How Much is it Worth to Be Prepared For
Your First Year as a New Self Storage Owner?
By Marc Goodin
If owning self storage is so great, why doesn’t everyone do it. Because It is just hard enough to keep the average person dreaming on the sidelines. The good news is the barriers to entry continue to make it one of the best real estate investments to make both a great income and build a great nest egg while you have the option to keep your career. Heck most people will not even get to the end of this article, never mind start their own business.
So, the next two questions are:
1) Why is it worth millions to be prepared? As you read the rest of this article you will learn why.
2) Why are most self storage not prepared in their first year and often never reach the premier status they could. The answer to this second questions is it takes time and knowledge to be prepared and the typical new owners simple do not have the time and experience. Like most businesses, Self storage is unique and takes time to learn.
It took me 4 years of engineering college and two state tests to become a Professional Civil Engineer. It took me 10 more years to become an expert in site plan designs. And then it took me 5 more years to be an expert in civil engineering sales and marketing. For the first 10 years, I was paid for my time, staring at $50/hr. and ending at $250/hr. But after I was both and expert engineer and expert at (engineering) sales and marketing I was paid for my knowledge and not just for my time. Of course, this provided financial success significantly more than trading dollars for hours. Believe it or not the same goes for most businesses including self storage.
It took me 6 months to build my first self storage and become a self storage owner. It took me 10 years to become a self storage expert and then 5 more years to become an expert in self storage sales and marketing (Over 10,000 hours) So when I say new owners do not have the time or experience to be prepared I am really not kidding.
Let’s take a look at those millions typically left on the table by most self storage owners. For this example, I am going to use a 50,000-sf foot facility with 420 units with the average unit rental rate of $150/month. For comparison, the average facility in the US is 67,000+_ sf and of course has more units.
I looked at several recent self storage feasibilities studies by the experts and they predicted rent up to 90% between 24 to 42 months. Typically, around 4-5% per month for 20 units a month. Last week a self storage that just opened 4 months ago shared his first 3 monthly rent up stats with me and he rented 15 units a month.
With the right design, premarketing and team in place on opening day you should aim for 60 plus units rented in your first month. If you use a conservative 12-month average stay each extra rental in your first month is worth $1,800 a year.
The first 20 extra units: 20 unit’s x 12 months’ x $150 monthly rental = $36,000/yr.
The second extra 20 units (60 units total) the 40 extra rented units’ value is $72,000/yr.
Done right the second month can be a repeat of month one in extra rentals compared to the average. So why is the typical so low. Again, because the new owner cannot tell you the 25 design elements or the 50 pre-opening and 50 post opening sales and marketing items required for these over the top results, never mind the secret sauce on how to execute them. Can you name them?
Typically, a new self storage facility opens with a manager who does not know how to sell and rent for over the top results. At worst, they are order takers, at best they are good customer service agents, neither will get you past the typical results.
Once you are past the first couple of months the number of move outs increase every month. And the increasing the facility visitors and renters becomes more critical. Just as important, is these extra rentals can reduce the rent up period by a year or even more! For a typical 50,000 sf facility of 420 units, 90% rented = .9 x 420 units = 378 units rented. If you use the average stay of 12 months that means at this 90% full equilibrium point you have 378/12 = 32 move ins and 32 move outs every month. In other words, your job of attracting prospects and converting them to renters never ends. So why not make sure you and your manager has all the tools before the grand opening. The simple answer is this information and education is not often available to the manager and owner.
I am sure you would agree: With the 6 months pre-opening sales & marketing training and assistance and 52 weeks of new learning and implementing of new sales and marketing techniques in your first year you could significantly increase your rentals which would also lead to more rentals every year.
Would you believe or consider:
Training must start by collecting the low hanging fruit. A sales and marketing manual, rental scripts, pre-opening rental program, two dozen rentals must do items, manager training, manager help hot line, along with more sales and self storage basics and you could increase your rentals by 1 a week.
Low Hanging Fruit: 1 extra rental per week for a year =
1 week x 52 weeks x 12 month stay x $150/month rent = $93,600 income/year.
Mid-level sales and marketing task for a second extra rental a week: co marketing with 15 plus local companies, over the top service, off site marketing & visits, social marketing, monthly marketing plan, secret shopping, warm calls, manager training, on site marketing, and much more
Mid-level training and education for a second extra rental per week for the is another $93,000/year.
And if you hire a sales manager to start with and throw in gorilla marketing and more sophisticated sales and marketing concepts for a third extra rental a week, it would be another extra $93,000 income/year.
Just as important is these “extra rentals” can reduce the rent up period by a year or even more.
Will most managers or owners take the extra steps required for these extra rentals? No, they will not even know the extra steps. Do you know the extra steps? Are they possible with the right people, systems and knowledge? Yes!
Garrett Byrd our Storage Authority’s resident expert on manager marketing was working for a multi-unit self storage group as a manager and manager trainer. When his company was building a new 3 story facility in 2016 he was chosen to manage and get the new facility off to a fast start. It did not look easy as another 3-story facility was under construction, just down the road. But he started with pre-opening marketing and continued his marketing every day. He rented an unbelievable 80 units the first month and 80 units the second month. At month 6 the facility was 60 % + rented – Wow. And at the seventh month we hired Garrett!
