Managing a property includes both fixed and variable costs tied to time, effort, and resources. Many property managers believe that every charge deserves thoughtful oversight and keen attention to detail. Therefore, adding a commission to all fees—beyond just rent—could be viewed as a fair acknowledgment of the hard work and careful risk management that go into handling every financial aspect effectively.
The "everything is an expense" theory in accounting and financial management emphasizes the importance of meticulously tracking and managing all costs associated with business operations. This theory posits that every activity, resource, and transaction should be recorded as an expense, whether direct or indirect. Key expenses could include property maintenance (repairs, cleaning, landscaping), utilities (water, electricity, internet), and marketing (advertising, listing fees, promotions). Administrative costs like software subscriptions and salaries are also important for smooth operations. By understanding and controlling these costs, businesses can gain insights into their financial health, improve profitability, and make informed strategic decisions. For short-term rental companies, this approach is particularly valuable due to the variable and dynamic nature of their operations.
Ultimately, the property manager has the choice to charge a commission on fees or expenses. The “everything is an expense” theory in property management treats all charges—rental income, cleaning, maintenance, and other fees—as expenses subject to a management commission. Property managers justify this approach by viewing all financial transactions as requiring their time, resources, and oversight, which incurs costs. By charging a commission on the total cash flow (not just rental income), they argue that they’re compensated for handling all aspects of property administration. This simplified, single-rate commission approach also clarifies the fee structure for owners, though it’s sometimes controversial among owners who feel commissions should apply only to rental income.
Detailed expense tracking can be complex and time-consuming, particularly for companies managing multiple properties. Fortunately, the OwnerRez property management feature automatically tracks expense records for commissions, taxes, and damage protection (if applicable) on new bookings and has many other options, such as surcharges, for automating expense tracking.