Rental Management Information
There are more than a dozen excellent rental management companies here that provide a valuable service to our island that only has two hotels. They give you the security of knowing that your island home is being maintained by caring professionals who take personal pride in your home as if it were their own. They each specialize in certain areas and they encompass both sides of the island with a variety of price ranges.
Many of our Buyers are off island customers who intend to put their St. John home on a rental program. The income and occupancy levels of a property are influenced by lots of factors including location, design, amenities and price. Most managers now prefer that all new homes they acquire have a pool and equal sized private bedrooms with adjoining baths. It’s all right to buy a house without those features, but possibly plan to add them at some future date. Air conditioning, which most residents don’t find necessary for everyday life here is also considered to be desirable by guests and managers. Views, breezes (bug deterrents) and an accessible location are really more important.
If you buy a home that is already on a rental program you will have the advantage of repeat guests that return to the same home every year and guarantee revenue immediately. Otherwise, if new to the rental market, a picturesque and descriptive brochure is vital. This will cost a thousand dollars or so but will be well worthwhile over time. You may wish to offer a lower price to build up rental occupancy the first season. However with the right management and amenities you should expect a home to consistently achieve annual occupancy levels of 65% or higher. Everything rents well throughout the winter season. The high season months of December to April are great, and then expect May and June to be spotty. Houses with pools and a/c are more popular during the summer than those without. July and August are good for families and longer stays. Then September & October are light, so that is a good time to schedule improvements and maintenance. November picks up again and is an excellent time for you to come down and prepare for season. Rental income will be enhanced if you do not personally use the property during prime weeks (i.e. Thanksgiving, Chanukah/Christmas/New Year, Presidents’ birthday week in February, Easter).
It is generally the same cost to maintain a four-bedroom home as a one-bedroom home, but you get more income if you can house more guests. Rates are often based on 2, 4, or up to 10 guests. Logic dictates that a multi bedroom home although initially more expensive to purchase, will bring in better revenue. However, a smaller house has the potential to be expanded and enhanced as time goes by and will most likely bring in more income than a condo.
Rental managers’ commissions begin at 20% but depending on the scope of marketing and management you want, 25-30% is more common. This usually includes advertising and booking the property, handling the deposits and payments, arranging for taxis from the airport in St. Thomas to the ferryboat, reserving car rentals here on island, meeting guests at the ferry, taking them to the property and explaining the idiosyncrasies of island life and your home in particular. Their fees also usually include routine maintenance, accounting, paying utility bills, marketing, etc. Additional expenses are incurred at local hourly rates for cleaning and housekeeping, pool maintenance, gardening, and hurricane prep before & unprep after storms. Some managers charge up to 40% “all inclusive” without those additional charges. Water, electric, cable TV, telephone, propane (stove/grill), insurance, exterminating, homeowners’ association fees, taxes (see below), etc. are extra. Overall, no matter which way expenses are taken care of, owners can generally expect to net between 50-60% of their gross rental income after commissions and expenses are paid (not including any mortgage payments for the property).
Most rental managers open a joint account for each Owner at a local bank. The manager then maintains that account and provides a monthly report of income and expenses to Owner including an up to date schedule of projected rentals when requested. Excess funds are distributed to Owner regularly as warranted and the manager, for Owner’s tax purposes, prepares annual income statements.
Gross receipts- paid monthly 4% of any income in excess of $5,000.00.
VI Hotel tax- paid by guests
Income taxes- paid by Owners to VI government on net annual; income tax
at same rate as their US income tax
Property taxes- paid annually based on 60% of assessed value.
By law, reassessed every two years, rate is
.0125 x 60% valuation
Travel agent commission (10%), when applicable, is generally deducted from gross income before management commission is computed.