How Property Managers Can Win More Inventory
By Properly / Sep 27, 2018
How do you grow your vacation rental property management business?
Despite the vacation rental industry’s growth over the last decade, property managers continue to struggle to find inventory for their businesses. Competition is fierce, owners demand more for their money, and it can be difficult to know which properties are available because of strict short-term rental regulations in some areas.
With all of those challenges, it can be difficult to know how to get your vacation rental property management business off the ground.
If you’re just starting out or would like to expand beyond a handful of properties, you’re in luck. We talked to some experienced managers in the industry whose businesses have skyrocketed in the last few years and got their advice on how to build a vacation rental management company – at scale.
Meet the Experts
Before founding their management company Better Vacations in 2012, David Malka and Charles Lei were dabbling in Airbnb as owners. They bought their first investment property in Las Vegas, learned a bit about the ins and outs of management, and then convinced friends and family to get in on the action. Once they’d learned the ropes on their own properties, they brought their expertise to providing professional management to over 25 cities. Lei spoke to us about how they managed such rapid expansion in a competitive market.
Sabrina Bethunin was looking for a business idea when her friend Quirin Schwaighofer asked her to manage his Airbnb for a few months. When Schwaighofer came back, Bethunin had restyled his property and listing, dramatically improved his rental income – and mapped out a brilliant business proposition. The pair cofounded MadeComfy in 2015 and had 50 properties under their management within their first quarter. Schwaighofer sat down with us to discuss how MadeComfy has managed such spectacular growth in such a new market.
Look Where No One Else Is Looking
If you want to establish yourself as the obvious choice for property manager in a given area, your first job is to figure out where your inventory is located. For Bethunin and Schwaighofer, the answer was simple: there were practically no professional short-term managers in their area.
“We realized Australia was about 5 years behind the U.S. market in terms of short-term rentals,” Schwaighofer says. “We started initially with just key exchange and cleaning and grew to 15 properties in about 4 months, which was a lot. And we started to realize that if you mess up one thing, everything comes down. So we started to offer a full service so we could be sure we were delivering everything.”
That was a unique business model in Australia; few had thought to offer full-service management. If you’re in an area where short-term rentals aren’t the norm, you may well be looking at a market that’s desperate for a taste of professional management. Provide it, and you’ll quickly find owners eager to sign on with you.
For Lei and Malka, finding customers wasn’t so simple. They had started operating their own Airbnb in Vegas, a popular area already filled with short-term rentals. Rather than try to persuade self-managing owners to try their services, the two looked for inventory in the long-term rental market.
“It was an arbitrage model, where we’d convert previously long-term properties to Airbnb with the owner’s agreement,” Lei explains. “We’d seek out properties that were currently for rent long-term, and ask if they’d be open to renting their place on Airbnb.” With cold calls and word-of-mouth referrals from owners delighted to be turning a better profit with a short-term rental than they could with a long-term rental, the Better Vacations empire grew.
The lesson here is if you have tons of competition for clients, think outside the box. Lei and Malka didn’t look at Airbnb listings for potential owners; they found them in long-term rental owners they could persuade to try something new for a chance at a better profit. Owners with properties suitable for short-term rental aren’t only available on listing sites; there’s potential in most properties, and countless avenues to reach those potential clients.
Target Your Marketing Approach
People need to know you have something they want, and the best way to make them aware is through marketing. The question is: what kind of marketing approach works best?
MadeComfy has built their business by being active participants in the short-term rental world. “Be up to date with the industry, educate yourself, be connected, and talk about what you learn,” Schwaighofer says. That strategy has made the MadeComfy cofounders a constant fixture in the short-term rental media. “We’re asked to talk on podcasts, on TV shows, we’re always present online when people are talking about short-term rentals. When you have a problem and Google it, we’re everywhere.”
That constant ubiquity has meant MadeComfy doesn’t need a sales strategy. “So far, we have not approached a single customer. We’ve been in a really good position, where people simply find us and come to us. We have 100% inside sales.”
Better Vacations’ approach has been to make good use of one of the most effective and under-used marketing strategies: word of mouth. “A lot of our new properties come from returning customers or friends of friends, and that comes from having a solid product people like. If you have something good, people will be coming to you.”
Word of mouth works best as a marketing strategy if you’re actively asking your clients to spread the word. Your client might not think to mention you when the topic of short-term rentals comes up. In person or by email, remind them: “If you know of anyone looking to rent short-term, please send them our way.”
If you regularly remind them to look out for such opportunities to talk up your business, they’re much more likely to do so.
Be Frank About the Money
A great service is always welcome, but at the end of the day, owners will decide whether to stay or leave your property management business based on the answer to one question:
Did my vacation rental earn enough money?
Owners need to know if you can meet their financial expectations for the property’s performance. Without a solid track record of meeting financial expectations, you won’t be able to persuade new owners to join your growing management business.
“Get really good at what you’re doing,” Lei says of managing owner profit. “Figure out what you can do to maximize the profits for your current owners, to lower your operations costs, to lower cost to the owner so that more money goes into the owner’s pockets. Without being able to show really solid numbers, it’s hard for you to expand.”
While you want to impress the owner with your ability to turn a profit for them, you also need to set accurate expectations. Owners who expect their property will be able to earn $50,000 will be disappointed if it only brings in $35,000, but owners who know that the average property in the area brings in $30,000 will be delighted that you helped them overperform.
“We’re very conservative with our projections because I would rather have them surprised in a good way than surprised in a negative way,” says Lei. “I feel very responsible for all the owners that invest in us. They’re putting their trust in us and I want to be able to deliver on what I promise.”
If you’re getting pushback on the amount of money you charge for the service you provide, redirect the owner’s attention to what really matters: the profit they’re earning with your help vs. without it. “The customer might say I don’t want to pay you $100, what you’re doing is only worth $80. That’s them not valuing your product. If you say well, we can make you $3,000 more than you’re making now, then they don’t even think about the cost of management,” Schwaighofer explains.
When you’re able to show that you’ve delivered consistently on the promises you’ve made the owners who already work with you, it’s much easier to persuade new owners to get on board.
While not every business person wouldn’t put this quality at the top of their list when it comes to tracking down new inventory, both of our experts are in full agreement on the standard for vacation rental property managers: integrity is absolutely essential.
“You have to be able to follow through,” Lei says. “Integrity is everything. So far we’ve had no owners quit our company – because we do a good job, sure, but also because we hit the numbers we said we were going to hit.”
Schwaighofer’s philosophy is similarly focused on following through on your promises. “What people associate with professionalism is making sure that what you communicate, you deliver. Make sure you can keep your promises, and I think you’re halfway there. People understand if you make a mistake, things can go wrong. Being a professional is not about covering that, it’s about being honest and telling them what you’re doing to improve.”
You won’t be able to expand your business if you’re dogged by a reputation for not following through on your promises. MadeComfy’s online presence wouldn’t be nearly as beneficial if they didn’t practice what they preached, and Better Vacations’ efforts to spread word of mouth wouldn’t be effective if the word going around wasn’t so very positive.
That integrity has to exist both inside and out of the company. “What’s really underrated is the values and culture you have within your company,” Schwaighofer says. “Focus early on the culture you drive and the values you live by that are applicable to your business, your industry and your goals.”
After all, when you bring in all that new inventory, you want to be able to keep scaling indefinitely. Which means you have to know what you’re bringing to the table, now and in the future. As Lei puts it: “Be honest. Not only with the owners, but with yourself. You have to be able to follow through.”
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