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Industry Overview: Fee Management

Mel Holsinger Comments

The concept of third-party self-storage management started to become popular in the '60s and 70s when facility owners decided a) they had more important things to do; b) they did not like or were not capable of handling all operational functions; or c) they recognized that outside management companies had the experience and knowledge to do it better. The opportunity for third-party management has been growing ever since.

Many of the first management companies were rooted in apartments, mobile homes, shopping centers or other similar operations. As the concept of self-storage grew, so did the role of the management company, as numerous aspects of operating the business became more specialized and important to the profitability of a facility.

At first, most operators looked around and found "caretaker-quality" retired couples who were looking to supplement their income or work in exchange for free rent. For the most part, records were kept on a simple one-write bookkeeping system, and it was relatively easy.

Rental agreements were simple forms, often plagiarized from another industry and modified to fit the needs of self-storage. Buildings were simple, with garage-type and swing doors, usually selected for their inexpensive price and installation ease. Most self-storage entrepreneurs laid down gravel driveways, put up a chain-link fence and installed a manual gate that was closed at night. Manager apartments were small, offices were barely large enough to accommodate just one customer at a time, and our idea of security was to use the manager’s pet dog, which may or may not even acknowledge a stranger on the premises.

As the business concept caught on, owners were the management company, they hired their own bookkeeper to do the banking, pay the bills and keep simple records. As the demand for rental space became greater, more time was needed to ensure that the managers were collecting all the rents and depositing them properly. When tenants failed to pay rent, we had to devise a system to "go after them."

In time, the secret of self-storage got out and other entrepreneurs tried to get their piece of the pie. We also entered what has become our litigious society, or better put, if customers did not get what they wanted (free rent, free insurance, impenetrable security), we began to get sued. And of course, let us not forget that our respective governments—including the city, state and federal—wanted their share via property taxes, sales taxes, employment taxes, etc. This in turn created more work for the owner and made all operators wonder whether we should even be subject to these taxes.

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