Investment Properties – Self-Manage or Hire a Professional?
As of December 2021, Summit County reported that 21.5% of all housing units are short-term rentals, demonstrating the popularity of this investment opportunity. A number of Park City neighborhoods allow nightly rentals, and it’s important to note that a number also prohibit them, so be sure to verify that it’s an allowed use before acquiring an investment property with short-term rentals as a goal.
The best way to explore this allowed use is by checking the Covenants, Conditions and Restrictions and doing a word search for “nightly rental” or “rental.” If contemplating a property within the City limits, Park City Municipal has a handy map which provides a quick reference tool, just click on any address within the map to see if nightly rental is allowed.
Once you’ve verified that the use is allowed, you should also check to see what type of business license may be required. Within the Park City Municipality, a license is required and there’s code specifically addressing requirements here.
You’ll need to complete this application.
For properties in the Basin, Summit County requires a Nightly Rental License which is contingent upon first passing an inspection with the Park City Fire Department. You can find the Inspection Request Form from the Park City Fire District here, and the application for the Nightly Rental License here.
Once licensing has been handled, the question of how to market and manage your nightly rental property arises. Here are some thoughts and questions to contemplate when evaluating this weighty decision.
DIY NIGHTLY LODGING MANAGEMENT
According to HomeAway, owners spend an average of 8.4 hours per week tending to a property! Assign a reasonable value to an hour of your time and do the math. What is the opportunity cost of dedicating this much of your time to the task?
While on the surface it may seem that doing everything required to maximize income potential yourself is a winning strategy, please ask yourself these questions before making that decision:
- Do you have the bandwidth and skill set to develop a website or at least landing a page with all your property specifics? Is it optimized for Search Engine Optimization (SEO) and responsiveness across multiple mobile devices and brands?
- Do you have preferred access to professional photographers who can show your property in its best light? Do you have professional seasonal lifestyle photography from the area to change out as needed?
- Can you create a digital calendar that displays in real time so it’s accurate 24/7?
- Are you willing and able to answer inquiries 24/7 in a timely fashion so potential lodging guests don’t just keep clicking for other options? Remember that our guests come from all over world, so time zones for inquiries will be all over the map. Like everything online, responsiveness is key to winning the business.
- What time can you dedicate for the post-booking inquiries guests will have to arrange essential services supporting their arrival? (transportation, equipment rental, dinner reservations, kids’ programs, ski school, etc.)
- Are you fluent in all the ways to effectively market a nightly rental in the digital space? Have you evaluated how much time it might take to conquer this effectively? Don’t forget social media, you’ll need at least 3 posts a week across Facebook, Instagram and TikTok to be effective.
- Can you create an automated trail of emails and/or texts to keep the guests engaged both before and after their visit?
- Do you have a plan in place to generate repeat business from past guests?
- If you don’t reside here full time and will be hiring out services, do you have a solid team of housekeepers and maintenance personnel who will make servicing your property their priority? Do you have backup personnel if needed? Do they have vehicles that can handle winter driving? This is perhaps the most challenging piece of the DIY puzzle. These professionals are in EXTREMELY high demand and wages have risen significantly since the pandemic.
- What welcome experience and inspection will occur to ensure that your property is in pristine condition and welcoming to guests upon arrival? Who is leaving on the lights for their after-midnight arrival? Who will make sure your welcome basket items have been replenished? This is not necessarily a task for the housekeeping staff.
- Who is inspecting the property immediately after each departure for any deficiencies or damage?
- What security deposit standard will you implement to protect your asset?
- Do you have a plan for seasonal deep cleaning and maintenance?
- Do you have competitive data available to help you manage revenue considerations relative to your pricing, so you can remain competitive in an ever-changing market and considering seasonality?
- Will you take the time to create a printed or digital Guest Handbook to address all the “concierge” questions they will have regarding where to rent skis, how to get dinner reservations, preferred restaurants, airport transportation options, activities, how to use the remotes for the TV’s, etc.?
- Will you devote time every 3-6 months to update your restaurant list and information?
- How will you handle the accounting and tax preparation?
- From a legal perspective, how will you structure your lodging business?
Yes, these are loaded questions, but they are also real considerations. If you have taken all these considerations into account and still plan to go it alone, you still might want to strongly consider utilizing one of the two most popular sites for this, airbnb.com or vrbo.com. There are fees to the property owner, however, the benefits far outweigh those fees, in my opinion. Also, the DIY program logify.com offers a nice bundle of options for vacation property owners supported by tutorials and webinars.
I DON’T HAVE THE TIME, WHAT PROPERTY MANAGEMENT COMPANY SHALL I HIRE?
If you have determined that self-managing is not your preference, the good news is there are numerous very qualified, seasoned property management companies in Park City. You will find that there is no straightforward way to do an apples-to-apples comparison on services versus fees. While in today’s market in Park City you can generally expect to receive approximately 60% of gross revenue, with 40% being earned by the property management firm, how you get there varies from company to company. Here are a few pointers to help you evaluate the companies before making your decision.
