There are many aspects to self-storage revenue management, but how you handle rent payments is important. It’s especially critical to a small operation that’s growing quickly.
My company now has eight locations comprising 1,400 units, spread across five towns and 40 miles. Our business model runs very lean on management, with one cellphone being used to cover all facilities, each with 50 to 430 units but no onsite staff. We wouldn’t have been able to expand our footprint as rapidly as we did if we’d had to meet customers in person to process rentals.
Though we may consider installing self-serve kiosks in the future, they’d be cost-prohibitive at our smaller locations; plus we worry about them being stolen. For now, we use our own kind of rental process to meet customer needs. We feel we’re able to serve them well via phone.
Still, we have to be as efficient as possible. This sometimes means making a sacrifice to save time. For example, we don’t currently charge late fees, so we don’t have to spend time explaining our fee structure to customers, when and why fees are charged, etc. Once all our properties have stabilized and aren’t in such a heavy rent-up period, we’ll add these things in.
For taking payments, we use different approaches, depending on the market. As we’ve grown, however, we’ve moved toward favoring autopay. It’s the best way to minimize delinquencies and streamline operation.
In our small markets, we allow customers to pay by cash, check, money order or autopay; but we’ve made a conscious effort to move tenants to autopay, even removing some renters when necessary. If someone is consistently late, we require him to switch to autopay or move out. If he won’t comply, we raise his rent significantly and give notice to vacate.
Currently, 66 percent of our small-market tenants are on autopay. In the last two years, our operation has improved significantly regarding late payments and auctions, as we’ve gotten more aggressive about pushing autopay and customer churn.
In our largest market, we insist on autopay. Though we’d like to fill our units quickly, we don’t want to invest a lot of time making collections calls, which occurs frequently in the first three years of a new location. Our upfront commitment to autopay is a culling process, as most instances of nonpayment have been with cash-paying customers. The market we’re in is underserved, so we’ll get the occupancy up, even if it takes a little longer due to our requirement.
In this particular market, 95 percent of tenants are on autopay. We’ve had to make exceptions for a few customers who can’t seem to keep current on autopay after moving in. Until we’re at the desired occupancy in this market, we aren’t ready to kick them out.
Which Approach Is Best?
As with many things, there isn’t a single right answer. Some self-storage operators have only one or two facilities and like to talk with their tenants. Efficiency may not be their primary concern. Some have onsite managers, so their approach to rent payments is different.
My advice is to tailor your approach to your specific situation. Try various tools and applications. Your market and customer profiles may allow you to dictate payment methods, or your circumstances may warrant more leniency. If you’re like us, running lean and expanding quickly, start small and make your big mistakes early.
Henry Clark is owner of Clark Storage LLC, which operates seven self-storage facilities in Iowa and one in Nebraska. The family-run business also includes Clark’s wife, Sandy, and son, Ryan. To reach him, call 402.618.6595.