Raising Rents on Self-Storage is Crucial to Long-Term Success

Unless you want to be one of those owners who is dragging down the market, you need to plan on raising your rent every 6 to 9 months. Once your renters are fully established in their unit, they are not going to move everything over $10. This will help you to build equity in the property by increasing your annual cash flow. Don’t lose out on thousands of dollars each year.

There are mom and pop shops that haven’t raised the rents in 15 years. They are 100% occupied and no one ever leaves. These shops are completely paid off and are generating plenty of income to make the owners happy. However, they are missing out on thousands in revenue and the increased value of the property because of the higher cash flow. In addition, in areas where there are a lot of these, they are dragging down the market.

Once your renter has had time to move in and get everything settled, they want to forget that that stuff exists. They put it there because of 4 reasons. They are getting ready to move, they are downsizing, they are in the middle of a renovation, or they don’t have enough room. Once they have everything situated, they don’t want to pick it up and move it to another self-storage facility just because you raised the rent by $10. If you do a large rent increase, then they might look around. You should raise your rent after they have been in the unit for 6 months and then every 9 months after that.

The amount of income that a $10 increase will generate can be quite substantial for you. For our example we will use a 165 unit self-storage facility where 150 are rented most of the time. Obviously, your rent increases will be staggered based on when people moved in. We are going to base the example on a solid line for our example. In reality, you never want to raise the entire facility at one time. You want to raise about 1/9th of the facility a month.

If you raised the rent by $10 on all of your units, you would have a $1500 a month increase which is $13,500 in revenue before your next increase. Now you are going to raise your rent another $10. This is a total of $20 from when each renter moved into their unit. This means that you are now bringing in $3,000 more a month than if you had never raised the rent. If we only calculate this for the first year, that is an additional $9,000 for a total of $22,500 in rent increases the first year. This number will continue to increase each year.

Your net operating income is what determines the value of your property. If you never raise your rent, you will never increase the value of your property. On the other hand, you can see that you have already increased the value of your self-storage facility by a significant amount depending on the cap rate for your area.

If you do a large rate increase, your tenants may actually think about what they are storing and realize that it isn’t actually worth what they are paying to store it. You don’t want that to happen. You want them to leave it where it is. Rate increases are a great way to increase the value of your property and your bottom line. Don’t neglect this simple step. As always, happy investing.