If you’re a self-storage owner, you’ve probably noticed that you’re being contacted more frequently, and not just from interested renters. I’m talking about communication from brokers, buyers and investors. Nearly every day—usually more than once—I’m asked if I’d consider selling one or all of my facilities. The requests come via phone, email, text and mass-produced letters designed to look like they were hand-written. I’ve even been contacted through LinkedIn and Facebook.
Why all the interest? Well, it’s become increasingly difficult and time-consuming to build new self-storage facilities, and independent owners often leave a lot of income potential on the table. The market has been changing rapidly, and even well-run sites have room for improvement. Whether you’re in the market to sell or buy, it’s helpful to consider strategies that maximize the value of a property.
Let’s look at the situation from the buyer’s point of view, being that there are so many eager investors in the self-storage market today. They’re all interested in finding properties with upside potential! If you were to sell your facility to one of these folks, following are the strategies they’d likely use to improve return on investment. You can just as easily use them yourself to increase revenue and property value!
They’ll raise rental rates. Mom-and-pop operators are notorious for having a “set it and forget it” mentality regarding rental rates. Savvy operators focus on maximizing income instead of occupancy. A facility that’s 90% full with properly managed rates will yield better returns than a full site with static rates.
They’ll improve marketing. Some storage operators don’t pay much attention to their online search listings. As a result, they might be missing some listings, or their listings might contain outdated information and photos. Today’s customers depend on their smartphones to find you, so if you aren’t putting your best foot forward in the digital realm, you can miss out on rental opportunities.
New owners will immediately claim online business listings and social media pages, and they may hire a professional photographer to showcase the property in the best possible light. Why? When you have more leads and rentals coming in, you can raise your rates.
They’ll install the latest technology. Modern property-management software includes several features designed to help you maximize rental income in less time. Automatic credit-card billing, online rentals, rate management, collections tools and more can help you keep your self-storage property rented at maximum revenue and provide detailed reporting to help make key business decisions.
When a site is sold to a savvy investor, a move to a modern software platform will be among the first tasks. If you haven’t done so already, they’ll implement online move-ins and hire a professional maintenance service to take over day-to-day cleaning. A call center will also likely be hired to handle incoming calls, so nothing falls through the cracks.
They’ll tidy up. If you’ve owned a property for a while, there may be maintenance you’ve neglected, such as cracks in pavement, peeling paint, dead plants, faded bollards, non-functioning lights, etc. A new owner will likely address all these little things, which will result in better curb appeal. And guess what: Better curb appeal leads to higher rates.
They’ll make capital improvements. If larger repair items and site upgrades are overdue, a new owner will likely roll the cost into the financing of the purchase. Improvements such as new lighting, driveway replacement, site-wide door replacement, access control and roofs can be costly but are important factors in keeping a site secure and attractive for new tenants.
They’ll expand. If your property has any unused land, a new buyer will develop it or use it to rent boat and RV storage. It’s possible they’ll add portable buildings along easements or other areas where permanent buildings aren’t allowed.
They’ll look for new revenue streams. Do you sell tenant insurance or property-protection plans? What about packing and moving supplies? Do you have a move-in fee? Do you waive too many late fees? A new owner will try to maximize all potential sources of income.
They’ll rein in delinquent tenants. Tenants who are more than 30 days late are a problem. If you aren’t conducting online auctions, a new owner likely will. These sales are easy, even one unit at a time. If you schedule auctions promptly, delinquent tenants will be more likely to pay before their balance balloons out of control.
They’ll have cash or borrow at low rates. If you developed your site 10 or 20 years ago, you made a good decision. Self-storage is no longer a hidden gem. It’s sought after by large real estate investment groups due to its stability and resilience during economic downturns (and pandemics). This is fueling interest and investment.
Frankly, it’s quicker to build a self-storage portfolio through acquisitions than from new construction. For those who are borrowing funds to buy existing properties, rates are low, and Small Business Administration programs make it very easy to borrow with minimal down payments.
They’ll conduct a cost-segregation study. Self-storage owners can use cost segregation to depreciate certain portions of their investment more quickly. The larger the site, the more potential for tax benefits.
As you can see, existing self-storage properties provide excellent opportunities to maximize income—for you or a potential buyer. If you’re ready to relax and enjoy the fruits of your labor, selling in this market is a great option. In fact, consider some of the tips above to increase the value of your site before you sell. Your goal should be to increase rental income prior to selling because site value is largely dependent on income.
If you aren’t ready to part with your business but see an opportunity to increase its income and overall value, consider refinancing. This’ll allow you to extract some value while retaining the income stream of your appreciating asset. You can also use those proceeds to make improvements or reward yourself.
If your motivation to sell is simply to step away from day-to-day operations, consider making an investment in technology and automation, and possibly hiring a manager or management firm. This’ll provide more freedom while allowing you to maintain the benefits of ownership.
Steve Hajewski the marketing manager at Trachte Building Systems, which designs, manufactures and erects a full line of pre-engineered and customized steel self-storage systems, including single- and multi-story, portable storage, interior partition and corridor, and canopy boat/RV. He’s also a partner of three facilities in Wisconsin and a frequent contributor on Self-Storage Talk, the industry's largest online community. For more information, call 800.356.5824.