How to Add Value in Self Storage? How to Differentiate Against the Competition?

With so many people interested in buying or building self storage facilities, how do you find one, and add value to a facility? How do you differentiate from the competition? Clair Hoover, an experienced operator with over 20 years managing self storage facilities shares some golden tips.

You can read this entire interview here: https://bit.ly/3vv9eYq

The cap rates are very compressed for self storage, how do you go about purchasing them nowadays?

You do what everybody has had to do in tight times and in every part of real estate, you end up looking at more properties and bidding on less. A year ago, for every 20 properties we looked at, we would put an offer on one. I’m guessing right now it’s closer to 100 properties that we look at before we find one that we think to even barely buy. It’s a challenging time. I think patience is part of it. But also we want to keep growing. So we keep sorting through every haystack we can find, trying to find some bargain buys.

What are some value add methods for self storage facilities, since you have so much experience there.

When we buy a property we like to see what we call the triple play. We like to see upside on rate management, we like to see upside on occupancy, and we like to see upside on expansion opportunities. We will settle for two out of three, but we rarely would buy something that doesn’t have those opportunities available.

The biggest mistake we see today would be under-managing rate management, there are so many opportunities there, you will actually find people in self storage who brag about 100% occupancy. They’ll brag about the fact that they have the lowest price option in their market. Think through the math on what I just said and what they’re laying on the table. I love meeting people like that I love making an offer on their property, a lot of upside on rate management.

Another one is, a lot of people are missing admin fees, it’s become customary, in our markets at least, to be charging admin fees. It covers some of your costs to put a client in and it’s accepted by the market. So again, you’re just letting money on the table. And you mentioned cap rates, when you started talking about $2,000 a year or even 10,000 in admin fees, you take out a five or even a four percent cap in some markets, that’s serious cash being left on the table by not maximizing that.

The other two other upsides I mentioned already were occupancy. If you’re low occupancy, I would invest in marketing, you’ve to fill that facility up, that’s dead dollars on the table. The last one, a lot of people say is not available to them, but it often is, and that’s expansion capability. If you’re on a five acre parcel, and it’s maxed out, you’re not thinking outside the box, there has to be some land within a mile or two of you somewhere that you could add more storage to and you probably don’t need to increase your labor costs. You can probably run both facilities out of one office if needed.

Another one is tenant insurance. If you’re not selling tenant insurance, there’s a good chance your tenants aren’t covered. And it’s not a matter of if, it’s a matter of when you’re going to have an issue whether it be a fire, or a flood, or wind damage, something’s going to hurt your tenants belongings.

How do you differentiate yourself from other facilities in order to increase your occupancy?

It can be different in different markets. I would say automation today is probably the best way to differentiate yourself. You’ve to be one of the strongest digital marketers in your market. If you're not, you're probably alienating anyone under the age of 40. And quite a few of us over 40 are going to write you off.

Clair Hoover

clairhoover@comcast.net

www.freedomstoragemanagement.com

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