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Heather Nicely is a Realtor, broker, and loan officer, and also the president of the Arizona chapter of NARPM. She’s been on all sides of property management and today, she’s joining us to talk about short term rentals and how managing those properties are different from managing long term rentals.
Heather’s Journey to the Short Term Rental (STR) Space
While other little girls were fantasizing about growing up into princesses, Heather was fascinated with real estate. By the time she was 12 years old, she knew she wanted to purchase a home in the mountains or near the beach so she could vacation there. Ultimately, she wanted to buy 52 properties so she could live in a different home every week of the year.
She also wanted to make money off the properties while she wasn’t living in them.
As she grew up, the idea seemed silly.
But now, it feels like maybe she was onto something.
Short term rentals were part of a platform within a software company she and her husband owned. She took the time to dig into it and learn about that space. Then, she became Vice President for an after-hours emergency call center and serviced some short term rentals while there. Heather learned that short term guests have more persistent needs than long term tenants. It seemed like a difficult market.
As her career evolved and she became a Realtor and opened a brokerage, she began to gather clients who were purchasing investment properties to be used as short term rentals. It made sense to her as she began to manage properties that she would include short term rentals in her property management portfolio.
Are Short Term Rentals the Future?
When COVID happened, short term rentals were the worst place to be.
But, since the pandemic has dissipated, there’s been a surge of binge travel. Now, short term rentals are more popular than ever. As a property manager, you might have heard about other long term property management companies dipping into short term rental management.
We asked Heather about the pros and cons of adding these properties to a long term management business.
- Short term rentals can be lucrative. Anyone renting out a short term home can tell you that there’s money to be made. Everyone wants a piece of the Airbnb market.
- But, if you’re generally doing long term rentals, you have to wrap your mind around the different business model that’s in place for short term rental homes.
Your 15 or 20 years of experience managing long term properties won’t help you.
This is a different beast, and trying to offer short term management services through an existing management company can be trouble.
Here’s the main difference: In the long term rental space, you’re developing a relationship with tenants over time. Your property owner is your main client. In the short term space, you’re renting out more than a roof. Vacation properties especially require you to rent out an experience. You have to cater to those guests. They’ll want coffee filters in the kitchen when they wake up on their first morning. If they’re checking in at 2:00 a.m. and the lockbox doesn’t work, you can expect a frustrated phone call.
Short term guests will want refunds if everything is not perfect. And, everything is an emergency.
So, it’s different.
But, Heather says that when you can hone in on those differences and create a good experience, you’ll do very well in that space. Educate yourself and understand the industry.
Most importantly, separate yourself from what you already know about property management.
Short Term vs. Long Term Property Management Mindset
Heather worked on the vendor side in a call center, and that demonstrated the difference between long term tenants and short term guests.
If someone is in a home for only two days, they’ll expect everything to be perfect for those entire two days, otherwise they’ll want their entire reservation refunded. This requires a mindset change for long term property managers. You’re not dealing with residents. You’re dealing with guests.
Two things need to be established if you’re a long term property manager considering short term rentals:
- Property turns are frequent and fast. With long term properties, you have a couple of days and
can take time to renovate. With short term rentals, there’s maybe a four-hour window to do all
the cleaning, change the linens, take out the trash, and make sure everything works. You’ll need
high expectations for your cleaning crew. Be ready daily for those property turns. With long
term rentals, you have a checklist and you have more time. Short term rentals require you to get
it right immediately. There’s no second chance. - You need to be more available than you are with your long term property management
business. There are no 9-5 hours, and you don’t get weekends off. In the short term rental
space, you’re on the clock 24 hours a day. People check in early or late and they’ll always have
questions. There has to be a communication process built in. There’s no ignoring the tenant
until Monday.
Technology and Short Term Rentals
Most property managers are familiar with the long term rental software.
There’s even more tech in the short term space, and it’s completely different from what’s available in the long term space. So, if you have 14 tabs open on your computer screen as a property manager of long term residential leases, you can expect to have at least 14 additional tabs open when you start managing short term properties.
Can you handle a lot of new software? Can your team learn it?
