Category: Self Storage Investing

Over the past five years, the industry has grown up and come into its own as a recognized commercial real estate investment. Self storage has grabbed the attention of private equity companies and real estate investors. Cap rates have dropped like a rock and development has increased to a frenzy. With so many people eager to invest in self storage, we must consider if self storage is a good investment.

How to Make More Money in Self Storage

Rate reductions should be used as a temporary means to attract customers, not an ongoing sales crutch or philosophy.

I can’t think of another business that relies as heavily on discounts as self-storage, other than maybe mattress stores. I despise rent concessions, but they’re so prevalent in our industry, it’s difficult to function without them. Still, any special deployed should be considered a temporary tool, not a permanent philosophy. For a sales promotion to pay off, you need a strategic approach. By beginning with the end in mind, you can create a self storage revenue plan that’ll help avoid the challenges chronic discounting can bring.

When I ask e operators about their self storage revenue management systems, the answers I get are often a mix of “I do what the other guy is doing” or “I really don’t know.” Too often, they choose the easy route and cut rates. Before going down this path at your own facility, put in the time to do the due diligence and build a solid business foundation. This includes training staff on sales and ensuring your property is well-maintained—things that can help you kick the crutch of discounting and justify higher rental rates.

Know the Math

Discounts aren’t as harmless as you might think. If your average unit price is $100 and the average length of stay is nine months, your average customer value is $900. If you’re offering a free month of rent and the tenant came from an online self-storage aggregator, that affects your numbers substantially. That $900 customer might now be worth only $650, which drops your average unit price to $72.Offering discounts means you’re playing in the mud with everyone else. What are you doing to set yourself apart from the site down the road that’s doing the exact same thing?

Some operators argue that discounting helps them fill their sites quickly. This might be true, but the only way to know for sure is to track the closing rate on discounted vs. standard-price rentals. Are markdowns necessary, or have managers become so reliant on offering them that they no longer know how to sell without one? Self storage revenue is a lot more than the set it and forget it.

Instead, Be Strategic

Taking a tactical approach means setting revenue goals and devising the right type of self-storage unit pricing to achieve them. This will help you avoid the common challenges associated with lingering discounts and bring in more revenue. To ensure a promotion is successful without damaging your business in the long term, consider these planned approaches:

First, find clarity.

Be clear about why you want to offer a discount. Typically, the goal of a special is to acquire new customers; but some operators may offer one as a thank-you to members of the community, such as senior citizens, military personnel, or first responders.

Typically, these types of promotions won’t be the deciding factor in whether a customer chooses to rent with you. While it’s OK to offer them, make sure you control their use. Giving 5 percent off here and there might not seem like a lot, but at year-end, when 60 customers have taken advantage of the offer, it adds up.

Keep it simple.

I’ve seen self-storage operators get extremely creative with their pricing structures, but if you’re going to offer a discount, make it easy for staff and customers to use.

Offering 25 percent off the first two months of rent isn’t a simple discount. There’s a Reddit feed I love called “Explain it to me like I’m five.” It’s great advice for marketing, too. Train staff. One of my biggest issues with discounts is, over time, employees believe they can’t sell without one. If they believe they can’t sell without a crutch, they never will, and that’s a real problem in self storage revenue.


Use a limited-time offer.

This gives new customers a reason to rent or reserve now rather than later. Consider using a callout on your website and other marketing that states, “Only 2 Left!” Scarcity is a great persuasive strategy that creates a sense of urgency, particularly online. Upsell. When you offer a discount, offer other items to help make up the margin. For example, sell the customer some tenant insurance or moving supplies. The renter may move in for a dollar, but upselling can at least increase your per-rental profit.

Focus on hard-to-fill units.

You likely have units at your self-storage property that are less desirable than others, maybe because they’re upstairs or farther from the office. To attract budget-conscious customers, consider selling these spaces at a lower rate than “premier” spots.

Try bundling.

