How Much Should You Pay for Property Management?

I’ve been having some interesting conversation recently with the founders of We Check it Out. Angela Balan and Jeff Sopik have partnered to bring their unique business and management skills to cottage country in the form of a membership package. Their current plans are designed for owners who need occasional checks to be made on the cottage when they are not there, and to cover emergency situations. It’s a lot like CAA membership in that it provides peace of mind together with access to a pool of trusted contractors for any maintenance issues that may arise. I like the idea and have been wondering how it could be adapted to meet the needs of cottage owners who rent their properties out and need assistance with the changeover process.

One of the biggest issues that face owners who plan on renting out, is how to manage the changeovers. Think about it….if you can’t see yourself making the trip up to the cottage every weekend to check readiness for the next renters, who is going to do it? There are a few choices and given the importance of the tasks that have to be done in that short time frame, it is worth starting early in your search to find that elusive caretaker or property manager.

Do it Yourself Costs

Before I start talking about paying someone else to do it, let’s consider what it actually costs to do the job yourself. If you have to make a 400km round trip you’ll pay around $50 on gas. Add on four hours of driving time plus a couple of hours at the cottage and that pretty much takes up a full day. And, since you only have a limited period of time between one set of renters leaving and the next arriving, there won’t be much time to relax on the dock, or enjoy a boat ride.

Then there’s the issue of a problem arising during the rental. Let’s say the water pump stops working or the hot tub clouds up and needs an application of chemicals. Or a storm passes through and you hear from the renters that the roof is leaking or a falling branch has broken a window.

If you have plenty of free time, are pretty handy and are able to respond immediately to a problem, then I can see it won’t be an issue for you. But, unless you can get to the cottage within a few hours of an emergency happening, you should seriously consider making a connection with someone who can deal with these challenges. Here’s a couple of examples from renters in cottages last summer:

A barbecue wasn’t working – it was an older model and a part had finally parted company with the rest of it. The renters had planned on a barbecue meal to celebrate a special event that night. Resolution: the caretaker drove into the local town and purchased an assembled model and delivered it to the cottage.

After a power outage the water pump failed to operate when the power resumed. Resolution: The property manager called by within 2 hours to reset the pump ( a 2 minute job).

What stops you from hiring someone?

I know of many owners who say they wouldn’t dream of hiring someone to do their changeovers or maintenance. The most common reasons for this are:

• ‘No-one knows my cottage like I do’

• ‘How can I trust someone else to check everything is OK and nothing is missing or damaged?’

I appreciate these reasons are valid. Cottages can have quirky systems that require specialized knowledge to maintain and operate, and a much loved property can be filled with antiques and items of family value. However both these objections can be overcome by careful preparation for third party property management, selecting the right person for the job, and educating that person thoroughly.

What are the options?

Apart from doing it yourself there are three options for your property management:

Ask a Neighbour

Let’s say there are neighbours who live in the cottage community year round; they are a helpful and friendly bunch and one or two have already mentioned they would be happy to ‘watch out’ for your property while you are not there. Sounds good? Well, this could be a great option given that your neighbour is familiar with the area and knows all the local contractors and service providers. He’s also willing to do the job for ‘a few beers’ so although you plan on paying him, it looks like the cost could be minimal.

This can work but there is a real potential for dispute if you are not clear what you expect them to do. Neighbours may not be willing to ‘be on call’; their enthusiasm can wane quickly, and you really need to consider how your friendship could be affected if it doesn’t work out as you expect.

An agency was concerned about complaints they were receiving from renters about the cleanliness of a property. The owners’ neighbour was conducting the changeover at the end of each rental but was not carrying out all the tasks required to ready it for the next rental group. On a couple of occasions, he had forgotten to even check the cottage between renters saying, ‘Something else came up that I had to take care of”. If this had been a business arrangement it would have been fairly straightforward to deal with, but because the owner had only an informal and verbal agreement over the tasks that should be undertaken, it was difficult for him to manage a working relationship with his neighbour. If you want to maintain a friendship, either have a written agreement or don’t go down this route.

It is unlikely that a neighbour/friend will carry liability insurance so it would be wise to check with your insurance broker before you begin to make payments for work being undertaken in your property. Consider the worst case scenario – your neighbour slips on your deck steps while they are at your property doing a changeover and subsequently launches a lawsuit against you for the injuries sustained through your ‘negligence’. Although your rental insurance may cover a claim by a renter, it may not be sufficient to keep you safe from litigation by a ‘worker’ at your property.

