Rentals: The Business Side Of Condo Ownership
Your Growing Role In Rental Management
By Selena Chavis
Emerald green waters, sugar-white beaches, world-class golf and fishing, spas, dining, shopping—it’s no secret why so many people are drawn to the Florida and Alabama gulf coast regions year after year. And while many realize the dream of owning their own condominium to regularly experience this unique stretch of paradise, the business-savvy condominium owner understands that at the most basic level, ownership is an investment.
Industry professionals are quick to point out that managing that investment to ensure the best outcome can be a tricky business, which is why many owners turn to the expertise of rental management firms to help ensure that their investment is protected and growing. Often, the successful marriage of rental management company and owner can bring about mutual benefits, but the development of that relationship must be cultivated and monitored regularly.
“Number one, owners are looking for occupancy and income,” said Randy Kaiser, vice president of Kaiser Realty, a full-service rental management company in Gulf Shores, Ala., pointing out that securing rentals is the name of the game.
In order to keep occupancy at its highest level, other services must factor in including support with maintenance and upkeep, regular consultation about the condition of a property and the highest level of customer service for guests, according Jeanne Dailey, president of Newman-Dailey properties in Destin, Fla.. “It’s our role to help them maintain and increase the value of their investment,” she said.
Trust is the key, especially if an owner is willing to give a management company leverage to move swiftly with the market. “I think the best approach is the true partnership approach,” suggested Sarah Kuzma, corporate relations director with Meyer Real Estate, a large rental management company in Gulf Shores serving the Florida and Alabama Gulf Coast. “We have that with the majority of our owners.”
Moving with the market may also mean changing the way business is offered as owners have started demand more ownership of the rental program over the past few years. With the current economic climate in play and the shifting of large shares of rental bookings from the phone to the Internet, many owners feel they have the ability to manage certain aspects of a rental program to keep costs down.
A New Day For Rental Management
According to Dailey, many owners have tried their hand at managing the whole rental program through Internet offerings such as VRBO.com, only to find that it too overwhelming.
“Owners are finding out how much work it takes to generate a reservation,” she said, noting that sometimes an owner may have to go through 100 emails to get one reservation. “We’ve had many come back to us after trying VRBO.”
Large, well-established rental management companies across the board are finding that owners still want to participate on some level in the rental program to offset costs, though. And the response, according to Bill Bender, broker/owner of Bender Real Estate in Gulf Shores, has been to find a mutually beneficial arrangement where the owner can bring in business and lower the overhead.
“With increased pressure on owners from higher taxes, insurance and association dues, they are looking for more creative ways to produce income. Most companies have moved to offering a smaller commission from the rental company…we offer a discount on the commission,” he explained. “I don’t see a good way to make that mutually beneficial if the owner doesn’t have the rental management agency in on the commission side.”
Kaiser Realty and Newman Dailey offer similar programs via either a referral fee program or discounted management fee.
New concepts are also emerging through organizations like iTrip.net, a concept that blends the concepts a full-service rental management company with the cost efficiencies of an owner managed rental program, according to Founding Partner Todd Morrison.
“There’s a new paradigm shift in vacation rental management,” he said. “What we have is a hybrid approach. We let the Internet work for them, and they make the money.”
Essentially, the company has developed a full-service management program while eliminating the costs of maintaining the overhead of an office environment. “They are still not having to do anything,” he emphasized, pointing to check-in, regular maintenance and advertising. “What they are getting is greater efficiency and more money in their pocket.”
Essentially, the company’s business is handled over the Internet via a virtual model with check-ins managed by email and over the phone. Digital locks and pass codes are used instead of keys, and maintenance and housekeeping needs are handled by calling in the experts.
The result, Morrison said, is that the savings are passed down to the owner via a much lower commission scale.
The concept is building momentum, according to Morrison, who said that since introducing the model into the Panama City Beach, Fla., market in early 2008, the company has grown to managing properties along the full Alabama and Florida gulf coast region; Orlando, Fla.; Costa Rica; Pigeon Forge, Tenn.; and Mexico.
