Keep Your Eye on the [Self-Storage] Asset: Maintaining Property Value in a Challenging Economy
|Copyright 2014 by Virgo Publishing.|
|By: Linnea Appleby|
|Posted on: 04/04/2013|
As the economy started to tank, we all tightened our belts and hunkered down to bear it out. Now, several years have gone by, and some facilities are bearing the marks of hard times. Perhaps the economic storm isn’t over, but there comes a time when you need to assess the damage, accept it for what it is and rebuild.
Indicators show the self-storage industry is on an upswing. Facility owners who want to take advantage of it need to prepare now. As our industry has matured, so have the tenants. Consumers have become self-storage savvy. Many are repeat users and know their way around a facility, so to speak. They expect things like move-in discounts, electronic gates, security cameras and online-payment options. With self-storage now a “one on every corner” business, customers are spoiled for choice.
So that leads us back to the basics. Great customer service and high curb appeal are a must to distinguish your facility from the competition. Begin this rental season with a good assessment of your site. Look at your facility from the tenant’s viewpoint, the eye of a potential buyer and, most important, through the eyes of asset management.
Consider Your Facility’s Appearance
Simple things like replacing stained ceiling tiles, repainting doors and door frames, and replacing worn flags and signage can make a huge difference. If a potential buyer would put it on the “first things to be done” list, so should you. Put new ropes on the doors and replace rusted hasps. If you can fix it, fix it. If it’s been seven years since the office was overhauled or repainted, it probably needs it. This may also help jar your manager out of a rut.
During your assessment, look for potential liabilities. Have you walked past something on your site and thought, “Someone may trip over that”? Someone probably has. Don’t wait any longer, get it fixed. The economy is what it is. It’s up to you to do the best to keep up your property value.
Keep Pace With the Market
If you haven’t visited your competition lately, you should. After a period of time, it’s easy to get complacent about the market. Actually go out there and visit. How does your facility stack up? Take a look at cleanliness, staff professionalism, customer service and curb appeal. If you needed storage today, would you rent here or from your manager?
Use this visit as a chance to find out what pricing and specials are being offered in the market. Sure, you get this information from the Internet and your manager submits a survey every month, but the information that goes across the counter may be very different. Storage managers don’t often get a chance to talk shop and are usually willing to share their thoughts on the business. Start a conversation to help determine if your prices, specials and occupancy level are within an appropriate range. If you find out you’re way behind the others, it’s time to make some serious changes.
How does your manager stack up to other managers in the area? Look at how they’re dressed, their attitude and customer-service skills. Do they understand how to sell self-storage? Good managers maintain asset value, but great managers drive it up.
Estimate Discounts, Rent Increases, Delinquency and Complimentary Units
It’s easy for time to get away from us in this area, too. When the economy is bad, everyone wants a discount; and discounts are a great tool when used effectively. Unfortunately, what was intended to be a short-term reduction can become a long-term money drain if rates aren’t regularly reviewed and adjusted. Business expenses rise every year, and you must account for that in your income. Tenants understand that and will not balk at a reasonable rent increase, especially when they see you’ve put a new rope on their door and fixed the lock on the lady’s room door.
Evaluate your complimentary and company units. Make sure you aren’t giving away income-earning inventory. These, along with manager units, should be the ones that are undesirable or more difficult to rent, not your prime real estate.
The economy in recent years has played havoc on delinquency control at a lot of sites. Good people have been hit hard. This can make delinquency a challenge, especially for a manager who knows his tenants well. It didn’t happen overnight, and it will take some time to clean it up. Just start from where you are, make a plan, and move forward to get it under control. If delinquency is out of range, the asset value of your property is diminished.
Budget for Larger Items
Time flies and suddenly the office equipment is several years old, some of the cameras are burned out, and the golf cart doesn’t go very fast anymore. During your assessment, you may find several items that are potentially large one-time expenses.
Put this list in priority order and develop a time line for completing these repairs or upgrades. Rather than guess at these costs, get a few quotes so you can plan accurately. Will completing this task increase income, decrease expenses, limit liability or increase asset value? If it doesn’t fall into one of these categories, don’t spend the money.
Do Preventive Maintenance
Understand and anticipate the life expectancy of major facility components. Computers and cameras will fail, roofs will leak, the gate will get hit, etc. It’s all part of the business. Spending a few bucks to keep things in good condition can go a long way toward meeting or exceeding life expectancy.
Scheduled maintenance to change the air-conditioner filters, replace golf-cart batteries or defrag the computer are easy ways to get the most out of your equipment. As items age, budget for their replacement or repair rather than wait for an emergency.
Self-storage technology has evolved. If you’re not keeping up, you’re falling behind. Updated management software that links gates, the security system and credit cards and provides an online payment option is a must. Web-based software allows for stronger controls and greater accountability than older standalone software. The ability to have real-time data is crucial, and the integration with QuickBooks saves time and avoids data-entry errors. The initial cost to convert software is minimal, and the process is pretty easy. The time saved and efficiencies gained are well worth the making the change. As in any business, using the right tools is always the best answer.
When you look at your business as an asset manager would, it’s easier to evaluate the operation objectively and make a plan for how to proceed. Your assessment may only uncover minor adjustments, or you may find there’s some major work to be done. Either way, it didn’t get that way overnight, and it won’t get fixed overnight. The sooner you start, the faster it can be set right.
The economy has not been kind over the past few years, but business goes on. Accept it for what it is, rebuild, and prepare to get your share as the industry upswing continues and your asset value grows.
Linnea Appleby is the owner of Lime Tree Management, a self-storage management and consulting firm based in Sarasota, Fla. To reach her, call 941.350.7859; e-mail email@example.com; visit www.limetreemanagement.com .