Local handyman or contractor

Rather than approaching a neighbour, you might have people in your area who advertise basic handyman skills. We often find these are retirees – often local cottage owners – who like to do odd jobs to generate some additional income. In many cases, once you start talking about the tasks that need doing, you’ll find an enthusiastic response and a couple who will work together as caretakers for you. This is just a step-up from hiring your neighbour – the difference is they are already looking for this type of work and you in a great position to create a long standing relationship and provide them with consistent work over a period of time. I talk to many owners whose property is in the very good hands of local caretakers and they are extremely satisfied with the arrangement. However, as in my comments above, check they carry appropriate liability insurance.

The drawbacks of using independent self employed contractors are that they may be unreliable if they take on too much.

Property Management company

A pricier but more professional approach would be to find a dedicated property management company. There are more of these in the popular cottage country areas – check you local Chamber of Commerce office for information as most will be registered with them.

What you are paying for are skilled workers experienced in all aspects of cottage management who are likely to be fully bonded and insured. What you will have (hopefully) is a professional service that gives you confidence in their ability to manage your changeovers and deal with any emergency that should arise.

Preparing for third party management

Whoever you choose, your most important task is to brief them thoroughly on what you want done. Be as comprehensive and detailed as you can, otherwise you may find something important has been left out. Things you might do without thinking like removing lint from the dryer filter or checking all drawers and under beds for left items need to be mentioned. Schedule at least an hour to go through each room to familiarize them with the layout and arrangement of the property. Don’t forget the outside. Checking that there is plenty of barbecue propane, that the oars and paddles for the boats are in the right place, and that outdoor furniture is clean, are all additional tasks that need to be carried out.

Finally, prepare a folder that contains the following:

• A changeover checklist that gives room-by-room instruction.
• Restocking list that includes all the items that may need to be replenished or replaced for the start of the next rental – this should inlcude paper products, cleaning supplies, tourist information, firewood etc.
• A series of photographs showing the property as it should be at the start of each rental. These are helpful when renters may have rearranged furniture.
• Copies of your renter checkout documents and survey sheets that will be left for the next group of renters.
  

If you are asking your rental groups to leave the property in an ‘as found’ condition, your caretaker shouldn’t need a lengthy time to complete the checklist – depending of course on the size of the property. My rule of thumb for a moderate size property would be that if it takes more than an hour to do the changeover, then it may be cause for deduction from the renter’s damage deposit.

It’s a good idea for your caretaker to bring along a digital camera, just in case there’s been any damage or the place was left in a mess. Photos are indisputable proof particularly if they are time stamped on the day of the renters departure. If he or she doesn’t have a camera and the means to download photos and email them to you, provide a few disposable cameras and get them mailed to you for processing.

I find that most of my renters leave my cottage in a pristine condition and it is simply a matter of running through the checklist and replacing used items.

So, what should you be paying for this service?

The rate will depend on the amount of time the caretaker will be present at the property, together with the distance they travel. Be fair with this. If he or she needs an hour or more to make a round trip to your property and you allow 2 hours for the changeover, they will only have time to do one per day, unless they manage other cottages in the vicinity. Offering too small an amount may not be enough to encourage them to take the job. Take into account any outdoor maintenance that is required – lawn mowing, raking, weeding etc.

Here’s some examples:

An owner on Belmont Lake pays a local cleaner $30 for a changeover in her 700sq ft cottage for which she charges $950 per week.

At a $3000 per week cottage north of Huntsville, the owner pays his caretaker $150 for a changeover in his 5 bedroom property.

Changeover at a 3 bedroom Viceroy in the Haliburton Highlands costs the owner $50 for the service provided by a local resort owner. Lawn and yard maintenance is done by a property management company at $75 per visit. This cottage rents for $1500 per week.

Using a percentage of the rental rate may be useful yardstick. 5% seems to be a reasonable level to work at, however it really depends on where the property is, how far someone will have to travel to carry out the changeover, and the scarcity of suitable caretakers in your area.

Finally, it may be an option to opt for a full cleaning service if this is the only way to get someone to do it for you. This is what I am going for in 2008. I am paying a cleaning team to spend 3 hours at my cottage and do a complete changeover. I’m asking my renters to leave it tidy with all the dishes loaded in the dishwasher, and the beds stripped (I provide linens). The rental rate will be increased to cover the additional cost, I get my Saturday back, and my renters will be very happy they don’t have to spend the last morning of their vacation cleaning the place.