Typical fees for self storage management?

Question

Anyone have an idea of what is a typical management fee for self storage facilities?  Looking at a 40k sf building and shopping around for a prop management company.

Also wanted to get thoughts on whether getting a company that operates upstate but not in SoCal but would be a bad idea. The principals said they could train the person that is local and manage them from afar but wanted to assess how feasible that is.

Thanks in advance.

Scott Meyers · Answer

@John Kim - you're getting some good nuggets in this thread, and some of it comes down to where you are in relation to the property.  You mention upstate and your signature indicates L.A., so you are either looking at a "real" absentee owner scenario or you're in a situation where you'd be local and the mgt. company would be, for all intents and purposes, absentee to their people.  It's not difficult at all to manage a self storage facility, but a lot of traditional property management companies will overthink the process to try to justify their fees.

I'd make sure I was really clear on expectations and the results you plan to have ... and I wouldn't be afraid to ask for the lower rate.  Never so "no" for the other guy.

On the other hand, it might be better to simply cut out the management company and pay a local person, trained to your exact standards and reporting to you, what you and him/her agree on.

George Fitz · Answer

@John Kim My experience jives with what most others here have said in terms of costs. Definitely quiz potential management companies on what other costs will be (web hosting, travel, call center, payroll costs, etc) and find out if they mark those up. Ask if you will be getting all of the profits from other revenue centers like tenant insurance for example. Some management companies pocket that money for themselves, or will do a split. If you are thinking about dumping the management company after learning the business, you really need to think ahead. Getting rid of a management company is like getting a divorce. It can be very messy. You need to make sure that the systems they put in place are easily transferable to a new entity after they are gone. This would include management software, credit card processing, banking, tenant leases, maintenance contracts, web site, phone numbers, etc. Management software and credit card processing/banking are probably the biggest ones. Ideally they use software that you like and can continue to use after the transition. Also, you don't want to have to reach out to 300 customers on auto-pay to reauthorize their credit cards after you dump the management company or change the management software. Make sure you like the tenant lease they are using. Because you will be stuck with it after they leave, at least until you get all of your tenants on a new lease.

Charles Kao · Answer

@John Kim

If you are going to have an employee I would allow them to do the lease up period.  Get then comfortable and also the customers will get to know them.  It will be way cheaper and they can give you feedback on what they think being hands on and onsite.  A property management company will spend to fill the units and they will do a good job but not as efficient.

Zach Quick · Answer

@John Kim I don't know if you will find a 'major player' at the 40k square feet level, maybe if you are in a very urban area.

That being said 5% of revenue is a good give-or-take # for management fee. I've also seen $2,500/month thrown out as a good baseline as well. I'd encourage you to try and call one of the three owners at Atomic Storage Group and they can help you walk/talk through some of your questions regarding management.

Michael Wagner · Answer

Generally we see between 5 and 8% depending on the size of the property. Plus payroll. It's not like residential small family where the  management fee covers all the managerial tasks. In storage, the managent fee covers "managing the asset" not managing the day to day ops. I personally choose to manage my own assets simy because 5-8% (or $2500 per month minimum as I have also seen) seems really expensive to handle the 2-3hours of work per week.

Charles Kao · Answer

@John Kim

6 -8 percent but beware

of the marketing advertising and other fees.  This is where it really hurts.

Peter Lee · Answer

@Charles Kao @George Fitz thanks for the feedback.  really great stuff.  I will keep in mind the potential divorce like proceedings, that's very interesting.  I guess one way to mitigate the breakup cost would be to have a really strong understanding of all of the stuff that is being managed so the transition could be facilitated.  So in that case, any system that is proprietary would be problematic and maybe discouraged if it is possible?  Thoughts?

Peter Lee · Answer

Thanks everyone for the good feedback.  Will keep all of this in mind.

Peter Lee · Answer

Thanks for the feedback Charles.  If you were to bake in the other fees, what do you think is reasonable as an all-in management cost (including marketing, and the misc fees)?

One thing I am discussing with my partners is signing on with a company and then working with them for a ramp up period until we feel like we have figured out the business and then putting in our own employee and cutting out the management fee.

Thoughts?

Typical fees for self storage management?

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