Rather than lowering your rental rates, try selling the unit together with another desirable product or service at a “special bundle price.” For example, if you have a moving truck, offer to let the customer use it for free if he rents a storage unit of a particular size or for some specified length of time. The idea is that the individual prices of products in the package become less expensive vs. buying them individually. Get creative with the concept, and be sure to measure and record what works to increase your self storage revenue.

Tools for Tricky Times

Let’s take a moment to address the current and future situation regarding the coronavirus pandemic. As the crisis ebbs and flows, so will customer behavior. For self-storage businesses, online and phone-based demand has increased, while walk-in traffic has decreased. Even with safeguards in place, most facility operators are trying to limit the presence of people at their facilities.

It’s more critical than ever to take advantage of every phone call and Web lead you receive. That being the case, I encourage you to maximize the positive impact of whatever resources and systems you have at your disposal. Make sure your team is armed with the proper tools, including a smart discount system, to help them succeed. I suggest adjusting your phone-sales scripts and online content to promote any specials you offer.


Remember, rate reductions should be used as a temporary means to attract customers, not an ongoing sales crutch or philosophy. The moment you begin to rely on them, you’re moving in the wrong direction—away from profitability!

What Are Important Self Storage KPIs?

Still, have questions about how we do what we do?


One of the great things about self storage is that you can measure everything with detailed metrics. Everything we do must be backed up with data. ​

We Identify Both Lagging and Leading Performance Indicators

One of the great things about self storage is that you can measure everything with detailed metrics. Everything we do must be backed up with data. ​Measuring calls, visits, rentals, clicks, or conversions is one approach to data analysis. However, at Atomic Storage Group, we identify and focus on the core KPIs for your business. Rather than choosing dozens of metrics to measure and report on, we focus on the key items that move your business forward. Many companies try to track too many KPIs, instead of laser focusing on the ones that matter. Data for the sake of data is useless. Data in Atomic language is an action verb.

​Lagging Indicators

Measure the output of what has already happened, such as rentals or retail sales. These types of metrics are good for purely measuring results, as they solely focus on outputs.​

Leading Indicators

They measure the inputs. These metrics help predict what is to come. A great example is website traffic, conversion rates, demand, demand trends, and area activity. ​Most organizations focus on lagging indicators. One of the main reasons is that it is easy to report on lagging indicators. It is easy to run a rental report. However, focusing on the outcome does not give you information to change the story. ​

At Atomic, we look at leading indicators as a huge driver of business. They help discover trends before they emerge. This allows us to maximize revenue, reduce costs, and have a much greater impact on the future goals at each self storage location. ​This is how we make every decision. Data. Experience. Your best interest. We consistently do what’s hard for us if it’s best for our customers. That’s the Atomic Way.

Is Self Storage a Good Investment?

Over the past five years, the storage industry has grown up and come into its own as a recognized commercial real estate investment.

The self storage industry started long ago with sheds in the backyard. Its meager roots began as “mini-warehouses” as ancillary income for otherwise unusable land. Over the past five years, the industry has grown up and come into its own as a recognized commercial real estate investment.

Self storage has grabbed the attention of private equity companies and real estate investors. Cap rates have dropped like a rock and development has increased to a frenzy. With so many people eager to invest in self storage, we must consider if self storage is a good investment. Here are some reasons to invest in self storage:

VACANCY RISK

Self storage is inherently more stable than other commercial real estate classes. Storage properties can range from 200 – 2,000 units which spread the vacancy risk compared to retail with 5-10 units. In a business with five units providing revenue, losing 1 unit will result in a 1/5th drop in income. In a 500 unit storage business, losing 1/500th of revenue barely makes a dent. The diversified vacancy risk improves the stability of a self storage asset.

LOW EXPENSES

Self storage has a low expense ratio compared to multi-family or office. When a storage tenant vacates a unit, it merely needs to be swept to prepare for the next renter. Storage has little to no tenant improvements or make-ready costs. Compared to multi-family, there are fewer significant utility replacement costs as well. The most substantial expenses are property taxes, insurance, and labor. Labor is a hot button issue as more self storage facilities are built to be fully automated.