Will your manager have even close the same results? I do not know. Will they visit (and know how to get referrals) the chamber of commerce, local banks, attorneys, funeral homes, realtors …. or have Santa’s visit during the holidays, beach day at their facility; or will they memorize a great rental script; or take the time to have answers to overcome the 10 self storage objections; or will they hand out candy, flowers, water and coffee to their visitors? Will they even know the critical 25 environmental factors and 100 plus other over the top customer service required to be a premier self storage? Can you list them?
If you and your manager learn the environmental and over the top customer service, and implement best management practices for sales and marketing not only do you get the extra rentals you also can be the price leader for additional income.
When a feasibility study is prepared, they determine the average rental rates of your competition and assume you will rent at the average rental rates. And I have found most new owners actually want to charge less than the average. With our help our franchisees rates will be 10% higher or more than if they set them on their own. This means our services are free. But if you understand you are not in the self storage business and learn how to solve customer’s problems and enhance their experience you can even charge more than 10% higher than the average rates. You can become the premier facility and price leader. Most managers do not know their job is to find out what customer’s problems are, never mind how to solve them in a fashion that builds trust and rent units. See my article Three Rental Rate Myths for more details, Where you can see first hand examples of charging 20% and more than the competition.
For a typical 50,000 sf facility with 378 units rented every 10% increase in rental rates = $68,000/year. Here is the math
378 units – Average rent $150/unit – 10% higher rent
378 units x ($150 x 0.10) x 12 month stay = $68,000
20% higher rental rates = another $68,000/year
30% higher rental rates = another $68,000/year
Can you answer why a customer would pay 10%, 20% or even 30% more to rent at your facility? You need this answer before you start your design. Again, it is a combination of environment, over the top customer service, sales and marketing. It’s about providing the “just right feeling”. The typical renter calls or visits 4- 6 facilities, what makes your facility superior? Your quality, your vault units, your additional unit sizes, your doors are 1 foot wider or higher, your landscaping, you, your manager, your security, your sale office, your sales and marketing, did you notice the customer car or his Boston Red Sox’s shirt, did your manager call a new prospect by name 3 times, did you …………. the list is endless?
I have heard many managers say I want to lower my rates to match the rental rates of the REITS down the street. But do they want to explain to their customers and friends the $19/month rental rate increase in 5 months and $19 rental rate increase in 9 months that the REITS impose? It is much easier and more fun to shine bright, surprise and delight your customers!
If you ask most managers what should be done to rent more units, they are going to tell you reduce the rates. Nothing could be further from the truth. The price is typically 4 to 6 down on the list why renters choose a specific location. So, you need to know how to promote the items ahead of price and overcome price objections.
“Marc, I understand your concern about price and that you want to get the best value for your money. I am sure you can agree with me that Storage Authority has many benefits and services our competition does not have, including the best guarantee in the business and me. If I gave some of my customers a discount I could not provide the services, they expect and deserve. Would you like to get that 10 x 10 in your name? I promise to earn your business everyday” There are several other steps and a couple of hours of training to perfect overcoming the price concern. But in most cases overcoming the price concern is not even needed to rent.
The number one excuse is I do not need it today and this is the simplest one to overcome. Last week I was checking out a possible new facility location and I called a nearby existing facility to see how full they were and their prices. I simple asked if they had a 10’ x 10’ I could rent next week. They had one but could not promise it would be available next week. I said I could always rent a 10” x 15’ and asked if they had any. He said he had two available today. He never asked if I wanted to rent today. For sure this facility is losing well over a hundred thousand dollars a year because their prices are too low and like most facilities they do not have any idea how to rent over the phone. And typically, of many facilities they do not ask for the rental each and every time!
Did you know you will rent more units priced at $149/month than at $143/month? People have been trained that prices have been cut back when the price ends in 9. Did you know you will rent more units at $149 plus tax than the same price of $159 tax included? Did you know you will rent more units at $149 than at $149.00? Did you know you will sell more $12.99 locks if the sign says $17.99 Locks on Sale $12.99? I have been to hundreds of self storages and never seen a lock on sale.
Unfortunately, or fortunately (depending how you look at it) self storage marketing and sales is years behind the hotel industry and the retail industry in general.
If you understand you are in a retail business and not the self storage business you will make more money. If you understand you are in the people business and the sales and marketing business you will make even more money. People do not rent self storage because they want self storage. But they will choose you because you understood them, took the time to discover their problem and desires and helped them resolve them and feel better. As soon as you understand it is not what is between the 4 walls of a storage unit but what is outside the 4 walls you will be on your way to having happy customers willing to pay more for your services.
