Finding the ideal self-storage property is probably the most difficult part of becoming an owner in this industry. It can take many days or months, even years; but once you pinpoint the right location, it can be a great pathway to financial freedom. Of course, once you’re in the business, ownership also comes with challenges.
I purchased my first facility in March 2017, and the knowledge I’ve gained over the last six years has inspired me to share the experience with other owners—current and future—to let you know you aren’t alone. Here are my top 10 pain points of self-storage ownership, as well as solutions I’ve found.
The process of eliminating the potential for theft and vandalism is an ongoing effort. I quickly identified this as a top priority when acquiring my first self-storage investment.
Solutions: Find regional vendors who specialize in self-storage access control and invest in a professional-grade security system that includes cameras, alarms, keypads and gates. My contract includes an annual inspection of cameras and other systems to keep everything in tip-top shape. Also, verify that every unit is secured with a good lock.
A self-storage property needs to be well-maintained, and each unit must remain in good working order at all times.
Solutions: In addition to ensuring that your access control and other technology is working property, regularly check for building and metal damage, and pay attention to wear and tear on doors and springs. Also, address driving surfaces, as they deteriorate over time.
Maintain a list of trusted vendors. I have an excellent working relationship with partners who help keep my facility in excellent condition. Loyalty to these providers has allowed me to resolve maintenance issues faster and at a lower cost.
3. Customer Service
Customer service is essential, and your tenants should be a top priority. It’s critical that you’re able to keep them happy and feeling confident that their belongings are safe. Response time to customer concerns needs to be a major focus.
Solutions: Provide a friendly and helpful experience, and respond quickly to any inquiries or complaints. Implement a call center that can address problems or contact your management team about issues that occur outside of normal office hours.
4. Revenue Management
Competitive pricing, along with offering good value for your self-storage services, is also important.
Solutions: Though it can be time-intensive and challenging, review competitor pricing on a monthly basis, and analyze your own property’s occupancy by size. Pay attention to your specials and discounts. Take the time to assess the market each month, and use that knowledge to game plan. Every $1,000 of missed revenue, at a 7% capitalization rate, is $14,285 of lost value.
Ongoing and consistent marketing efforts are essential to the long-term success of a self-storage facility. That said, ensuring that your location is a top option for prospective renters can be challenging for any small operator.
Solutions: Work to build relationships with local realtors, moving companies, multi-family developments and other real estate professionals. Warning: This can be quite an undertaking.
You also need to promote your website through search engine optimization strategies, which can be complex and confusing. Find a trusted website provider who specializes in self-storage. There are resources available through state and national associations as well as the Inside Self-Storage online Buyer’s Guide.
6. Legal Requirements
Self-storage is a simple business in concept, but it has many nuanced layers including those that deal with legal issues and regulations. Each state has specific requirements that must be adhered to when it comes to auctions, late-fee schedules, the amount of fees that can be charged, lease language and liability related to the storage of tenant belongings.
Solution: Engage in an annual “health check” with an attorney who specializes in self-storage. This should include a review of your lease, late-fee timing and amounts, the language of your delinquent notification letter as well as your auction process to ensure you’re in compliance with state laws.
Insurance is another important factor of self-storage ownership. You need the right liability coverage to protect your facility as well as a reputable insurance provider to assist customers in the event there is ever a loss at your property.
Solution: We have a liability policy that covers damage to the storage facility itself as well as potential issues with customers’ stored belongings. The previous owner didn’t offer tenant insurance, but we’ve implemented a program that gives customers the option to insure their unit contents.
8. Management Team
Your self-storage managers are tasked with running a multi-million-dollar investment, so they need to understand how to protect the best interests of the business. I have an excellent management team in place today, but this didn’t happen overnight. Hiring the right people is key, but giving them the tools to do their jobs properly and competently takes effort.
Solution: My philosophy is if you invest in your management team, they will invest in you. Our staff is required to complete the certification program offered by the national Self Storage Association, but there are many other training options available in the market.
The technology stack used to operate my facility plays a vital part in its success. The previous owner didn’t use any property-management software to track day-to-day operation, which created a number of challenges to address.
Solution: Choose a robust management platform. Our software program ties into our access-control systems, enables credit-card processing and online payments, and automates most of our revenue management.
Expanding a self-storage facility can be an extremely rewarding financial opportunity for your business. My property has high occupancy and an opportunity to grow, but the cost of materials and labor has increased significantly in the last five years.
Solution: If you have the ability to expand, bid the potential project to three general contractors. You can then use their bids to weigh the financial risk of adding more debt vs. the long-term reward of higher revenue and future equity.
Self-storage ownership can be extremely challenging, no matter your level of experience. My path to success hasn’t been easy, and I’ve made plenty of mistakes along the way.
I strongly recommend that you attend industry conferences, network with vendors and speak with trusted brokers. I’ve leaned on many self-storage professionals to learn how to become the best owner possible. As a result of these pain points and the need to find solutions, I’ve been able to turn my investment into a wealth accelerator.
Andreas Makris is a self-storage owner in Souderton, Pennsylvania, as well as an associate of The Bledsoe Self-Storage Group (BSSG) of Marcus & Millichap, a commercial real estate investment services firm with offices in Canada and the United States. BSSG specializes in self-storage brokerage throughout the mid-Atlantic and Northeast. For more information, call 717.808.1192; email [email protected].