After nine years of self-management, I first hired a property manager for my first short-term rental back in 2019. It went terribly. I made many mistakes. I took too long to remedy those mistakes. And my failures lead to poor guest experiences, lost money, and unnecessary stress.
I’ll share my story and what I learned to help you avoid the same fate.
For the first nine years of my investing career, I invested where I lived: in Denver. Then in 2018, I bought a short-term rental in a Colorado ski town a few hours’ drive from Denver. Knowing that I wouldn’t be driving to the property regularly (and a local regulation that requires every STR to have a point of contact within an hour), I set out to hire a property management company.
It started out well. I contacted close to 10 different companies, with varying service levels and price points. I interviewed them all multiple times, sought references, and read every review I could get my hands on. I actually did well with this part.
Ultimately, I selected a nationally known company. You’ve probably heard of them. They had pretty low rates (which they attributed to technological efficiency), but offered the full-service experience I was looking for. I couldn’t discern what higher-priced companies offered that justified a higher fee, and I’ve worked in tech for most of my (non-real estate) career, so the idea of a tech-enabled company resonated with me.
For the first few months, things went OK. They did install some great tech, did a good job getting the listing up, their reporting was top-notch, and I loved the dynamic pricing. I started making solid revenue right off the bat.
The Problems Begin
After a few months, the cracks started to show. Well, I guess I should say the dirt started to show. And the guest complaints. And the piles of trash.
After only three months working together, I went to visit the property, and things weren’t great. The furniture was all out of place, everything was dirty, and it was clear the cleaning crew wasn’t doing a great job. I spoke to my contact, and they assured me things could get better.
Another three months went by, and the same thing—but worse. Red wine splashed across the 18-foot ceilings (how?!); dozens of bags of trash and recycling stacked high in the garage; broken furniture. I called the company and spoke to the new contact, who promised it would be fixed and we’d get new cleaners.
Then, I moved to Europe. My wife was transferred for work, and I could no longer visit the property regularly. It was also 2020, so I couldn’t visit for more than a year.
When I finally got back to it in 2021, I was appalled. The floor was caked with dirt, several beds were missing duvet covers and pillows, and there were no utensils in the kitchen. There was a TV entirely missing, as well as all the outdoor furniture. It was chaos.
Mind you, this is a luxury property—or it’s supposed to be. I again called the company, and spoke to yet another new person, who assured me they were hiring more people to fix this situation. I was angry, but also lazy—and chose to believe them.
My Big Mistake Made the Problems Worse
This is the point where I should have cut bait. There were enough red flags and tough conversations that failed to bring about change.
But I was still making decent money. And, the thought of finding a new partner, from Europe, during a pandemic, was overwhelming. So I buried my head in the sand for another year or so.
But eventually, as always happens, the bill came due. I couldn’t ignore my problem forever. In early 2023, the bad reviews were piling up, and bookings were declining. Everyone loved the house but said the cleaning, response time, and other basic operations a PM should handle were insufficient.
I flew to Colorado to check it out, and when I visited the property, the front door was unlocked, and one was even open. No doubt that rodents had come in. I had had enough.
This Time, I Took Action
I finally fired the company and hired a new manager, but it wasn’t without pain. Perhaps the biggest mistake I made at the beginning was signing a contract that allowed my previous PM to cancel my bookings if I canceled my contract. They owned my listing and reviews, so when I started with a new PM, I started with a blank calendar and no reviews. It hurt. A lot.
Despite being in a ski town, the house actually generates about 60% of its reviews in the summer. Last summer, I made about $2,000 in revenue—maybe 5% of what I made the previous year. Had I done this earlier and timed it for a slower part of the year, it still would have hurt, but I would have been back on my feet already and wouldn’t have lost as much money.
Five Lessons Learned
I learned a lot of lessons from this experience, but here are the five most important ones:
1. You (usually) get what you pay for. If a vendor offers prices well below their competition, it’s probably because they skimp on service quality.
2. It doesn’t matter how good the company is—what matters is the boots on the ground. I still think the company I fired offers decent value. I’ve heard great reviews of them from other investors. But in my location (a small town with a small talent pool), they couldn’t hire and retain good people, so even though the company had great tech, it didn’t matter. It was a rotating door of unaccountable people.
3. When you see a red flag, address it immediately—even if you’re making money and it’s inconvenient. The sooner, the better.
4. When you know it’s not going to work out, rip off the Band-Aid. I really messed this up. I knew I had to fire this company about two years before I did. Delaying the inevitable cost me real money and caused a lot of stress.
5. Property managers don’t always work out. Don’t sign a contract that makes a breakup more painful than it needs to be.
Final Thoughts
A lot of other investors would tell me the only way to really alleviate this problem is to self-manage, but I don’t agree. I wanted full-service management, and my new company has been great. I pay almost double the rate of my old company, and I’m thrilled about it. The house is in great condition, and I should have done this two years ago.
Lucky for me, this deal has still been great. I got a steal on the buy, and we’ve gotten the property back up and running and generating real revenue. Hopefully within the year, I’ll get back to the level of bookings and reviews I was at before this disaster.
But I did a lot of things wrong here that I regret, and I should have known better. Hopefully you can learn something useful from my failures!
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