I recommend you visit 5 self storages and see how many managers show you a unit (half or less I bet.). Call you by name (none). Ask the manger the last time they called back a prospect and asked them if they wanted to rent; the last time they visited the competition to make sure they sent prospects their way when they were full; the last time the competition referred clients to them; the last time they visited the local business in the 5 mile radius; the last time they raised their renters rates, the last time they carried free water out to their renters; how many people are on their newsletter list or how often they send out newsletter?, what is their guarantee?, What percentage of renter buy insurance and go on auto pay?, why they sell the cheap unsafe shank locks? or, how many boxes does it take to move a house? …………the list goes on. Then you will start to have a better understanding of the concepts here. Send us an email and we will send you a check list that will help you understand what you are looking for on your visits.
Call a couple of facilities and let them know you are just getting prices and see if they even try to rent you a unit over the phone.
If these self storages, in businesses for many years, have not figured out how to be premier facilities how is your manager going to figure it out? It takes an experienced team.
A well set up retail office with the right training will provide you an extra $50,000 a year in what I call manager sales.
You have 32 people moving in every month, so the opportunity for add on value keeps repeating itself month after month! At most self storage, most add on sales are close to zero. In fact, most managers are willing to give free stuff like a free lock or dropping the $20 one-time admiration fee or reducing the price at the drop of a hat.
If you consider items locks, boxes & tape, insurance, admin fee a person in the know can add a couple of thousand dollars a month in profits or an extra $25,000 a year and if you stop the unnecessary discounts you have another $25,000 a year
I love customers on auto pay because they save us time (for marketing) Typically only the few who put themselves on auto pay get on auto pay. Even if asked if they want to go on auto pay say no because most yes or no questions naturally end up with as a no. This one is a no brainer. It just takes learning the script and techniques mandatory and one hour of training and the proper lease. Because people stay 2 extra months if they are on auto pay an extra 10 auto pays a month is worth $30,000 a year. As far as I know we are the only one who has this option on the front page of a lease making it easy to present and get a yes at just the right time. And no extra paper work like every other facility. Of course, I had to pay a self storage attorney to set it up to make sure we met the law.
One of my all-time favorites is eliminating the crazy “free month” deal. For our example of 32 new rentals each month at $150 it would be a whopping $4,800 a month or $57,600 giveaway each year. The REITS have to do this because they have $9/hr. managers and this is the only rental tool they have.
A couple of years ago, I was hired for 2 days to visit a self storage to simple confirm they were not doing anything wrong. They were making a great income and they were not looking to make any changes that would create more work for them, like better training the staff or sprucing up the office. In the end to get them to items I knew would make them a ton, I offered to give back my $5,000 fee if they made two changes and if they did not make triple my fee in profits. The first was to eliminate the first month free offer and the second item was to eliminate the big sign out front “units starting at $9/month and change the price of these small unit to a still great below market price of $39/month. In six months, the owner called me back and they were making $8,000 more a month because of the 2 changes.
We have reviewed a lot of first year extra income items, but in the end most if not all are important every year, year after year. If you add them all up they equal several hundred thousand dollars, so of course, it is not very likely that they will all be extra profits. But at least you can understand that they can make you a larger first year income and the ability of renting up twice as fast. And enjoy your business with more profits year after year by building a great team with self storage expertise along with a sales and marketing background.
If you are not ready to do the some of the work yourself and be part of an experienced team, I would not recommend you go it alone. That leaves you one other choice and that is to give your facility over to one of the REITs to manage your facility. I believe strongly once you pay for their fees and add on expenses (and often lower rental rates) you will make less money. If you want to be totally 100% hands off this is a route to consider.
So how do we get to that that 3 million by being prepared. It simple, let’s cut all those additional incomes back to just an extra $100,000 a year income. If we assume you own your business for ten years you have the first Million Dollars. As you may know self storage sell based upon cash flow after expenses. If you have and extra $100,000 in profits and a 5 cap rate your sales value would increase by $100,000/0.05 = $2,000,000.
If your like me and thinking why not aim for $200,000 or $300,000 of extra income give me a call, we think alike!
Storage Authority Franchising is about owning your own hometown self storage business. And having the professional systems and knowledge to assist and guide you. We like to say You are in business for yourself but not by yourself. If you are thinking about self storage you owe it to yourself to contact Garrett at 941-928-1354 or Garrett@StorageAuthority.com to learn more about the Storage Authority Franchise opportunity.
Marc Goodin is President of Storage Authority Franchising. He owns 3 self storages he designed, built and manages. He has been helping others in the self storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answerer your development, marketing, sales and operations questions. His bestselling self storage books are available at Amazon.
You should not base any investment decisions on these examples and ideas. It is strictly for discussions. Many factors will vary significantly based upon any given facility, location, competition, your efforts, experience and time.
This information is not intended as an offer to sell a franchise or the solicitation of an offer to buy a franchise. Certain states regulate the offer and sale of franchises. If you are a resident of one of these states we will not offer or sell you a franchise unless and until we have complied with the applicable presale filing, registration, and disclosure requirements in your state.
In NY, an offering can only be made by a prospectus filed first with the Department of Law of the State of New York. Such filing does not constitute approval by the NY Department of Law. Minnesota Franchise Registration #F7944. If you have any questions, please let us Know