Self Storage: Golden Nuggets

When I made the decision to pursue self storage investing, I realized that finding information on this niche was not easy. After digesting as many articles, blogs, videos, and books (the few books available) as I could, I realized that most of the information getting pumped out was just general tid-bits. Enough information was available to wet the appetite, but not enough to make anyone comfortable to go through with a purchase.

Once I realized I needed more information on this subject, I started to venture out and really learn what it takes to run a successful project/facility. I got a part-time job at a facility to learn the ins and outs. This has been single-handedly the best learning experience in my entire investing career. The lessons I’ve experienced from being the day-to-day manager has been invaluable. The knowledge is one thing, but the confidence to run a large facility on my own is what really matters.

I took my education a step further. In the old days investors had to go to networking events and ask for referrals to meet other investors in their niches. The internet has accelerated that process drastically by allowing you to network from your office. Meetings and networking events are highly recommended and still extremely powerful for building your network. I’ve called, and continued to call, anyone I can that is involved in self storage to hear their story on how they got started. This has been very influential in seeing different viewpoints, strategies, and overall market sentiment.

The information below are just a few, random, golden nuggets/tips I learned along the way. I have only been involved in self storage for a short time, but the information I have received will stick with me for many years to come.

This is one of many “Golden Nuggets” blogs I will make. Keep an eye out!

Hope these are helpful to anyone in self storage; newbies and seasoned investors.

Closing Sales

-If a customer is on the fence about the facility send them a quick video on why your facility is the number one choice.

-Give a small discount or free lock for any tenant that gives a good review online.

-Waive your administrative fee if customer signs up for Auto Pay. This makes management easier at the first few days of the month.

-Have a TV in the office that shows the amenities of the property. This will show any new customers the benefits of the property if they need to wait for assistance. In addition have a small fridge of refreshments.

Pricing

-Units closer to elevators, gates, and have easier accessibility should be priced higher.

Competition

-Rent a unit from local competition. Doing this will allow you to see their prices, sales process, lease, extra fees, retail products on display, facility condition, and even number of units rented out (if you want to walk the facility and count locks). This is a great way to learn the market on a new purchase.

Tip: When you initially rent the unit, request prices on as many units as you can. Make sure the manager takes you on a tour of the property.

Tip: See what specials they are running.

Employee Morale

-Bonuses are extremely important so lay out the criteria in a simple one page agreement. Keep it simple so there is no confusion.

Example: Quarterly bonuses; Manager gets the bonus if they beat the estimated revenue each quarter.

Tip: Base the bonus off of one parameter such as revenue or occupancy. Don’t get fancy or complicated by making them hit multiple targets.

Tip: Always give an end of the year bonus. If the manager knows they are going to get a bonus each year they will take more pride in their job throughout the year and go the extra mile when need be. The bonus will pay for itself tenfold!

-Annual events

Tip: Company outings, happy hour, holiday events, or even volunteering events are great ways to engage the employees and bring the team together. If you run multiple facilities in the same market, make sure the employees are in communication with each other. They will have to fill in from time to time and even work together on certain issues rather than going to upper management every time.

Cut Costs

1. Hire a professional to dispute property taxes

2. Get new bids on all contract work. Do this annually.

3. Automation: Taking payments and move-ins on your website helps drastically. Automation can go all the way to implementing a call center to installing a kiosk for move-ins and taking payments. Companies are reporting that the assistant managers’ position can be cut out by having a call center and kiosk in place.

4. Go paperless on office supplies. Imagine how much paper you could cut out if you didn’t have to print a physical copy of each lease, insurance policy, etc.

5. Increase deductible on insurance.

Overall: make sure you create monthly budgets for each line item and go through them monthly to keep on track.

Auctions

-Whatever balance is left after the auctions should be sent to a third party collections agency. These companies usually get compensated by taking a cut of whatever they collect so your upfront costs are minimal.

Supply Index

-Demand ratios are changing in each market due to population changes and new facilities coming online. Make sure you know your market and don’t rely on national averages for supply/demand ratios. A feasibility study is a great tool for new purchases.

Buying Negotiations

-If the seller counters with a higher price, ask them to finance the difference.

-Most commercial loans require the general partner(s) to have a net worth equal to the loan balance. If this is a problem, then you should find someone with a high balance sheet and bring them into the deal. They can be compensated a certain percentage of the loan balance every year. Get as creative as you want.

Pre-Purchase Audit

-During the walkthrough, do a yard inventory and compare it to the rent roll the seller provided.

-Take note of signage. Order your new ones (if being rebranded) asap so you can have them installed on day 1 of owning the facility.

-Large facilities make it difficult to review each lease. If you decide not to, you can always randomly select a handful of lease files to make sure the paperwork is there and filled out correctly.

Thanks for reading!

I will be writing more of these in the near future.

Feel free to connect with me.