Volsky’s View - Addressing Homeowners Who are Thinking about Self-Management

by George Volsky, Instant Software, Director of Research

More homeowners today consider self-management than ever before.  How should rental managers deal with this?  Is it sufficient to address this issue only when a homeowner announces his intention to leave our rental program?  Will a homeowner newsletter article merely stir up homeowners who believe they could do a better job of renting and maintaining their home?

Personally, I think that rental managers cannot afford to say nothing or be reactive.  That abdicates the battleground to RBO advocates who already have high visibility and large advertising war chests.

Rent-by-owner sites heavily promote self-management.  One major company is now holding conferences where it provides education and resources for homeowners who self-manage.  The economy and housing markets continue to put financial pressure on second-home owners to consider self-management.  

Managers have several interests to protect.  The most important is to protect existing inventory from losses to self-management.  A second is to persuade new buyers of vacation homes to use managers.  There is also a less obvious goal:  helping homeowners to understand our value, so we get less pushback on fees and more leverage to stop homeowners who press for more service or lower costs.

I think that a successful campaign must drive home simple themes, including these:

· Rent-by-owners don’t save money but earn it;

· Rental management is a demanding and stressful activity;

· Rental managers make second home ownership more enjoyable.

You can drive these themes home through your newsletter, a letter to homeowners, or by attaching an article on the topic to a monthly homeowner statement.

We have drafted the following article which we invite you to use in part or in whole for any of these purposes.  Change it or attribute it to us if you think a third-party source might be more credible.

 

Homeowner Letter or Article

Drafted by Instant Software Research use by Customers

Why Use a Rental Manager?

We occasionally hear homeowners ask about the tradeoffs between self-management and management services.  Obviously managers cost money.  Do managers earn it?  Are they cost effective?  This month, we share our answers to the question, “Why use a manager?”

RBOs Don’t Save Money.   They “earn” it, doing some of American’s dirtiest work.  The challenge is not just finding renters, but “fixing, cleaning, and taking care of the screaming guests:” Typical examples:

· Responding promptly to emails by impatient renters who are quick to look elsewhere;

· Answering 10 inquiries for every booking;

· Negotiating rent with bargain shopping renters;

· Responding to renters who argue that a malfunctioning hot tub justifies a full refund;

· Finding a back up cleaner when the regular cleaner doesn’t show up;

· Dealing with lost keys at 2 in the morning;

· Finding a vendor to remove unexpected snow that is blocking access to the home;

· Getting prompt response by an a/c repairman in the middle of summer.

Unplanned Problems.  Are problems rare?  Work-order statistics commonly reveal as many major problems per home as rentals!  Managers are experts in the problems that routinely arise in putting a non-resident renter into a home owned by a non-resident.  We anticipate and avoid recurring problems through preventive maintenance.  We put together networks of service vendors who respond to us faster than they would respond to an individual homeowner because we send them so much business.  We can keep backup cleaners on call because we have enough homes to keep them busy.  Our cleaners serve as our eyes and ears for homes they don’t actually clean, helping us keep properties safe from unruly or unauthorized renters.

Liability.  Many rent-by-owners expose their net worth by failing to inform their insurance companies that they are renting their vacation homes without using a professional manager.

Managers minimize homeowner’s liability by using:

· Bonded workers; and

· Workers covered by workers’ comp;

We use a professional laundry (do you know how many pathogens survive a household washer)?

Credit Cards.  We can take credit cards, assuring more rentals.  This is a credit card society where most renters want to either defer payments or earn miles by paying with credit cards--individuals can’t take cards and PayPal or third-party services are only partial solutions.

Tax.  No one enjoys dealing with the tax man.  It is not uncommon for RBOs to not charge tax.  This may appeal to renters.  But local tax authorities are mobilizing and starting to access homeowner’s Federal Tax returns (through PACE agreements) to identify homeowners who have reported the expenses associated with their rental homes.  Managers relieve the homeowner of tax collection, tax reporting and, of course, interest, penalties and criminal penalties.

Refunds.  We also earn our keep by relieving homeowners of the infrequent but inevitable nightmares-- where heat or air systems break and the renter won’t remain in the home, or where weather prevents renters from getting to the home and they want their money back.  RBO sites sell travel insurance, but usually not in a way that prevents uninsured renters from demanding a refund from the homeowner.

Slave to Phone and Computer.  Most importantly, there is the question of bookings.  RBO sites make it easier for owners to market their own properties, at least for homeowners who are willing to chain themselves to their phones and computers.  Aggressive RBOs can generate as many bookings as a manager.  But most RBOs lack the time or energy to respond promptly to the many non-booking inquiries.  And you only need to look at the leading RBO sites to appreciate the challenge of maintaining availability calendars.