It is enticing to cut payroll costs by $40,000 – $60,000 a year, increasing the bottom line. However, having a property manager typically leads to faster absorption and stabilization of the property. Self storage expenses are relatively stable and predictable, making it an excellent investment as long as the numbers make sense.

REVENUE POTENTIAL

Street rates and rate increases make up the rent revenue potential in self storage. Street rates can be manually adjusted or preset to change based on specific qualifications. Similar to retail, the unit characteristic can drive the price. Retail can charge more for space that faces the street compared to the elbow. Storage units on the first floor are typically more expensive than those on the upper floors. Climate-controlled units have a premium price over standard units.

Storage, unlike most commercial real estate investments, has month-to-month leases. While this may seem like a weakness to those who come from the long-term lease retail world, it’s a massive strength. Month-to-month leasing allows rate increases to be issued with only 30 days’ notice. Smart storage owners calculate the average length of stay, and base rate increases off historical data.

Month-to-month leases also reduce the risk of locking in an under-market rate and remove the need for a step-up rent standard in office or industrial real estate. Couple the ability to adjust existing tenant rates with the ease of changing the street rate and the diversified risk of vacancy, and you see why self storage is an excellent investment.

DAILY OPERATIONS

Self storage is an operating business, unlike some of the other commercial real estate classes. It’s more retail than industrial, and more multi-family than retail. “Self storage” encompasses a wide range of property types from 5 units behind a house to a 2,000 unit class A property on Main and Main. The day-to-day operations will fluctuate with the class of property, but tenants still need to pay each month, will have questions, and move in and out.

The property needs to be cleaned and maintained. The bills need to be paid, and the accounting needs to be handled. If there is a full-time on-site manager, they will need to be trained and monitored to ensure they are running the property correctly. Although storage doesn’t have the headache of “toilets,” it’s far from a passive investment, unless you employ a professional management company.

Many storage owners treat the property as passive and neglect to adjust street rates, raise rates, tend to maintenance, or adequately market. With the drop in cap rates, these owners are losing millions of dollars by not running their property as they should. Which is one of the main reasons we started the Atomic Storage Group.

THE INVESTMENT

Self storage used to be reasonably easy to build. The cost was low, zoning was straightforward, and demand was pent up. After 2006, self storage development halted for several years. At the beginning of the boom, storage was still reasonably easy to get off the ground.

New development absorbed renters quickly, and occupancy hovered in the high 90% for most facilities. With the tariffs and increased construction costs, development is tougher. Land prices have increased along with construction, property taxes, and payroll costs. With an abundance of new supply coming online, rates have remained flat or decreased. It’s getting harder to make the numbers work with traditional financing.

Self storage requires more investment upfront and patient money. If your investment strategy can handle your cash sitting for 3-4 years, self storage may be an excellent investment for you. Sure, there are several creative ways to finance the property. Syndications, private equity, or private investor funding are all ways to get the deal done.

However, when the REITs are sitting on the sidelines, waiting to acquire properties at a great deal because the developer couldn’t hit their projections, we should all be a little nervous. If you are new to investing in self storage, be careful about the deals you choose to pursue. The two biggest risks in storage are 1) It’s too small and can’t support itself and 2) demand isn’t there to fill the number of units available. Think about it logically. Revenue must exceed expenses.

Income in storage comes from the capacity to rent to people who need it. You need capacity (size of the property) and people (market). It’s quite difficult to make 20 units in the middle of Nowhereville Population. 1 work, no matter how well you operate. So, is storage a good investment? I believe so. I love this industry and am fully invested. To make storage a good investment, you need the right market, patient money, strong rates, and excellent operational skills.

Your Employee Will Make Or Break You

If you are not willing to work and get out of your comfort zone, please stop reading this article. However, if you want to start thinking about playing offense and growing your business. Please read on.

“In life change is inevitable. In business change is vital.” says Warren Bennis. Competition is growing, markets are shrinking, and rates are dropping. What are you going to do? Polish your doors? Increase your marketing dollars? Are you going to sit back and let life happen to you? If you are not willing to work and get out of your comfort zone, please stop reading this article. However, if you want to start thinking about playing offense and growing your business. Please read on.

