SelfStorageInvestingRichesBlog

Investing in a self storage facility means that you’re investing in a business. While you may be great at finding leads, making deals, and writing up real estate contracts, operating a self storage facility will require time and effort to make it a success. For that reason, investors may opt to look for a third party self storage management company that specializes in self storage.

What is a Third Party Self Storage Management Company?

A third party self storage management company handles the day-to-day operations of a self storage facility including capital improvements and repairs. They bring expertise and experience necessary so that private owners can compete with national companies. Investors can expect professionalism and a turn-key system of daily operations that standardize the way a business is done.

What are the Benefits?

Self storage investors stand to gain much from using a third party self storage management company. For example, investors benefit because they are able to leverage the management company’s size and experience cost savings on advertising and marketing efforts, property maintenance, and property insurance for their own property. Additionally, private owners benefit from amenities such as a call center, a human resources department, revenue management, standardized policies and procedures, legal counsel, and an information technology department. A third party self storage management company will work to increase the value of your investment

What are the Drawbacks?

Like any opportunity, there are drawbacks that must be taken into account and addressed before a contract is signed. The performance of third party self storage management companies ranges from bad to great. Self storage investors may find that their prospective management company has experience limited to a certain geographical region. Additionally, investors may find that their management company’s accessibility is limited depending upon how far they are from the management company itself making communication difficult. Lastly, while investors benefit by being able to participate in national cost savings, that often means a pre-selected group of vendors must be used.

How Do I Review a Third Party Self Storage Management Company?

Selecting the right management company for their self storage facility is critical to the investment’s success. Investors should obtain definite answers from their potential management company and any red flags should be clarified immediately. Here are questions to ask and information that investors should obtain as they review several self storage management companies.

• What experiences does the management company have?
• Do they have a license?
• How long have they been in business?
• How do they get paid?
• How much is my fee?
• What services are included in the monthly fee that I pay?
• What is the applicant screening process for on-site staff?
• What equipment and technology do I need to operate within the management company’s system?
• How will business reports be communicated?
• What level of involvement does the owner have in making decisions?
• How do I recognize if the management company doesn’t perform as agreed?
• Will the third party site audit the facility?
• Talk to current and past owners that have used the management company’s services.

Investors need to ask questions until they have a complete understanding of what a property management company will do for them. Self storage investors need to also keep in mind that property management companies can differ significantly in the services they offer.

A third party management company may not be the solution for everyone. The needs and goals of the self storage investor should be taken into account. Should the investor decide to use a third party management company, any associated costs should be factored into the deal prior to purchasing the property.

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In the past, self storage properties didn’t have the attention of real estate investors. The metal buildings weren’t aesthetically appealing and the properties itself were often located in places outside main stream traffic. Well, things have changed. The self storage industry has reinvented itself to become a profitable and easily manageable investment. In fact, self storage properties are regarded as the “bread and butter” investment to own.

1) High Demand for Self Storage

Over 35% of self storage facilities were built within the last eight years. Currently, there are over 60,000 self storage businesses in existence and studies have show that approximately 1 out of every 10 people in the U.S. rent at least one self storage unit. What that means for you and I is that there’s only a 10% market penetration among consumers and an opportunity to profit. What’s more, the demand is projected to increase and in fact, skyrocket. Baby Boomers are expected to downsize and travel more which means they’ll turn to self storage to store their valuables. Economic recovery is already underway and growing businesses will turn to self storage to store excess inventory and documentation. The demand is there and it’s growing fast.

2) Low Operating Costs

Now this gets me excited. The operating costs for self storage properties are considerably lower than other types of commercial investments. Property taxes are lower. Retail sales taxes are virtually non-existent and depreciation tax breaks all mean lower tax liability. Insurance premiums are low because of the nature of the building itself and you don’t even have to insure your customer’s personal belongings. What’s more, self storage property owners don’t have the maintenance costs that other commercial investments carry. Utility costs are minimal. Property maintenance for self storage includes fixing doors, repaving the driveways, maybe general cleaning like buying a broom or two. You don’t have to deal with landscaping, plumbing, and other labor intensive repairs that are required when owning an apartment building or commercial office building.

3) Added Streams of Revenue

Self storage property owners have the option to increase their monthly revenue by adding convenience products and services. Basic items that self storage renters need are locks, boxes, moving and shipping supplies, and perhaps even a vending machine means opportunities for more money to be generated above rental profits. Other services that benefit self storage renters are truck rentals, pack and ship services, and even internet access to post their items on eBay or Craig’s List. In fact, the number of revenue streams you can add is limited only by what products and services you are willing to provide to your customers.

