Most self-storage owner and operators shudder at the thought of conducting tenant background and credit checks. Perhaps it’s the fear of losing business. Hopefully, this article will put those fears to rest.
 
The Research
We were fortunate enough when we started researching this industry that we found Inside Self-Storage. Through the publication, it was suggested to us early on that we do background and credit checks to protect our business. Our first thought process was “Wow! Won’t that scare away our potential occupants?”

As we started doing research on companies offering background and credit checking, the fear of loosing business diminished. We then started looking for different services that could give us software appropriate for our facility, which offers RV and boat storage along with climate- and non-climate-controlled self-storage.

We reviewed a few companies and found one that seemed to be very RV/boat centric, making it a good fit for our needs. The software allowed us to have levels of access for our employees, restricting their viewing of other people’s credit and criminal history, information we felt should be restricted to management exclusively.
We also wanted to be able to adjust certain criteria, leading us to create categories: 

Then we made a few simple decisions: Anyone with a felony criminal record would be denied, as would potential tenants in bankruptcy or collections.

 
The Benefits
After attending many association meetings and conferences we have found few facility managers can say they have no collection issues.  Since we have been using this process, though, we have not had any at our site. Yes, we have a few slow-paying occupants, but now they are all less than 21 days late.

The cost for the service is minimal. For our program, we only pay per occupant, a cost that we pass onto the tenant in our one-time administrative fee. Input time to activate the checks is also nominal. Perhaps most importantly, the only customers we have lost are felons and individuals with bad credit.

The way we look at it, self-storage operators can pay a minimal fee upfront to conduct background checks, or pay hundreds or even thousands of dollars for legal fees—not to mention the angst of dealing with delinquencies and lien sales. Wouldn’t it be nice if these were completely a thing of the past?

We think the secret to eliminating tension with tenants when we tell them we conduct credit checks is in how the information is presented. We explain that we do it for their protection as well as our own. Most people readily understand the practicality of keeping the self-storage site safe by eliminating felons and other questionable characters. It makes them feel protected. The ones who give you grief usually have something to hide and they are the ones you send to your competitor.

We have hundreds of people visit our facility and have only turned a way a handful. In hindsight, the few times we have lowered our standards and allowed questionable tenants in the door, we have been sorry. These are the same people who have become slow pays. Plus, one advantage of the software we selected is that you can adjust your credit standards depending on how the economy is doing. 
 

Take Out the Guesswork
We all know you cannot judge a book by its cover, but we are all learning that you can’t judge a self-storage tenant by first appearances. We have noticed a trend: The people we have rejected came into the office well dressed and looked as if they were solid citizens with good credit. On the contrary, these are sometimes the folks with sketchy backgrounds and bad credit. The system reveals credit facts and doesn’t require us to be clairvoyant.

Doing a background and credit check allows you take control of your business. The process saves you endless hours of collections and also gives you an edge on your competitors. Again remember, you can set the criteria so it fits your occupant base. The success is in how you present this to your potential occupants. Homeland security guidelines can help you understand why this process is so important.

We are always trying to find ways to increase our security and protect our facility financially. We have found that signing up for the background and credit check service has been money well spent. 
  
Terri Heil is the business development manager and Ed Heil is the manager of operations and security at Lake Havasu RV & Boat Storage of Lake Havasu City, Ariz. Both belong to the Arizona Mini Storage Association and are regional chairpersons for the Arizona Mini Storage Association.  For more information, call 877.764.1961; visit www.lakehavasustorage.com.