Heather recommends having part of your team handle long term properties and another, separate part of your team responsible for short term rentals. There’s a lot to learn when it comes to:
- Guest relations software
- Noise management systems
- Key systems
- Data and metrics checking pricing comps
- Dynamic pricing tools
- Rating software
If you already don’t love learning new technology, prepare for this because it’s a learning curve.
There’s no single platform that takes care of everything. So, you’ll have to go through an evaluation process to decide what works best for you.
There’s also some controversy in the technology that’s used.
Noise monitoring systems, for example. There’s a sensor you can install that picks up decibels in a rental property. You can be alerted if there might be a party going on. This might seem invasive, but a lot of owners and managers find it’s better to find out this way than to field phone calls from angry neighbors or the police.
Cameras are often used in short term rental properties, too. Guests may complain about that; they don’t want to feel watched while they’re in the pool. Property owners may want access to those cameras. Privacy is a big issue with technology and short term rentals.
Pricing Short Term Rental Homes
Comparables are also much different in this space than in the long term rental space.
Property managers will have to look at pricing trends more frequently. If there’s a concert or a festival or a major event one weekend, prices will jump. There’s software that automates this, but it sometimes needs human intervention. In Arizona, the Super Bowl was in town in February. If one owner priced his home at $5,000 a night, it threw off the entire pricing model. Technology is only a tool, and to be successful and keep your property occupied, you have to watch the market all the time.
It’s a lot of work and a different type of property management.
So, is the juice worth the squeeze?
Heather says yes, as long as you go into the space with a lot of knowledge and your eyes wide open. There’s a lot of money in the industry, but the work won’t be easy. The people who do well already have systems in place to effectively run long term rentals. They’re dialed in and they have a team.
Don’t try to just tack this on as another income stream.
You’re opening a second business. It needs to be treated as a separate entity. You’ll have to learn about things you never considered before, like the importance of having separate linens for makeup removal.
If you’re struggling to make things work as a long term property manager, you’ll probably have some tough challenges as a short term property manager.
Marketing and Reputation
Long term property managers are often inundated with negative reviews because no one can really avoid those crazy tenants with a list of complaints. The guest experience with short term rentals is different.
But, there’s less negativity and more positivity, generally. Airbnb asks automatically for reviews from guests. There are a lot of positive stars and reviews on that platform.
Most managers in the short term space are review-driven. You want to get five stars on every booking. You’ll be able to show off good reviews, and you can turn them into testimonials.
It’s not so much that your reviews will show up on Google or Yelp. They’ll be on Airbnb and Vrbo and similar rental sites. But, if you’re trying to get direct bookings off those sites, you’ll have to ask your guests for reviews. Build your reputation by asking.
Licensing and Regulation
Most states do not yet have clear licensing requirements for short term management companies.
Maybe you own three units and rent them out and then you manage your friend’s two rentals and then a rental for your doctor. That makes you a company.
In Arizona, Heather does not need a license to rent out properties for fewer than 30 days. Other states are different. Or, there are no requirements in place at all.
This might seem crazy, especially since you are dealing with other people’s money and the activities are so similar to long term rental management.
Legislation is always changing and there’s no standard way to define a property manager. Start with your own company and define who is a property host, who is a co-host, and who is responsible for the management of the property.
It can feel a bit like the Wild West. Everyone is rushing to it, but the legislation and the regulation cannot seem to keep up.
On the long term management side, there’s plenty of regulation. Short term rentals have far more transactions, but a lot of people worry about government overreach. Different groups have their own agendas and priorities when it comes to regulation. People locally get mad when HOAs feel like they have a say in who you can rent to and for how long. Then, there’s the city dealing with noise complaints and traffic issues and parking capacity, and it becomes an issue for them as well.
This feels like a new industry, and there’s not a lot of consistency yet. The laws and rules are very local, if they exist at all.
That’s a lot of information from Heather so far, and we want to save the rest of what she says for Part Two. On the next show, we’ll go into the current state of the short term rental market and how you as a property manager can serve your owners better.
If you have any questions before then, please contact us at Fourandhalf.