4) Benefit from High Cash Flow

High demand, low operating costs, and added streams of revenue all contribute to high cash flow for self storage property owners. The price per square foot to rent a self storage unit runs around the same as what it costs to rent other types of real estate investments. This means that the break even point of your self storage investment is lower than what it would be for office buildings, strip malls, and apartment units. Building maintenance costs are lower; employee costs are almost nothing and with the benefit of multiple revenue streams, self storage investments are able to generate one of the highest cash flows per dollar invested.

Self storage properties are both profitable and easily manageable. They offer high cash flows and a higher ROI than other real estate investments without the headaches of maintenance issues and upkeep. The growing demand and the opportunity for multiple revenue streams of self storage investments also make it an attractive type of property to invest in.

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The self storage industry is an industry of service. We provide a place where people can store their personal belongings that can’t be stored in the home. We provide a place where businesses can store excess inventory and documentation files. We serve and in return, we benefit from high cash flows incurred from unit rentals. But there are other ways that you and I, as self storage investors, can increase our level of service and reap more profits – adding multiple streams of income.

Providing extra services can boost the average income from a self-storage business over 10% – 30% depending upon the number of revenue streams operated. In fact, that number can go even higher and be ultimately limitless depending upon how many profit centers you are willing to take on. Here are just a few ideas to get you started.

1) Retail Sales

Many customers who come to self storage facilities aren’t prepared to rent their unit. They need the basics such as locks, boxes, and packing tape to make their move-in complete. You can offer different types of locks, different sized boxes, and even different types of packaging material to help them get organized. Wardrobe boxes may be something that your customer hasn’t thought about. Dish packaging specific for plates and cups may also be a need that your customer has. Different sized boxes to store books or oversized items like baby toys are also viable option. You may even consider vending machines that sell snacks and cold drinks.

2) Truck Rental Services

Access to truck rentals is something that most customers don’t have access to and it’ll be a key way that you can profit. Furniture and large, bulky items that don’t fit into a closet or under a bed are some of the most common items stored in self storage units. These items often don’t fit into a personal vehicle or customers will have to transport their items over several trips to get it all there. If you provide a truck rental service, you will be saving them time, money, and gas to get all their items into storage – that’s a real benefit to both you and your customer.

3) Tenant Insurance

Self storage investors don’t have to insure their customer’s personal belongings. As a result you can offer the added service of providing an insurance option which provides additional security for your client.

4) e-Bay and Craigslist Access

There’s a growing trend for consumers to resell their personal items on eBay or Craigslist to make some extra cash. You can offer a listing service to help them manage their sale. You may be thinking that Craig’s List is free and wondering why anyone would want to pay for that kind of service. Craigslist, like eBay operates on the internet and many consumers aren’t educated in selling online. That’s where you come in. The service you provide helps them get their stuff sold online. You can then offer to pack and ship their items to their buyers and gain more profits. Another option to assist people who sell on eBay and Craigslist is to offer internet access so they can access their own account.

5) Document Shredding and Handling Services

Businesses often store their company records at self storage facilities. You can make money by offering a secure shredding service that comes complete with documentation that their records were shredded in a secure manner. You can also provide fax and copy services for your clientele as well as mail services for those who need to send documents right away. You could also help your business clients get organized by selling documentation labeling systems.

While there are only five ideas listed here, the truth is that the number of revenue stream ideas that you can add to your self storage property are limitless. The only limit is what you are willing to provide to your customers. Think of it this way, by providing more products and services to your customers, your perceived value goes up with your clients and you become an indispensable solution to their every day life.

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From my experience, self storage investing is the “cash cow” of real estate investments. High returns and low expenses mark this type of investment as one that is stable and an excellent addition for any investor’s portfolio. What’s more, even banks love this type of property and here’s why.

Self Storage Investing Provides a High Cash Flow

Self storage investing sets itself apart from other real estate investments because it has the ability to provide a higher return on investment (ROI). When compared to apartment buildings, office buildings, and retail commercial properties, self storage investing incurs lower taxes, insurance, and utilities. Real estate tax, retail sales tax, and depreciation tax breaks all contribute to lowered expenses for the self storage owner. Insurance premiums are lower because there are no tenants to deal with. Concerning utilities, self storage properties don’t even come close to the utilities usage of other commercial properties.

