In the self-storage industry, we often ask each other, “How is your property doing?” Usually the response is something along the lines of, “Good, OK, had a few rough months, etc.” This brings up an interesting idea: How well do you know your property’s performance? Do you have all of the facts in front of you? Are you looking at the complete picture or just pieces of the puzzle?
Is your manager or third-party management company using the correct tools to ensure the proper management of your facility and giving you all the right information for view? The answer to this question is crucial to your facility’s success.
Management Summary Reports
When you walk into a self-storage facility and ask the property manager, “How’s business?” they will usually pull out a management summary report and rattle off a few numbers. The report is one of the most important tools you can use to review the performance of a property. However, there are some steps you should take to make sure your management summary report is working in the best way possible for you.
The first step is making sure the report gives you the information you need, including money collected; any concessions given to tenants; rental activity; economic, unit and square foot occupancy; potential rent; and rents that are past due.
The second step is to double check how the metrics are calculated. Metrics can be calculated in many ways and can skew the analysis if not calculated properly. For instance, a metric called “actual total rent” on one report could be called “projected rent” on another, and both are calculated as the sum of the monthly rent rate for every renting customer on a given day. The metric names are not necessarily indicative of their calculation. However, one cannot live on a management summary report alone. Without a frame of reference, the report does not tell you enough about how the property is performing compared to its potential.
Think Big Picture
In order to get the full and complete picture of your facility’s performance, look at the following:
Open lines of communication. Nobody knows your self-storage property better than the people managing it every day. Ask the manager to compose his thoughts and observations for you at least monthly. If you employ a third-party management company, ask them for updates on the property manager and any training they are working on; the current occupancy, delinquency, ancillary sales; and capital improvements or maintenance work that needs to be done. Also, get information regarding the marketing efforts and the local market in general. This communication will often give you more information about what’s really going on at the site than the combination of all other reports.
Profit-and-loss statement vs. the budget. Let’s say you are looking at a management report that tells you your property collected $27,200 in revenue last month. That sounds pretty good, until you look at the budget and realize you had budgeted to collect $35,000 in revenue for that month. Wait a second ... now you know you need to look into this. Has the market changed since the budget was prepared? Is there a different manager running the facility now? Did you lose a big tenant with multiple units? Make sure to look at expenses as well. Get the full and complete picture before jumping to conclusions.