self storage investing Archives

Hiring the Best Self Storage Manager for Your Store.

Hiring the right self storage manager is one of the things that can make or break your investment. Consider the property, demographics, physical location, clientele, and overall goals to help you select the right fit for the store. Some properties need a strong salesperson, while others need more of a property manager who can handle projects.

Posting the job ad

Posting a self storage manager job ad is fairly straightforward with lots of options to choose from. We typically post jobs on Indeed, although there are other job posting options. Adding a custom question for applicants to answer is a great way to get insight into how applicants think, problem-solve, and approach their day.

We favor open-ended questions with no right or wrong answers. Consider the main goal your employee needs to accomplish and craft a question around it. Most self storage manager needs to have outstanding customer service skills, a strong ability to communicate and be able to think on their feet and make decisions.
Here are a few sample questions to choose from:

An upset tenant comes into your office on Monday because their gate code didn’t work over the weekend, although their account was paid. Without knowing the policy, what do you do?
A tenant needs a second unit, but only for 3 days. Without knowing the policy, what do you do?
A tenant claims items are missing from their unit. Without knowing the policy, what do you do?

A well-run self storage property will have policies and procedures around each of these issues, but having applicants, who likely know little to nothing about storage, answer, will give you insight into their mindset and problem-solving skills.

Interviewing applicants

Interviewing candidates can be grueling if you don’t have a system in place to handle the various administrative tasks. We use a memorized response in Indeed to request that applicants schedule their own interviews using a Calendly link. This allows us to block our time for interviews and have the applicants do the rest of the work.

We conduct interviews via Zoom so we can feel like we are talking to the applicant as much as possible. It is a great way to see if they are prepared for the interview. Did they find a quiet place to talk? Are they dressed? Are they focused on the interview or are they doing a million other things? I once interviewed someone in the car with their friends while they were going out for the weekend.

Remember, they picked the time! During the actual interview, try to speak as little as possible. Ask: Tell me about yourself. The best self storage managers are people who can connect with people. We love hiring people who are outgoing and personable, who can connect well with others, and make communication easy.

The applicant should be able to take control of the interview and talk about themselves and why they are best for the job. Ask if they have any questions. They are interviewing you as much as you are interviewing them. Are they prepared? Do they have a few smart questions? Do they understand the job? We like to ask about applicants’ work habits and how they structure their day? People who plan ahead and follow a plan make good employees. We want to hire autonomous adults who can be self-directed.

Finally, have someone do a second interview. It’s always a good idea to have someone else talk to the potential candidate and make sure they are a good fit for you. If you have the time, having them work in the office for a period of time before you offer them the job is the best case. It’s easy to be on your best behavior for 20 minutes on Zoom, but you can start to see someone’s real personality after an 8 hour day in the office together.

Once you select your best choice, be sure to follow all your state guidelines in offering them the job. Having a good HR onboarding will save you a massive headache if the employee doesn’t work out.

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.

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!)

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?

Self Storage Investing