Low Break Even Point Equals Low Risk

Self storage properties have a lower break even point than most commercial properties. The lower operating costs I mentioned earlier spread over multiple units cause the break even point to be lower than apartments and other commercial properties.

Additionally, self storage investments work in both good and bad markets. In a good economy, people buy more stuff. They need a place to put the old stuff and look towards self storage as the answer for their needs. In a bad economy, people tend to downsize. They move into smaller homes or to other locations and again, they need self storage.

Operate Multiple Streams of Income for Added Revenue

There are several products and services you can offer customers that provide additional income. For example, most storage facilities already contain basic packing supplies and locks for sale at convenience store prices. As a retailer, you can purchase items like boxes, Styrofoam, packing tape, and locks in bulk and then sell them at a high profit margin.

Offering convenience services have been a growing trend for real estate developments. The idea of a Starbucks or convenience store located in a condominium isn’t a foreign idea and self storage properties are no exception. Consumers are looking for the conveniences – the little extras and adding complementary products and services such as truck rentals increases your perceived value to your customers. For example, the number of people using eBay and Craigslist to sell their new and used items has increased tremendously. Offering a place where consumers can access the internet easily to post their items will mean added value service and an additional income stream.

If this doesn’t get you excited about self storage investing, here’s one more thing to note. There are over 40 more streams of income you could add to your self storage property to make your investment the place that consumers turn to for their every need.

Self Storage Properties Have an Increasing Demand

There are roughly 63,000 self storage facilities in existence in the U.S. and in fact, there are many cities that don’t even have storage facilities to use.

Trends have shown that the demand for self storage properties is increasing. Self storage properties work because people tend to accumulate stuff that they have a sentimental or nostalgic attachment to, but they are unable to keep those items their regular home or business. As the economy improves, businesses which have downsized will purchase more goods and need a place to store it. They will also need a place to store records and other business documentation. Additionally, the home based business trend continues to grow and the need to store products in an off-site location is ever increasing.

Self storage facilities make a case for being a strong option in terms of making money. There’s a high cash flow, low break even point, an opportunity to add other streams of income, and an increasing demand. Cash flow is higher than other commercial properties providing even less risk to you as an investor. This is a great option for your investment portfolio.

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The phrase ‘ethical business practices’ relates to the fair and honest actions in the life of a business owner. This has nothing to do with the behind the scenes personal actions and reactions of the same business person. The two are as separate as oil and water, and this is the area in which many self-storage business owners find themselves in deep water. Some, not all, and definitely not the ones that are already successful self-storage business owners, cannot separate the two personalities. The basic knee-jerk reaction is to allow the personality and the reactions for one to drift or crash into the realm of the other. The two require a separation, like the separation of church and State, to function properly and efficiently. This is not a psychology class so the personable affable side will not be covered; only the side that refers to the business practices of ethics and morality. This is the self storage business owners chance to turn over a new leaf and start creating more profit through better business relationships.

What are Ethics and How to Apply Them in Business?

Ethics is a code of conduct that defines a person especially a person who is the owner of a self storage business. The code is an unwritten set of rules and regulations for business behavior that starts and ends with politeness and appreciation in all transactions. The business can be on its heels, suffering from either one or many traumatic economical or environmental effects that have the for sale sign being dusted-off and preparing to be hammered into the tree outside the office. Stop right there. The business position has nothing to do with how the ethical treatment of the clientele is practiced. Regardless of the business environment the code of ethics should be practiced at all times. Ethical business practices can refer to; greetings and salutations while in person or on the phone. This can be when the potential customer walks into the office and inquires about a 10×10 unit when all that is available is a 10×5. The past reaction would be to rudely, and as fast as possible, dismiss the cash-paying customer, and get back to the crunching of the numbers on the QuickBooks program. This does not have to happen and here is how that can be turned into a great code of ethics approved for correct business behavior. As soon as the potential client pulls up, and this is when the sales radar needs to be turned on and ready for a sale, the throat should be cleared and the computer work saved and turned away from. A salutation such as, “Good afternoon, how may I help you today?” should be immediately uttered before the door has a chance to close, literally. After that beautiful and purely ethical salutation is commenced, the conversation about the smaller unit being the only one available presently can be initiated. By the way, there is a sale there and that is for another topic another day!

Ethics and Profitability in the Self-Storage Business

The association of ethics and self-storage unit business ownership is akin to peas and carrots; they are  just so good together! In order to create a dynamic and highly profitable business, ethics must be top on the list for any business. This is so true in the self-storage business and needs to be learned if not owned already!

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