No system, lock, or golf cart can grow your business more than an engaged employee. The single best investment you will ever make is to invest time and effort into your employees. When an employee is engaged, they will always strive to become better and better. As they do that, everything around them will improve. The irony comes when employers dress up engagement as a stocked break room or a yearly Christmas party. This is a pacifier that will lull the C players, bore the B players, and anger the A players.

Among the current employee base, 44% feel that they are stuck in their role, 50% feel that their employer takes them for granted, 35% feel that work directly affects their ability to be happy, 40% believe it has a negative impact on their lives, and 70% are not engaged in what they are doing.

While those numbers might seem shocking, take a moment and think of your own work history. Has your work always been unicorns and rainbows? What jobs have you had that were engaging, made you happy to come to work, or made you better? Once you start to think about it, those statistics make perfect sense.

As a young boy, I often went camping in the mountains of Yellowstone National Park. Whenever we went camping there, I always lived by one motto, “leave it better than you found it”. That creed has followed me throughout the years and into my business life. As a business owner or even a leader in an organization, I believe you have a responsibility to better the lives of the people you lead, or to leave them better than when you found them. Engaged workers believe in the work they are doing. They have “bought” into your vision and are emotionally attached to what they are doing. They work with drive, passion, and are willing to go the extra mile. They are pulling on their oars and are doing everything they can to move your business forward.

Directly contrasting that are the employees who are not engaged. They can range from individuals who are actively working against your business to “seat warmers.” They bring others down, they monopolize a manager’s time, they drive away customers, and do things that are not productive to the workplace. They are work Zombies. How do you create a more engaged employee? You can start by answering these questions:

  1. What am I doing to be a better boss (leader)?
  2. How am I improving the work environment?
  3. Am I giving every person an opportunity to grow?
  4. What am I doing to recognize people?

What am I doing to be a better leader?

You can bet your sweet patootie that any change you want to see needs to come from the top. Employers have to know the personality of their employees. The same strengths and issues the employee struggle with outside work and the same inside work. By knowing your employees’ beliefs, values, goals and challenges you will be able to interact with them in the best possible way.

How am I improving the work environment?

Your employees spend more waking moments at work than they do at home, with their loved ones, and in areas, they are most comfortable in. The workplace they come into everyday needs to be an area they like. Look around the office, when was the last time you changed things around at all? Does the area ever change? Is there something you can do to make it different periodically? Change things up once in a while. Not only does this help prevent burn out but it will increase creativity. I would go crazy if I had to sit in an eight by eight windowless office every day.

Am I giving every person an opportunity to grow?

There has been a change in what an employee wants out of work. To some various degree, it has changed from my paycheck to my purpose. My satisfaction with my development, my boss, my coach, my weaknesses to my strengths, and finally my job in my life. If you are not spending equal time developing your people as you are driving your new Ducati motorcycle, then they won’t be your employees much longer. If they stay, they will only remain at the C or B level and you will never reap the rewards of having a truly engaged team. Much of this growth comes from continual conversations and coaching opportunities. These conversations need to be focused on the employee’s strengths versus their weaknesses.

By no means am I discounting the fact that employees are not responsible for them. They are to manage their weaknesses and play to their strengths. Almost every employee feedback session I have been in has focused on what I am doing wrong. While there is a place for that, the majority should be what I am doing right. If you are to raise a B employee to an A employee it is not by correcting their weaknesses. It will only come by helping them become more effective through their strengths. We are all trained to give feedback in a negative way. Think of the last time someone asked for your feedback. Did you make a list of the things they did right? No. You made a list of the bad. While there is some merit to part of that, we are weird to receive positive feedback. So why aren’t we giving it? I don’t know about you, but whenever I received a review that had things I needed to work on, I looked at it, got defensive, and never looked at it again. It was worth the paper it was written on and no more.

What am I doing to recognize people?

