November 1, 1998

4 Min Read
Three Myths of Self-Storage

Three Myths of Self-Storage

DEAR WALDMANS: My brother-in-law recently retired and has a nice nest egg savedfor retirement. He has decided that he would like to open a self-storage facility. I feelvery honored that he has asked me to be his partner. Actually, the truth is, I feel veryscared about the entire idea. Don't misunderstand me-- he has good business sense and hasmaintained success all of his life.

His plans are to purchase a tract of land in a very high-traffic area. He then proposesto build a large storage facility--at least 110,000 square feet--and hopes of having itrented in the first six months. The plan also includes hiring a wife-and-husband team tobe on call from their apartment. He also wants to rent trucks at the facility, with plansto have 10 trucks at the site at all times. His understanding is that when you have truckson the premises, it is more convenient for the tenant.

I am also very successful in business, but I am having some difficulty with this entirescenario. Still, I certainly don't want my brother-in-law to think I don't trust hisbusiness abilities. Do you really believe we can open a facility like I mentioned, employa couple to manage the site and rent trucks, too? How long will it be before we can expectto show a sizable profit from the business? It sounds like we can just sit back and waitfor the profits.

I have told my brother-in-law that I will give him an answer within the next month. Healready has a spot chosen for the building, but I am quite nervous. I really need somehelp with my decision.
--Waiting for Your Reply in Boca

DEAR WAITING:Sounds like you have a big decision to make in just a month. I amnot sure I would make any business decision this large in that length of time. Startingyour own business takes a lot of research, consideration, and most important, you have tofeel good about the decision. I think you are having lots of doubts about opening thisbusiness. Of course, this is just my opinion, but I hope the following will give you moreinsight into what you may be getting into.

First of all, there are three myths that I can relate to in your request for help. Thefirst one is that it is feasible to open a large facility and rent it 100 percent in thefirst six months. That rarely occurs. It generally takes that long just to set up theoperation and get things going in the right direction. When starting a facility, it isusually best to build in small increments, rent those units and then expand. Bythat point you have an idea of the business and profits to be made.

Secondly, a wife-and-husband team is a good choice for managing the facility,but not enough manpower to cover both the facility and the truck-rental business. Rentingtrucks seems to be an easy way to make money, but that's not always the case. Having 10trucks requires at least two additional employees. Truck-rental businesses usually paycommissions of approximately 20 percent on truck rentals. Local rentals are not where youmake your commissions; the money is usually made on a one-way truck rental. Also, iftrucks sit on the lot too long (without any rental business), be prepared to hand thetrucks back to the rental companies. If you don't rent, you don't make money. Idlevehicles don't make money for the rental companies either.

Lastly, it takes more than a couple of people sitting in an apartment to make asuccessful storage facility. You need a designated office with regular working hours. Astorage facility, like you mentioned, takes a lot of work and consistency. You can'texpect to get rich by placing a couple in an apartment and have them run to the officewhen a potential customer comes into the facility. Your business has to look professionaland be professional. That's how you will rent units and make money.

It would be a great idea for you and your brother-in-law to thoroughly research thisproposed facility and create a business plan before committing to this deal. You bothshould feel comfortable and confident that the business will be a success and make aprofit for both of you. There still seems to be a lot of work to do before this deal canbe closed. Good luck on your new venture.

The Waldmans, a father-daughter team, are self-storage owners/operators and attorneys. In addition, Ms. Waldman holds a Master's degree in Labor and Employment Law from Georgetown University. The Waldmans are co-authors of the industry's leading series of books on self-storage operations: Getting Started, Forms, Policies & Procedures and South Carolina Tools. Another creation of Ask the Waldmans are their colorful posters designed exclusively for the self-storage industry.Comments and questions for ASK THE WALDMANS may be sent to: The Waldmans P.O. Box 21416, Charleston, SC 29413; E-mail: [email protected]; Web: www.askthewaldmans.com

Views and opinions on legal matters are those of the authors. Professional counsel should be obtained before any determination or positive action is taken.

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