It takes a lot to manage a self-storage property in 2019. Twenty years ago, you just needed to keep the place clean, collect rent, manage your Yellow Pages ad and engage in a bit of community involvement. Now, a facility operator must be a data analyst, marketing wizard and yield-management pro, on top of many other things. There’s so much that goes into successfully managing a storage site that owners can easily feel overwhelmed.
The industry is also filled with investors who have no interest in handling the daily minutia of operation. They may have other careers or several additional assets and just don’t have the time. There are also owners who’d like to open a second or third facility but lack the bandwidth to manage the existing site and pursue new ventures. For all these scenarios, there’s a solution: third-party management.
Services and Fees
Some self-storage management firms offer a menu of services from which you can select the areas you want covered, while others offer a complete package that includes everything: staffing, payroll, accounting, maintenance, marketing, software, etc. A full-service provider does everything except file your taxes!
Owners and investors who manage their own storage sites often pay themselves for their time and effort. When you bring in a third party, you’ll typically pay $2,000 to $3,000 a month, or 6 percent of gross revenue, depending on property size. Some firms also require a monthly minimum. Many owners find that spending $30,000 or $50,000 a year to ensure their property is well-run and efficient is more than worth the money.
It’s important to note that having a management company doesn’t necessarily change the site-level expenses. You must still pay the electric bill and real estate taxes. However, when a third-party firm takes over, it often finds new efficiencies and other ways to increase revenue. In general, it can pay for itself by bringing in more money, helping control expenses and making the operation more efficient. How long it takes to reach this breakeven point can vary quite a bit and will depend on the individual property and market.
How do you find management candidates? To begin, see which companies are out there promoting themselves. Do an online search for “self-storage management companies” or visit the online buyer’s guide at insideselfstorage.com (you’ll find it under “Directories” in the top navigation bar). Ask members of your state storage association for recommendations or see which firms are involved with that group. Search LinkedIn or other social media to see which companies are active. Ask industry acquaintances and other operators in your area for their suggestions.
There are many firms available, including local, regional and national companies. You can choose from very large companies like the real estate investment trusts or much smaller firms that manage only a few properties. A lot fall somewhere in the middle.
Mid-size management companies typically oversee 15 to 25 properties. They generally have a solid infrastructure with engaged leadership and can customize their services for a specific market or offer special add-on services to respond to market conditions. Many owners find an advantage in dealing with firms of this size, as they receive more individual attention than with larger companies but still benefit from some economies of scale.
Some providers manage other kinds of commercial properties in addition to self-storage, for example, multi-family or office. Just bear in mind that if you use a company that manages many types of real estate, it may lack the breadth and depth of self-storage knowledge necessary to handle all opportunities and challenges.
Choosing a Provider
Take your time when interviewing management firms. A good prospective partner should:
- Listen to your needs and want to learn about your specific property and market
- Have experience in the self-storage industry and understand the business inside and out
- Be familiar with your area, type of store and situation
- Visit your site and meet you in person (Note: Some will charge for this.)
Here are a few important questions to ask:
- What is your management fee and what does it include?
- Are your travel fees and costs folded into the standard management fee, or are they charged separately?
- Which facility-management software do you use? If mine is different, will I be expected to change?
- Will you keep my existing onsite staff?
- How do you handle branding? Will we have to rebrand to your identity or can we keep our own? Is there a co-branding option? What provides the strongest marketing?
Perhaps the most important question to ask is whether your facility a good fit for the company and its services. Not every site will fall into its “sweet spot.” Also, do you feel comfortable with the company’s mission and how it conducts business? Once you’ve narrowed your list of candidates to two or three you'd be interested in working with, get to know them and become familiar with their ways of doing things.
Onboarding and Oversight
Once you hire a management firm, it could take 60 to 90 days before your facility has completed the onboarding process. There's a good deal of setup involved when taking over daily operation of a property.
The company will generally assign a team to your site that might include district or regional managers, vice presidents, or managing partners who’ll have some involvement in finances, operations and maintenance. These members will conduct periodic visits to your property to do inspections, audits and employee evaluations. In addition to ensuring everything is running smoothly, they’ll seek ways to increase revenue and control expenses.
Hopefully, I've given you some insight to what to expect and helpful tips on how to choose the right third-party management company for your business. Good luck!
Tron Jordheim is the business-development manager for Store Here Management/RHW Capital Management Partners. He’s a consultant in sales, marketing, call-center practices, lead creation and management. He’s also the author of three books, a regular speaker at industry events and a frequent contributor to trade journals. Store Here operates more than 20 facilities nationwide. For more information call 855.831.1105; e-mail [email protected]; visit www.storehere.com.