Discounting.  RBO sites attract bargain shoppers.   We have a larger pool of renters who are more interested in getting the home they want than in getting a bargain.  RBO site renters often send multiple email requests soliciting discounts.  We monitor the booking pattern of an rental program to determine whether we need to give discounts.  We have a good sense of when to discount and by how much.

To summarize, management is not a fun or stress-free job.  Self-management can work for a homeowner who is both motivated and willing to do a lot of work.  Some who self-manage know what they are getting into.  Others don’t yet appreciate how much stress is involved.  We are equipped to do the heavy work for homeowners.  We make vacation rental home ownership a more pleasant experience. Most of our homeowners prefer to hire us for that purpose whenever finances permit.

 

 

Comments

[Rob Kincaid]

George is right-on. Great thoughts and talking points for homeowner clients who think renting by owner is a plus. Well done.

[Jan Leasure]

Thank you! I am going to personalize this and put it to use right away!

[Sandy Stone]

Great article George! You took a swing at a huge "Chunk" of the why we are worth every penny we get paid. The accounting you elude to the, the time commitment that an owner must give to this bussiness as well as the cleaning, oh the cleaning is never enough for some guests. The people skills we as managers bring to the table are learned from years of working with owners and guests. The dishonesty issues we deal with from guests as well the criminal eliments we have encountered. The list goes on.....

[Fred Sheffield]

Thanks George for the excellent article!

Having tried rent-by-owner myself, your statement that "RBOs don't save money, they earn it" hit home with me: I remember how stressed I was every Saturday wondering what kinds of problems would come up with renters checking out, cleaners showing up (or not), and new renters checking in, and how I was going to get them resolved from 150 miles away on a Saturday evening.

The RBO guides don't mention that stress when they tell you about how much money you will save/earn!

[Mike]

It's great to see Instant Software creating resources for property managers. Very well thought out and I'm sure many will find it useful. I'd like to discuss a few things:

What do managers need to protect (following quote from the article)?

"Managers have several interests to protect. The most important is to protect existing inventory from losses to self-management. A second is to persuade new buyers of vacation homes to use managers. There is also a less obvious goal: helping homeowners to understand our value, so we get less pushback on fees and more leverage to stop homeowners who press for more service or lower costs."

I think it's backwards. I think the most important thing to do is communicate/protect your value. Work hard, create value and the other things fall into place. Communicate (and deliver) the value and if an owner still wants to do it themselves then let them (without feeling bitter or sour). The reality is there are many owners that do a very good job "managing" their home. The HomeAway Owner's Community generates a lot of content for owners (and managers) to help the process. I don't think they are stealing business away from managers ... in fact, they are probably doing a better job communicating to prospect RBOs on why to use a manager. If a RBO prospect goes to HA Owners Community they are inundated with information ... what a perfect time for a manager to say "we have you covered ... and we've been doing it for XX years."

--> Side note, Paragon Lodging just sent out an email newsletter announcing they're celebrating their 10th year. Congrats! And what a way to demonstrate your experience. Do your owners know how long you've been in business?

I think Instant Software hit it on the head in the last paragraph of their template letter:

"In summary, management is not a fun or stress-free job. Self-management can work for a homeowner who is both motivated and willing to do a lot of work. Some who self-manage know what they are getting into. Others don’t yet appreciate how much stress is involved. We are equipped to do the heavy work for homeowners. We make vacation rental home ownership a more pleasant experience. Most of our homeowners prefer to hire us for that purpose whenever finances permit."

I think too many people in the professional management business get upset/irritated/frustrated when people decide to rent on their own. Why? Just wish them luck ... you know they'll need it. It's not an easy business to be in.

Thanks to Instant Software for creating these resources.

[Debbie Goodwin]

What we are faced with is new companies popping up that don't even have a web site, but they have their owners put there property on VRBO and discount commission. We need to have our owners on VRBO to compete but how do you ask them to do that and still be legitimate. I have been in the business since 1987!

[George Volsky]

Thanks for sharing that concern, Debbie. I think you can ask homeowners to list on third-party sites and remain legitimate (protecting your management company). My thoughts on this are the topic for this week’s blog (link below). If they don't work with your specific market, feel free to email me directly so we can discuss this in more detail.

http://blog.instantsoftware.com/instant_software_blog_vac/2010/07/volskys-view-encouraging-homeowners-to-use-thirdparty-listing-sites.html#tp

[Vacation Planning]

I agree there is no reason not to sk the home owners to post to a 3rd party site, If you feel like you will be seen less legitimate then you are not giving the right sales pitch and making t sound worst then what it is.

IN sales you have to know when to shut up and hand a order form!