Small storage units, are they profitable?

Question

How are small storage units profitable?  One near a small 4 unit apartment I just bought has less than 50 units.  They rent from $30 to $60 a month.  About 20% have double locks, which I am guessing means they did not pay.

I know the overhead is less than houses and apartments, only one bathroom, small office, outside electricity, lower level of expenses.  But the gross income is only slightly over $2k, and with the number of double locks, likely much less than $2k a month.

There are several storage facilities nearby and the rents are pretty much the same, so raising the rent would result in empty units.

And it seems that it is a labor intensive endeavor.  Someone to answer the phone, someone to do the evictions, collections, figure out who damaged the door, collect rent (they do it in person the first 5 days of the month), sign up new people and close out those leaving.

I read on here that storage units are money makers, but I do not see how it could be with the smaller units at least.  Dealing with 48 units for $45 a month average does not seem worth it.

Please enlighten me!

Vlad Kolbas · Answer

We own a couple of small facilities, 85 and 40 units, in a rural area about an hour away and had the same issue of customers wanting to pay in person. What we did is open an account with a local bank and directed our customers to make deposits directly into our account. We can see copies of deposit slips online with unit number and customer's name on them so we know who made those deposits. This has worked great for us.

We also use Easy Storage Solutions to manage those facilities which really helps.

If I were you I would rent out the office or convert to self-storage.

We also use Easy Storage Solutions to manage those facilities which really helps.

If I were you I would rent out the office or convert to self-storage.

Lynnette E. · Answer

@Justin Frank

ITs a long story...

I am not trying to look at this in a negative point of view.  I am just trying to understand it.  The 5 days of staffing at the facility is what the current owner does.  ITs a rural area and most people do everything in person...even paying utility bills.  They stop by and wait in line to pay instead of doing it by mail or on line.

The apartment I bought was a Fannie Mae foreclosure.  The apartment and storage facility property was owned by the same person for 2 sales past.  It was developed without regard to the 2 lots and their lines.  At some point in time, I do not know when, the last owner changed the property lines to place all the storage facility on one large lot and made the apartment lot much smaller and added an easement for ALL the storage traffic to be directed through the apartment lot.  This change went through the County required process and is on the books.

BUT Fannie Mae did not know of or approve of the change in the lot lines.  Each business has a separate loan.  They may also not have known that of the 2 buildings for the storage facility all but 2 inches on one of those buildings is on the apartment lot.  They are silent.

I bought the apartment with a title issue.  Fannie Mae gave me the deed that they foreclosed on, which has the original lot lines.  According to Fannie Mae the lot change was not valid as they did not change the deed.  And the owner did not have authority to transfer property that was under a mortgage without their approval.

Title insurance wont touch that lot line issue.  Everything else is insured, but that issue is excluded.  I am ok with that.  The apartment will make money.  IF I wanted to sell in the future, I could quit claim the disputed property to the storage facility owner.

The previous owner let the apartments go to foreclosure.  But filed bankruptcy on the storage units and was able to keep them through the bankruptcy.

Personally I would have kept the apartments, but he/she kept the storage facility, which is the oldest looking one in town.  The apartment had to make more money, so I don't get it.

But I have to decide what to do now with the lot line dispute.  Trying to decide if I want to try to get any of the storage units, about 1/4 of them are totally on my property.  The other half of that building has a few inches on the other lot, but it is the doors that are on the other lot.

Really I just want the access to not be by my building, but that actually is in the deed, and for that to change the storage facility owner would have to clean up piles of 'stuff' stacked and stored, more like a gym for rats...probably abandoned stuff from units that they do not want to pay for disposal.

If I did keep the one half of the building I would use it to store stuff for my rental business and give each tenant in the apartment a place for their bikes and outside toys.  But I am trying to understand if that would then cross some line that the facility is then not feasible for the current owner to operate.

And trying to determine if its worth the court cost to do anything, or just let it go.

Or maybe offer to buy the other half...but I have no idea of the value / price to even offer.  Also I am not sure what amount of time that would take to mange, or the whole process of eviction for units when they do not pay.  I am not looking for long term time drainers.

Justin Frank · Answer

@Lynnette E.

Maybe you are just looking at it from a negative point of view. It would be silly to pay some one as an employee for 49 units and the idea of paying someone to stay for the first 5 days of the month to collect rent and rent out units would not work very well simply because People come in at all different times to rent.  The beauty of technology is that you can have everything a customer needs online to view which eliminates needed employees. What I am saying is either manage it yourself or find someone who would be a type of property manager. Pay someone a small fee to go do the small things like clean out a unit, or lockout a unit. You would be surprised the amount of people out there who are willing to do a little extra simple work for a few dollars.  There really isn’t much to storage and most things required don’t take much time at all. You could even offer a tenant at your complex extra work to do the basics you feel you may need an employee for. There really isn’t much work to be done around a storage facility. Especially a facility with only 49 units. It is very hard to get into details within this post. My personal opinion is that there wouldn’t be much time required to operate those units that would bring you an extra $2k/month minus what pay someone to help around the facility every now and then. If you don’t think it’s possible, or can’t understand how it will work then bail on the idea. You know your property much better than myself. Personally I wouldn’t mind adding $20k a year to my income. I wouldn’t mind adding even half that. I typed this while trying to entertain my daughter. I hope this makes sense and isn’t offensive in any way

Lynnette E. · Answer

I just do not see how $2k would be anywhere near added to income.  That is what I am trying to understand.

So someone is paid to stay there for the first 5 days of the month to collect rent, rent out new units.  Say $10 an hour.  Good luck finding a person who is trustworthy and willing to work full time one week a month for that wage, but just say.  That is $400, plus SS, unemployment, disability, etc.  The taxes and insurance will be $300 a month.  Electricity and water, unknown, evictions cost unknown, paying someone to immediately show up for a new customer, unknown, adding gravel to the lot, unit repairs, does not seem like a lot is left on the plate.

The numbers are what I am trying to understand.

Charles Carillo · Answer

It all depends on buying the facility right. If you are unsure, offer a lower purchase price. Put your numbers at not being able to raise rents and higher than normal unpaid units while having someone assist you with the day to day. Is it possible to automate rent collection on future rentals?

Justin Frank · Answer

Smaller facilities are generally more successful if they are self managed, or self automated with some boots on the ground to help you with lockouts, clean outs, ect...... If your deal was purchased correctly and you are flexible/dynmanic with your management of the 48 units you will have $2k plus added to your income every month. That’s a quick and short answer. PM me if you would like more help or details. If they are in good shape I would keep them.

Small storage units, are they profitable?

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