Self Storage- Can I buy your Storage Location?

[Henry Clark]

Was watering some new trees we had transplanted into the dark about 8PM.  Sitting there got a call from someone in either Virginia or Tennessee.  Will you sell your location at xxxxxx?  Thanks for calling but not interested at this time.

That week we received a letter in the mail and 3 phone calls.  All from people from out of state.

I told myself, boy these people don't know what they are doing.  But then since I was sitting in the dark waiting on each tree to get watered, I remembered a lesson I learned in Speech class in high school and told myself, everyone is correct just from their viewpoint.

Below is a list of types of investors and why they are "RIGHT".

A.  Mom/Pop- had extra land next to their hotel, gas station, house and decided to build storage.  Location wasn't picked for the customers benefit.  But most of these locations were determined in the early stages of Self Storage development thus they are successful.  Costs less since land was underutilized.  Management is free.

B.  Local investor- buying from Mom/Pop in the area.  Doctor/lawyer/Indian chief.  Basically, a high-net-worth individual looking for passive income in their market area.  Looking for Passive/Scalable income that can be managed locally.  They have learned that if they don't work a day, there is no income.  

C.  Out of State investors- looking to expand quickly, but not willing to pay premium prices.  Go where the opportunity occurs.  Fits their territory, business model and financial metrics.

D. Large REIT investors- All companies once they get so big, their product is usually not the product you see. No matter what their product is such as Self Storage, Steaks, Furniture, tractors, etc. once they get so big, their product becomes, Marketing, Distribution, Financing, Management, Information flow, etc. These companies have easier and cheaper access to funding markets, "better" management and must deploy those investments as fast as they come in. Time is not an option. Each year, investors want a higher Sales number and a better profit percentage. Which gets harder as you grow. Last year $10mm of acquisitions was great. This year $50mm is needed to hit the same percentage of growth.

E.  Our model- Daisy Chain or Wagon Wheel approach.  Daisy Chain- Work our way up to 60% of the market in a town and also the next towns down the road.  Wagon Wheel- larger cities, don't compete in the city.  All cities have roads leading away from them or the Spokes of the Wheel.  Buy along those roads on the outskirts of the city and buy/build away from the cities.  Once we have achieved the Daisy Chain between cities, we start to raise prices.  Since we are in the next town, they can't get away from us.  If our competition doesn't raise their prices, that is okay since everyone is near 100% full.  We don't lose customers.  In the Wagon Wheel approach, we are using the large city competitors as a backstop.  If their 20's are $230 inside the cities and we are 5 miles further out, we raise our price from say $130 up to $180.  Our customers can't go towards town since it is more expensive.  They could go another 5 miles out, but we already own that market.  Used to be $80 in that market, now we raise up to $130.  And so forth down the road.  Basically, we are able to command the price by cornering the market.  

Who is RIGHT?  We all are, just different resources, and expectations.

Start small and Make Your Big Mistakes Early.