First, if you are buying from a seller who had had their property professionally managed, talk to them to gauge their satisfaction. The benefit of staying with that company could result in significant repeat business.
Next, if the condominium is in a building with a front desk, unless fees or reviews are horrible, it might behoove you to stay with the onsite management firm. Think about your guests and how they will feel if they call or drop by the front desk to request more towels or amenities and are told they need to call their own property manager. It just doesn’t make for a good guest experience.
- Ask your Realtor® and any locals you know to suggest a few firms.
- Do your online research and be sure to read their reviews. Read a lot of them so you don’t just see the good ones. Google the firm so you can see “off website” reviews.
- How long have they been in business and what are their growth patterns?
- Does the company manage any other properties in your same community or nearby? This will influence efficiencies in housekeeping and maintenance. It’s also helpful if they know the Homeowner’s Association members to improve responsiveness when “common area” maintenance issues arise. However, if the firm manage too many properties that are remarkably similar to yours there might be too much competition. Ask how they manage the inquiries for comparable properties, is there a rotation system?
- Evaluate their digital presence – is their website easy to navigate with professional photography so properties are well presented? How about their social media presence, is it well targeted?
- Ask what their marketing budget is and where and how it is spent. Any good lodging management company should advertise your properties on AirBnB and VRBO as these are the largest consumer portals. How else do they keep your property high in the search results?
- Ask if their housekeeping and maintenance are on staff or independent contractors. My recommendation is to find a firm with their own staff, this way you’ll be protected from other clients usurping the staff when they have emergencies and such.
- Is their maintenance staff on call 24/7? Lockouts and confusion with TV remotes and technology in general are quite common and the companies should have staff to address these concerns.
- How are housekeeping and credit card fees handled? What about travel agent fees (this is an exceedingly small part of our local business yet still worth understanding.)
- How active is the company in working with travel writers?
- Ascertain their cleanliness standards, check-in/check-out procedures and security measures. Many companies now offer sophisticated ‘smart’ door locks that provide especially useful data on property access, allow remote control of room temperature and some can even determine if there’s a water leak. Additionally, they can deliver huge cost savings in the utility arena as guest are notorious for leaving the heat, fireplace or AC going full tilt when they’re out adventuring.
- How do they oversee guest inquiries beyond lodging needs such as equipment rental, airport shuttles, rental cars, getting their kids into ski school or camp? Many of the larger firms have an elevated concierge service which guests appreciate, and which can lead to repeat business.
- How much of their focus is on the nightly lodging business versus other aspects of property management?
- What are the niceties they provide for guests? This can vary from quality of linens to welcome baskets to a personal welcome to selling lift passes or other services without markup.
- Speaking of repeat business, what are their stats and what is their system to drive more returning guests for your property?
- When and how are funds dispersed? Check out their owner services online portals and the types of reporting provided to owners. Is it sufficient for you?
- Do they have a yield management staff person, who studies the competition and adjusts your rates to stay competitive?
- How do they vet the guests to make sure your property won’t be the locale for this week’s Rave party?
- How do they value customer service and what is their vision around this? If they have a human answering phones versus just a website this can drive much stronger guest satisfaction.
- Are they active with our local Convention and Visitors Bureau so they understand where that organization is investing their marketing dollars and effort ?
- What is their approach to deep cleanings and deferred maintenance?
- Who will be your primary point of contact? If this isn’t the person trying to sell you their services, make sure you get to meet that person to make sure they’re a good trusting baseline. It has to be a good fit.
- Ask for a review of their rental management agreement with your attorney to make sure risk management is appropriately addressed.
- Ensure that the rental deposits are held in a trust account. While this isn’t the law yet in Utah, during the recession of 2008 several large respectable firms went out of business here because they were forced to use rental deposits to cover their overhead when traditional bank lines of credit were abruptly terminated, and many owners lost significant amounts of money.
- Ask for references and make sure you talk to those folks – it’s well worth the time.
- Make sure you have the ability to approve rental rates. During the off season, most of our lodging business is regional and if your property is priced too low, you could attract clientele that may be more likely to cause excessive wear and tear or damage. A good firm will understand this pricing approach.
- What are their policies around damage and pet deposits (if allowed) and how do they manage discrepancies when they arise?
I know there is a lot of “meat” in this post, but it is important “meat”! Owning a vacation rental property can be the best of both worlds – the chance to have a vacation property you, your family, and friends can enjoy, along with the opportunity to offset many of your ownership costs by offering nightly rentals. It truly can be a win-win if you rigorously evaluate which approach will best serve you. However, if you don’t do your homework, you might end up quite unhappy and disillusioned. Please feel free to reach out with any questions.