We are sometimes contacted by a storage owner to conduct a business review of their self storage operation. Often, they are very well occupied and feel they have limited means to grow income beyond rent increases. The catalyst for this type of call can be due to the need to refinance their loan or have discovered because their income has not kept pace with expenses, they are receiving a smaller and smaller piece of the pie.
We review their records and financial statements to analyze the various sources and amounts of income they produce. It's not unusual to find they are not taking advantage of the income generating opportunities that are readily available to them.
The following are a list of viable income generating options that any operator can take advantage of if they focus on the task and analyze their current results to establish a goal for new income. Once they have a goal, it’s a matter of developing a plan to put this into action.
Potential Sources of Hidden Income
- Board Rates (Street Rates): Make a chart of all your competitors then add their rates for each size. Most are available online now. Or, you can look into data providers that provide these "street rates" in realtime. Now, add your rates then evaluate yours based on supply and demand. If you have virtually zero 10x10’s vacant, they may be ripe for a rate increase at or above the competition. If you have significant vacancy, consider short term specials or lower rates.
If you could increase rates an average of $10 per on 100 units, you have added potential new income of $12,000 annually!
Unit Conversions: Sometimes we simply have too many of a certain size and too few of others based on our demand. It’s very easy to convert (2) side-by-side 5x10 into a double door 10x10, etc. If that size is in higher demand, you will quickly rent the newly converted unit generating new income.
Late Fees: Review the storage lien law to confirm you are charging the most you are allowed. Many states have amended their lien laws which usually now define the allowable charge. In many states it is the greater of $20 or 20%. If you were charging old school late fees of say $10 you just doubled that income. Further, enforce late fees. You cannot play favorites.
Administration Fee (Make Ready Fee): Again, check what your competitors are charging and consider increasing yours. Many REITS charge $25! It's rare anyone complains about an administration fee.
Customer Storage Insurance: There are essentially two options available of which you have to choose the best fit; true insurance or a protection plan. And you add a layer of protection between you (the owner) and your customer. Plus, its much better to respond to a reported issue saying, “I see you have insurance, let me get the claims department number for you,” as opposed to, “We are not responsible.” It's important to note you cannot force someone to purchase your insurance program but you can require proof of insurance. Many will opt for the ease and convenience of taking yours.
A 400 unit property can generate $5,000 plus annually in fees paid to you.
- Merchandise and Lock Sales: At minimum, you should sell quality pad locks and remind customers they need to lock their space at the time of rental. Simply say we sell these quality locks for $XX and slide it across the counter. If they don’t slide it back, add it on to their account. The standard markup is 100%.
You should be able to sell a lock to at least 40% or more of new rentals.
Moving supplies - boxes, mattress covers, tape and dispensers, etc. - are also marked up 100% and should be available for sale. These sell best when they are actively mentioned rather than just passively available. We find the majority of our sales are to non-tenants, especially if there is a “We Sell Boxes” sign out front. This is a great opportunity to make a good impression on people who may someday rent from you or refer a friend.
Expenses: While not technically income, any savings here directly increases the bottom line. Typical opportunity here could be in lower cost phone service, purchasing electric and gas from a competitor supplier, converting both interior and exterior lighting to LED (70% more efficient than fluorescent), controlling heat and cooling temperatures in a climate controlled building, etc.
Misc.: There are various other options that can be considered such as truck rentals, propane sales, dump stations and wash facilities if your boat and RV storage is a significant part of your business. The viability of these primarily depend upon your location and market.