Ready For Some Pillow Talk?

pillow First there were properties. Then there were owners of those properties. Those owners wanted to make money from their properties. They rented the properties out and became landlords...

Then landlords started having management headaches. Or they wanted to expand their business, and they needed help. That led to property managers. And property management companies.

Property managers are very common these days. A very large percentage of commercial properties is run by property managers. Same with residential properties. Especially after all those hedge funds bought up every rental property in sight.

Sometimes it is difficult to find a really good property manager. When you do though, that person can really make your life a whole lot better.

The same trend is starting in vacation rentals. First there were homes owned by homeowners. Those homeowners:

Went on vacation
Were snowbirds
Had a vacation home
Had a spare room or two because they were empty nesters

For a whole host of reasons, there was living space laying idle. Then along came Air BnB. And VRBO. And HomeAway. And Booking.com.

These websites turned regular homes and spare bedrooms into vacation rentals. Suddenly, Joe and Jane Homeowner had an additional income stream.

Vacation Rental Management Ain’t Easy

The trouble was that Joe and Jane didn’t realize that running a vacation rental is a little more than just:

Creating an ad on a website
Cashing checks

First, the home needed to be cleaned thoroughly… then the ad needed to be placed... then the bookings needed to be coordinated... then the tenant’s complaints needed to be resolved… then the damage needed to be assessed.

And then the cycle needed to be repeated. Often multiple times within the same month.

Either one of two scenarios started unfolding for a lot of budding rental homeowners:

They spent a lot of their free time managing, cleaning and advertising the property.

Or
They tried to hire out all the individual tasks and found out they were making little-to-no money for all the headaches.

Is There a Good Vacation Rental Property Manager?

There may be some good property managers for vacation rentals, but they are few and far between. Unless you start looking on the web.

There’s a vacation property management company out there called Pillow. Although you basically interface with the company through their website, they have lots of employees and contractors ‘on the ground.’

Sean Conway, the founder of Pillow, followed the business model of Hotwire, Expedia and tour operators of old. They buy a bunch of rooms at potential discounts with the hope of selling them later for a higher price.

Instead of just buying retail and selling wholesale, though, Pillow charges the homeowner 15% for their services.

Now, 15% may seem a little higher than traditional property management rental companies, but you will also receive much more for that commission.

Before I tell you what comes with the service, I will also tell you there is an additional $250 charge for the service. And a small monthly service fee, which is waived if your home is available for more than 15 days per month.

signin In addition to the normal administrative costs for signing someone up, part of the $250 also goes toward buying linens for the rental home. You probably haven’t heard of a property management company buying towels for a regular rental, have you?

Another twist Pillow offers is their ‘minimum income’ guarantee. Regardless of whether they rent the property out for the homeowner, they will pay a minimum income each month. Anything they make above the minimum income will have their 15% fee deducted from it.

Pillow will perform a host of other services that are similar to regular rental property management companies:

Provide an analysis of the best price points to list your property (they will also monitor events in the area to see when prices may go up)
Create advertising and manage listings on all the top vacation rental websites
Handle bookings and payment
Coordinate key exchanges
Clean the property
Perform maintenance
Generally communicate with guests before, during and after each reservation

Pillow also offers 24-hour call centers so your tenants will bug Pillow at 2 am about the leaky toilet – instead of you.

Pillow also protects homeowners against tenant damage by requiring security deposits from the renters. They also require homeowners to purchase Homesharing Liability Insurance (available through Peers.org).

Currently Pillow is only available in the following markets (as of the writing of this lesson):

San Francisco Bay Area – including Berkeley, Oakland, Sausalito, San Jose, Mountain View and Menlo Park
Los Angeles – including Hollywood, Beverly Hills, Santa Monica, Venice Beach, Downtown, Marina Del Rey and Playa Del Rey
San Diego – including Downtown, Pacific Beach, Mission Beach and La Jolla
Seattle – including Downtown, Capitol Hill, Belltown and Squire Park

To help encourage them to operate where you are, you can sign up for their newsletter. By signing up, you can let them know where you are located. That way they can see where the demand is enough to expand their services. They plan to open up business in multiple cities soon including the East Coast.

Obviously they can also only operate in areas where vacation rentals are allowed through local ordinances.

Here’s a video summarizing how Pillow works.

If you have a rental property in one of these areas, you may want to look into making it a vacation rental and hiring Pillow to manage it. Some of the reviews about Pillow say that the heightened customer service helps heighten revenues as well.

Got Any Pillow Talk?

Tell us about your experience with Pillow or vacation rentals in the comments section below.

Do What You Do Best, Hire Out the Rest – You will make much more money as a real estate investor putting deals together than handling day-to-day management.

Investigate Vacation Rentals – Society is becoming a lot more mobile. Is it time to convert some of your rentals into vacation rentals?

Become a Manager, Not an Owner – If you want to see if rental properties are for you, try becoming a property manager for others before buying one.