The other side of the bottom-line equation is facility expenses, many of which can be controlled or reduced through bulk-purchase programs. Management companies usually get discount pricing on products and services such as retail merchandise, Internet hosting, website design, search engine optimization, Yellow Pages advertising, waste disposal and others. Property-insurance costs can often be reduced substantially through the use of a management company’s bulk-buying power. Credit card processing fees can also be substantially decreased; this reduction alone can add hundreds of dollars each month to the bottom line.
Real estate taxes are another area where substantial savings can be derived. Although most management companies are not prepared to deal with the real estate tax process, they should have access to professionals who can provide these services without direct out-of-pocket costs to the owner. Income taxes and estate planning are other areas where a management company should have access to partners.
The Physical Plant
What about the physical self-storage site? Has the management company provided a detailed short- and long-term capital-improvement plan? Although many of these items require the outlay of dollars to effectuate, many can be implemented over time. Although painting or seal-coating may be an out-of-pocket expense for the facility owner, the increase in curb appeal and, hence, added tenants, can improve the bottom line.
Electricity is a significant operational expense that can be mitigated by the installation of high-efficiency lighting. These costs can often be offset through rebate programs from utility providers. Exterior security lighting is the single largest user of electricity at traditional self-storage facilities. LED wall packs can significantly reduce these costs. In my experience, I’ve seen a two- to three-year payback on these types of capital lighting costs.
Your management company should provide a comprehensive business plan for increasing revenue and decreasing expenses for your project. It should address the entire spectrum of strategies needed to improve the facility’s bottom line. Not only is the plan important, the management company should have a proven track record at implementation. In addition, it should have access to a wide range of professional services to successfully navigate these economic times.
Yes, a professional management company will initially increase your operating costs. But with time and attention to detail, it will improve your bottom-line results. Your investment in an effective management company will provide a better return than your property.
Bryce Grefe is vice president and a principle in Storage Investment Management Inc., a boutique management company that manages 31 facilities representing more than 1.5 million square feet of self-storage storage, from the mid-Atlantic region through New England. SIMI's principals have more 75 years of successful self-storage management experience nationwide. For more information, call 781.335.1604; e-mail email@example.com ; visit www.simi.org .