that we provide turn-key experiences for our guests. Clean linens on the beds, towels placed out and certain "materials" placed out so they can maximally enjoy their stay (first impressions are important!). This includes, but not limited to... toilet paper, paper towels, detergents, soap, toiletries, coffee, tea, sugar, etc. Our homeowners pay a per-stay cost for us to supply these materials, and it may vary between $15 and $35 depending on what is provided, size of home, etc.
Hot Tub Management - If you have a hot tub, we can handle the management (or you can work with an outside company). If we manage the hot tub, we provide the chemicals and filters to help maintain the integrity of the hot tub. We clean the filter and balance the chemicals between every stay, at $25/visit. Every ~6 weeks, depending on need, we will need to dump the hot tub, clean the shell, refill the hot tub, reheat it and add new chemicals. This takes a few hours and we charge $200/refill.
Management Fee - this is where our 25% management fee on the Gross Revenue is applied. This fee covers quite a bit (which you can see
) but essentially covers us stepping into your shoes to handle the responsibilities you would have to incur if you were to self-manage your home. For example, if you were to self-manage, you still have to restock materials, pay cleaners, hot tub specialists, registration costs and platform fees.
Illustrations are important! The below example is showing all possible costs. This is pretty much the highest cost scenario where an owner is paying for Hot Tub cost, registration fees (which is not present at all our homes). But also keep in mind, revenue is higher because the Hot Tub draws more revenue and a better community (with registration costs) tends to help generate more revenue (i.e. Lake Access!).
So in the above example, The Gross nets down to 52% of the Gross Revenue. And typically the Gross Revenue Nets Down to 50-55% on average.
Keep in mind there can also be unexpected costs. An example would include the water heater breaking. IN a case such as this, we can contact the plumbers, ensure they come out to replace the water heater and ensure it's completion. If we pay for this service upfront, we will be deducting the actual cost (no upcharge) from the end of month proceeds. So if you were owed $4,000 and we paid $1,000 to replace the heater, we will pay you $3,000.
While the real estate market has gotten hot, leading to higher purchase prices, it is still certain possible to Cash-Flow positively. Please see our
to help you assess what makes a valuable property!