If you are like most self storage investors, you got into the self storage industry to create passive wealth, not deal with the day to day management of a business. Self storage in unique in the commercial real estate industry as it is both an investment AND an operating business.
The business demands time and attention to give a strong return on investment. Whether you want to free your time to chase more deals or relax on a beach, we suggest hiring a self storage management company (like us!)
If you are like most of our customers, you have some questions before you are ready to give a management company the keys to the kingdom. We get it. Here are some things to think through before you decide on hiring a self storage management company.
1. Who should you partner with?
There are basically three options in regards to self-storage management companies: REIT, Private Storage Management Company, or Boutique Self Storage Management Company.
To hire a REIT, your store has to meet specific criteria. It will be integrated into a network of hundreds of facilities very quickly. The operating systems, marketing campaigns, sales programs, and facility reporting come pre-installed. Your store will be re-branded (at your expense) to the REIT name and identity. If you decide to cancel management at any time, you need to re-brand back to your original name. A REIT management company may choose to purchase your property when you decide to sell.
A private management company is privately owned and may have 5 - 200 properties. Private management companies may or may not make you rebrand your property. There is less consistency among private management companies, so be sure to do your homework to make sure they are a good fit.
A boutique management company (like Atomic), is a true partner in your company. Boutique companies believe it is their obligation to run your storage business to the best of their ability and take care of your asset. Boutique companies give their customers care and attention and do not just see them as a number on a spreadsheet. They focus on the small things that matter to yield the largest benefits for their customer. They focus on the bottom line just as much as the top.
At the end of the day, it all comes down to who you feel comfortable with? What are your goals for your business?
2. What will they do for you?
When hiring a company to manage your self storage investment, specifics matter. How the management company you interview defines the word “management”? Let’s start with general self-storage operations.
Where is the management company located?
What is their experience?
Who is your company contact?
How often do you communicate with this contact?
How often will they conduct a site visit to your property?
What happens during a site visit?
How do they communicate with the facility manager?
Does the company institute policy and procedures?
Do they have a manager hiring system?
Is the facility manager an employee of the facility or the management company?
How is training conducted?
Are you required to change your self-storage management software?
Who handles the accounting?
Does this include paying bills? If so, what is the dollar limit for management company approval?
What financial reports will you receive and how often?
Do they install a preventative maintenance schedule?
How are vendors chosen?
3. What is their marketing plan? How will they close leads and rent units?
As competition heats up in our industry, you need to know how your self storage management company plans to take on this challenge.
Do they have a marketing plan?
What kind of marketing plan will they institute?
What is the cost? What kind of campaigns are included?
Is there an internet component to this marketing plan?
What does the internet component consist of: website, social media, pay per click, aggregators, etc?
Do they implement any local, ground-based marketing?
Will they market to local businesses such as apartment complexes, realtors, moving companies, etc?
Will they install a referral program?
What kind of rental specials are offered in the marketing campaigns?
Can you review example materials?
How often does the local marketing take place?
Is there a call to action in the marketing materials?
What kind of reporting will you receive in regards to marketing?
How is marketing tracked? What is the Return on Investment for each campaign?
Most self-storage managers are not natural marketers so training this discipline is critical. The answers to these questions will give you a good idea of the kind of exposure your investment will receive in your local market.
Marketing is integral in driving potential customers to your facility. The sales program will determine how many of those potential customers will turn into actual customers of your facility. The facility managers must be able to close these leads to make a difference.
What kind of sales training will be provided?
Who conducts this training and through what medium?
Are sales scripts provided to the managers? How are potential customers tracked?
What kind of specials or discounts will be offered?
What latitude do the facility managers have in regard to pricing and discounts?
Is some type of CRM software used?
How often do the facility managers follow up with potential customers?
Is there some type of bonus program for the facility managers?
As with marketing, most self-storage managers will need some sales training. It’s vitally important that any management company you choose takes the time to implement this type of training. Customers have less patience than ever, so the best sales plan will win.
4. How is the money managed?
Next, you need to start asking questions on financial management. Request a budget projection for your facility. Review it and then ask yourself if the projection seems reasonable?
What kind of expenses are in the projection?
Do your expenses increase or decrease?
Do the expenses for line items such as payroll, utilities, maintenance, office supplies, property insurance, taxes, and management seem reasonable.
What is the strategy for revenue management?
How often are street rates adjusted?
Are there any expectations of street rate decreases?
How often do existing customers receive rate increases and what is the percentage of increase?
Is the revenue management system for existing customers automatic?
Is the management company implementing fees such as administrative fees?
Will the management company promote ancillary income such as merchandise, box sales, truck rentals, and tenant insurance?
What vendors do they use for ancillary items?
What is the process for delinquent customers?
What is the delinquency schedule that will be implemented?
What do they consider to be an acceptable level of delinquency at your facility?
What is the lien sale process? Are they familiar with the lien laws in your state? How are lien sales handled?
Will the management company conduct an audit? If so, how often?
The financial viability of your self-storage facility is paramount. Don’t leave this to chance and ask as many questions as you need to feel comfortable.
Finally, it’s time to talk about communication. Communication is a major factor in how well the relationship will work with your self storage management company. In addition, a regular reporting schedule will help keep you informed on the health of your self-storage facility. Most self storage management companies will provide you a monthly report on your facility. Typically, this will be comprised of a facility summary, financials, bank reconciliation, software reports, etc. While you are completing your management company research ask the following questions.
What kind of reporting does the management company provide?
How often will you receive it?
Who authors the report?
If you have a question, who do you contact?
When is that contact available?
Do you prefer to email questions or make a phone call?
How quickly should you expect a response?
Are there any additional meetings, conference calls, or other types of reports you should expect?
Understanding how the communication process works will directly impact the relationship you have with your management company. If regular meetings are required to increase the comfort level between you and your management company, then be upfront with that necessity in the beginning.
You will need to feel comfortable hiring a self storage management company and believe they have your best interest at heart. This will allow you to step back and let them do their job so you do what matters most to you.
The costs related to hiring a self-storage management company are fairly homogenous across the industry. The monthly price is normally a set monthly fee or a percentage of gross revenue. The choice is going to come down to something more intangible than just financial compensation.
One of the most important parts of hiring a self-storage management company is finding a company that meets your expectation level. Your comfort level with the management company you choose will be a determining factor in regard to the length and success of the overall relationship.