Along the same lines, Daniel and Tamala Prickett market the Gulf Shores-based Prickett Properties as a boutique-style rental management agency. By keeping the program small, they eliminate the need for overhead and are able to provide more personalized service.
“Because we are small, we are able to keep our hands in all aspects of the business,” said Tamala Prickett. “We really consider ourselves in partnership with out owners.”
One of the more attractive pieces of the program for owners is the fact that “we don’t use maintenance as a revenue generator,” she explained. “We find that people don’t want to be nickled and dimed. The days of charging $35 for a light bulb are coming to a screeching halt.”
The company relies on a Web presence with 24-hour online booking, updated promotions, online chat and video blogs. Other “sister” websites—10 total—have also been developed to generate additional inquiries.
Leveraging the Rental Management/Owner Relationship
Regardless of the approach to commissions and overall business structure, the key to investment success is keeping units filled and staying ahead of the competition. Industry professionals agree that an experienced property management company can provide needed expertise to paint realistic pictures that will keep owners up-to-date on the way the market is moving.
“One of the things people need to be looking for is that you are working with a legitimate company that has been around and knows the business,” Dailey said. “Look for companies that have brand recognition and longevity in a market.”
Being up front and realistic with owners is the approach that has paid off for Bender. “We are still in a market with excess inventory, and owners need to understand that. We try not to overstate or oversell because there’s not an equilibrium in the market yet,” he said, pointing out that property management companies should be wary of taking on too much inventory. “We don’t have to have every condo in town because we can’t book them all. We want to have the ‘right’ number to satisfy our clients’ needs.”
Kaiser pointed out that most owners find it very hard to effectively manage a property if they are not local. Property management professionals are able to constantly monitor the condition of a property and make recommendations that put a unit at the forefront of the market.
“What happens [if regular monitoring is not done] is the guest suffers, and then you have a dissatisfied customer. It’s all about customer service,” he added. “Each year, we conduct a thorough property evaluation for our clients.”
With so much business done on the Internet now, the ability to show the condition of a unit is key to successful bookings, Kuzma said. Virtual tours have become the expectation of some potential clients, and there is no longer “anything barring the customer from comparing units. The Internet has brought about a new way to sell,” she said.
Because it wouldn’t be cost effective for most owners to engage in large-scaled marketing campaigns, a property management company can provide a much-needed resource in this area, say rental management officials. And many are finding that leveraging the power of the Internet is an efficient and effective method.
“We are using more third-party rental engines on the Internet,” Bender noted, adding that he has found that strategy effective for a small company. “We can use the marketing power of these third-party sites, and with the operating system we have in place, we are able to interface directly with customers and collect our own money.”
Alongside a robust marketing and advertising program, Morrison said iTrip has developed a system that advertises each property separately on the Internet as opposed to “rotation system” platforms that have been used in the past.
“If you have an extra nice unit, the rental customers shopping for a property will clearly see the advantage of selecting your property,” he explained. “Also, because of the large inventory of properties in this Internet system, there is an opportunity to book multiple units at one time to large groups, and when an inquiry comes in on a similar property that is already booked, you get the booking on your unit as overage.”
Newman Dailey and Prickett Properties take a narrowed approach to marketing, targeting a higher-end client and focusing on higher-end product.
“We happen to manage a lot of higher-end properties,” said Daniel Prickett, adding that the company keeps the inventory spread out across many condominium offerings, rather than focusing on shoring up 300 units at the same property. “We have enough [higher-end product] so that we can move guests to what they are best suited to.”
Dailey pointed out that targeting a pre-identified socio-economic market also keeps potential customers from becoming confused or overwhelmed with the flood of inventory available on the Internet. “The customers we’re looking for value service and are not necessarily looking for rock-bottom prices. They are looking for the experience,” she said. “We’re pulling in the business savvy client, who understands the nature of the long-term investment. We are business partners in this, and we’re looking for a long-term lucrative relationship.”