Many property managers in the short-term rental (STR) industry attract new business by shouldering the upfront onboarding costs for their homeowners. From bed linens to smart locks to coffeemakers, purchasing these items now — then recouping the costs from your owners’ rental income later — can maintain quality control for guests and start your homeowner relationship off on the right foot. 

But, without the proper processes and safeguards in place, it can also rack up spending and place financial strain on your business. 

So let’s dive deep into onboarding costs for STR managers: what to expect, the financial pitfalls to watch out for, and a few strategies for how to make the most of your onboarding budget. 

Common onboarding expenses

First impressions matter. Even when a guest’s visit is technically over, their experience can live on fee-free in their minds — long enough to share with others. As every manager knows, the review of that first-time experience can make or break an STR’s earning potential.

To ensure your property is unforgettable in all the right ways, here are some of the most common onboarding purchases you should anticipate:   

• Bed linens (usually 3x per bed)
• Towels (usually 3x maximum occupancy, + one bathmat per bathroom)
• Window coverings for bedroom windows
• Smart locks
• Well-lit address signs
• Kitchen essentials (coffeemaker, microwave, toaster, plates and silverware for the home’s maximum occupancy)
• Smoke/carbon monoxide detectors
• “Extra” amenities, such as pack-and-plays, grills, board games, or equipment for local attractions like beach gear  
• Replacements of any worn or unappealing furniture and appliances
• Local permits or licensing fees
• Home improvement repairs
• Landscaping projects

Financial risks of upfront onboarding

Floating new STR costs upfront can entice clients and propel growth, but it can also expose your business to certain financial threats. Notable among these are delayed reimbursements, expenses leakage, and owner churn.

Delayed reimbursement and cash flow issues

Upfront onboarding expenses usually only serve as a stopgap until you’re reimbursed by STR owners from the revenue generated from the new unit’s bookings. But depending on the season, it can take owners a long time — sometimes months — to secure an initial reservation for a first-time vacation rental. That means, depending on when their first guests complete their stays, you may not see a reimbursement check for quite a while. 

When your business has to shoulder onboarding expenses without reimbursement for a significant period of time, it can cause substantive cash flow issues if they aren’t accounted for in one place. 

Expense leakage

If your company juggles onboarding costs for a lot of properties, there’s a high likelihood multiple employees will make one-off purchases for different properties. These types of expenses can slip through the cracks and go unrecorded if receipts aren’t linked to their respective units — which means they will never be reimbursed. 

One or two missing receipts per unit may not seem like a lot, but they can quickly snowball and take a heavy toll on your finances.

Owner churn

Ideally, you’ll retain every customer you win — but realistically, you should anticipate some turnover. Pricing concerns, competitors, or dissatisfaction can all contribute to owner churn, but sometimes clients drop because of circumstances beyond your control. In those cases, without a clear and thoughtfully structured contract, you may have to absorb these onboarding costs altogether if owners churn before they book their first guest.

Minimize risk with smarter financial decisions

Yes, the list of risks may sound daunting, but don’t be alarmed. Deploying a few precautionary measures can mitigate these threats and safeguard your finances.

Corporate credit lines

A convenient and easy way to curb cash flow problems is to use a corporate credit line dedicated solely to your business expenses. That’s where we come in.  

With Topkey’s corporate credit cards, you can monitor your employee purchases, set limits on employee and rental expenditures, and earn 1.5% cash back on purchases. A corporate card like Topkey’s can help you track your expenses and get a clearer view of your spending, which leads to more precise cash flow projections and better saving opportunities. We issue our own Visa cards, but also let you use third-party credit cards, such as American Express, which we link to your Topkey credit line.

^{*Topkey is a financial technology company and is not a bank. Banking services provided by Thread Bank; Member FDIC.}

Good expense management

To ensure reimbursement for each of your onboarding purchases, you’ll need to keep meticulous track of every one. This can prove challenging when you rely on generic expense management tools which don’t account for the nuances of the STR industry — such as busy operations employees making multiple purchases that need to be properly tagged and billed back to the appropriate unit and owner. 

By contrast, Topkey offers a sophisticated expense management system tailored specifically to STR managers. Our system routes each expense directly to its respective property. It also integrates with most PM software systems, such as Guesty, Track, and Streamline, so your reports and statements can automatically reflect your real-time spending, allowing you to save time and money. We make it easy for you to pinpoint, analyze, and categorize every onboarding expense so that all of your hard work doesn’t go to waste.

Well-structured contracts

Finally, a well-drawn contract is your best guardrail against unsavory business practices or ambiguities that can leave you vulnerable to early owner churn. When drafting contracts, use discrete and specific language to prevent confusion and guarantee you’ll be repaid for every upfront onboarding purchase you make.

Make the most of your budget

It’s not just what you’ve got in your bank account, but how you spend it. Tracking expenses and investing in financial tools can certainly free up capital, but they aren’t the only ways to maximize your budget.

Buy items that are built to last

This may seem counterintuitive, but you’ll want to prioritize quality over price when stocking a new unit. Keep in mind that your average rental will sustain more wear and tear than an individual home — so you’ll save more money in the long run when you choose items that can tolerate frequent usage and a high volume of guests.  

Here are some specific tips to keep in mind when shopping for a new rental: 

• Avoid ‘fast furniture’: Mass-produced, cheaply constructed furniture may be affordable and convenient, but it’s not made to last. Materials like particle board or laminate, for instance, cost less but won’t be able to withstand accidental damage like the nicks, dings, spills, and dents that will inevitably result from constant use. Though fast furniture price tags might tempt you, opt for pieces made of wood or metal that will hold up against high traffic — your owners and guests will thank you. You may also consider purchasing contract-grade furniture, which is designed for commercial spaces and is constructed to meet certain durability standards.
• Prioritize easy-to-clean furniture: Accidents happen, and you should expect quite a few of them at any of the rentals you manage. Supply new units with low-maintenance, stain-resistant furniture made with performance/washable fabrics or PVC/leather that has removable cushions as they’re easier to clean and maintain. Investing in these kinds of items will cut down on replacement and repair costs, and can potentially spare your cleaning crews (and your labor budget) hours of greasing elbows.‍
• Keep aesthetics in mind: A picture says a thousand words, and pictures of your rental property could affect thousands of potential booking decisions. When decorating your interior, buy tasteful pieces that align with a consistent design style.

Become a repeat customer

Once you establish the products and services that deliver on quality and cost, there’s no reason to test the waters with unknown vendors. Make repeat purchases on the same products from brands you trust to guarantee consistency and reliability. This will have the domino effect of making your brand more reliable because your guests can expect the same quality of products across your suite of properties.

Choose quantity and quality

Who says you can’t have both? Purchasing large quantities of certain household mainstays, such as sheet sets, towels, or other linens, in advance can save you money because you’ll inevitably find use for them in one unit or another. The same holds true for other common rental items like kitchen equipment and bathroom supplies. 

Pro tip: If you purchase from a specialized hospitality supplier instead of a big-box store like Target or Costco, you can select pre-laundered linens and skip the trouble of having to wash and dry sheet sets in bulk.

Capitalize on industry perks and advantages

You can streamline STR onboarding and maximize savings with preferred pricing brokered by a group purchasing organization (GPO). HostGPO is a members-only club that offers exclusive deals, discounts, and partnerships with a myriad of brands, products and services within the STR industry. (You can join today and get a free 3-month trial.)