When asked what was the most important tool to encourage employees, overwhelmingly it was recognition. Think of a time you worked hard on a project and finished it. It was your baby and your blood sweat and tears went into it. After it was finished the person above you didn’t recognize your effort, or put in a half hearted thank you that was more crushing than helpful. Has that ever happened? It has to me, more times than I can count, and it changed the way I worked. Have you been guilty of doing it yourself? It doesn’t cost anything to recognize someone. However, when it is done right it will have a greater impact than any financial bonus. Send people a handwritten thank you note instead of an email. Since you should know your employees, send them a personal gift related to their favorite hobby or sports team. These four steps have one thing in common. They all require “doing.” This will not happen unless you take the time to make it happen. Rain happens, employee engagement and success does not “just happen.” Your role is critical to the success and confidence of your employees. Make sure that all your employees know that and actively work toward a common purpose, belief, and outcome. By so doing, your business will grow and you will be able to harvest the rewards of engaged employees.

Self Storage Marketing

Self storage marketing is the foundation of a good management company. You might have a lot of questions about what they do and don’t do. Hopefully, this article can help you out a little!

Here are a few good questions to ask a management company:

“What is their marketing plan? How will they close leads and rent units? Do you have a marketing plan in place with a cost associated with that? What should be included in your marketing plan?”
As competition heats up in our industry, you need to know how your self-storage management company plans to take on this challenge. 

Having a marketing plan in place will significantly increase your chances of weathering the storm.

Below is a list of things to consider when asking about marketing plans:
 Internet presence – may include a website, social media, aggregators, pay per click, etc.
 Ground-based Marketing – advertising at local businesses such as apartment complexes, realtors, moving companies, etc.
 Referral/discount programs
 Design of marketing materials
 Timing – how often will you run your marketing plan? Once a quarter, yearly?
 Reporting and tracking – How do they track it? Make sure they include how potential customers are tracked and followed up with. Because this helps to determine how successful (or not) a marketing plan is.
Once a marketing plan is complete, implementation of that plan is just as important. Most self-storage managers are not natural marketers, so proper training is critical. How will the staff be trained and by whom? The facility managers must be able to close these leads to make a difference. 

It’s vitally important that any management company you choose takes the time to implement this type of training. Customers have less patience than ever, so the best plan will win. Check out what we did for our customers! http://Client Stories

Partnering With A Storage Management Company

Parting with a self storage management company is one of the most important decisions you can make for your investment. If you are like most self storage investors, you got into the self storage industry to create passive wealth, not deal with the day-to-day management of a business. 

Self storage is unique in the commercial real estate industry as it is both an investment AND an operating business.  The business demands time and attention to give a strong return on investment. 

Whether you want to free your time to chase more deals or relax on a beach, we suggest hiring a self storage management company (like us!)

Self Storage Management

 If you are like most of our customers, you have some questions before you are ready to give a management company the keys to the kingdom.  We get it.  Here are some things to think through before you decide on hiring a self storage management company.

Who should you partner with?

There are basically three options in regards to self-storage management companies: REIT, Private Storage Management Company, or Boutique Self Storage Management Company. To hire a REIT, your store has to meet specific criteria.  It will be integrated into a network of hundreds of facilities very quickly.  The operating systems, marketing campaigns, sales programs, and facility reporting come pre-installed. Your store will be re-branded (at your expense) to the REIT name and identity. If you decide to cancel management at any time, you need to re-brand back to your original name. 

A REIT management company may choose to purchase your property when you decide to sell. A private management company is privately owned and may have 5 – 200 properties. Private management companies may or may not make you rebrand your property. There is less consistency among private management companies, so be sure to do your homework to make sure they are a good fit. A boutique management company (like Atomic), is a true partner in your company.  Boutique companies believe it is their obligation to run your storage business to the best of their ability and take care of your asset.

Boutique companies give their customers care and attention and do not just see them as a number on a spreadsheet. They focus on the small things that matter to yield the largest benefits for their customer. They focus on the bottom line just as much as the top. At the end of the day, it all comes down to who you feel comfortable with?  What are your goals for your business?