Managing Self Storage How Far is Too Far

Managing Self Storage How Far is Too Far

Homeowner · Melrose, FL · Member since 2013 · 90 posts · 18 votes

I'm taking a cursory look at a Boat and RV storage facility. So far all the numbers look fine and I'm wading through the due diligence process to get some hard data. The only thing I am concerned about is the distance from my home city. The facility is just under 3 hours from the house. Obviously this isn't a terrible drive but if I have to do it too often it's going to get to be a pain in the butt real fast. I'm willing to make a greater number of trips early on while getting the property swapped over but eventually I'd like to limit my visits to once a month or so. With that said, is it practical to manage a facility of this type from a distance? I am able to answer the phone and email documents during the day with no issues but the field visits would have to wait until the weekends. There is an office on site so I could staff it if I had to but obviously it would cost more to operate. I could try to get creative and rent the office out with the caveat that the office staff needs to handle some of the basic operations but I'm afraid it could be difficult to get the right tenant to accept that deal and do a good job with it. Any advice is greatly appreciated. 

Tom

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Real Estate Investor · Grass Valley, CA · Member since 2014 · 124 posts · 85 votes
10y

You may want to also look in Kiosk that can rent units for you. Check out what Open Tech Alliance offers. As I understand it, they aren't cheap to start, but it may make sense for you in the long run. I have no personal experience but have spoken with other owners who've used them with good success. You could work a couple of days a week on-site and let the kiosk do the rest. If you have plenty of camera's then you could keep an eye on things remotely as well.

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  • Investor · Wasilla Alaska · Member since 2014 · 123 posts · 55 votes
    10y

    I would figure in a manager salary in to your numbers for sure.  Then look at that number and ask your self do I want to spend the time driving and signing up tenants for that amount.  My guess is no.  Id find a retired person or some one to meet with the tenants.  3 hours is almost the same as 5 or 6 in my opinion.  

    How big is the facility?  It it a gate code access?  Any storage buildings?

  • Homeowner · Melrose, FL · Member since 2013 · 90 posts · 18 votes
    10y
    Originally posted by @Patrick H.:

    I would figure in a manager salary in to your numbers for sure.  Then look at that number and ask your self do I want to spend the time driving and signing up tenants for that amount.  My guess is no.  Id find a retired person or some one to meet with the tenants.  3 hours is almost the same as 5 or 6 in my opinion.  

    How big is the facility?  It it a gate code access?  Any storage buildings?

    It's roughly 3 acres all paved with 107 parking spaces, 26 covered 81 open. There are also 17 storage units of various sizes a 750 sqft office and a 5000sqft workshop of some kind. It sounds like the workshop is fenced separately from the storage facility and is being used by the current owner as a personal space so if that were rented out it would provide additional income. There is a coded gate for access to the facility and it does appear to have security cameras though I have not visited it yet. I'm still waiting on a P and L from the owner as well as some other basic documents. The area is light industrial adjacent to a boat yard and if the owner is truthful operating at about 98% capacity.

    I see some potential to drive up the income by adding additional covered storage (there is supposedly a waiting list for covered storage). The existing pole barns being used for storage look sound but will require some repairs I think based on the photos and don't appear to be in an ideal location for maximizing the space available. Eventually I think you could demo them and rebuild with better looking, more efficient space. The owner is claiming a net cash flow of $12,300 per month with a operating cost of $2,500 a month though I have no proof of those numbers yet. 

    Tom

  • Investor · Wasilla Alaska · Member since 2014 · 123 posts · 55 votes
    10y

    Ok well that is big enough that I would want a manager close by.  His expenses sound lean, probably isn't figuring any management expense.  Defiantly sounds like the rents need raised if its that full (need to check comps)  Be sure to add in a vacancy factor, it won't always be this good of a self storage market in my opinion.  Also figure in a offsite management cost to pay your self for checking on it and overseeing operations.  

    If he has a management software then great but if not id figure in some for something like Site Link Web based for around 150 a month.  It makes managing soo easy.

    Just be very honest with your self on expenses.  

    Best of luck!

  • Homeowner · Melrose, FL · Member since 2013 · 90 posts · 18 votes
    10y
    Originally posted by @Patrick H.:

    Ok well that is big enough that I would want a manager close by.  His expenses sound lean, probably isn't figuring any management expense.  Defiantly sounds like the rents need raised if its that full (need to check comps)  Be sure to add in a vacancy factor, it won't always be this good of a self storage market in my opinion.  Also figure in a offsite management cost to pay your self for checking on it and overseeing operations.  

    If he has a management software then great but if not id figure in some for something like Site Link Web based for around 150 a month.  It makes managing soo easy.

    Just be very honest with your self on expenses.  

    Best of luck!

    Just got the P and L via email and you are correct that he is managing it himself so those costs aren't included. Based on what I got it appears he's running the whole operation off an excel spreadsheet. He seems to be organized and doing a good job, but definitely some room for improvement as far as automation is concerned. It also appears he's been building the business over the last 5 years and is selling at a peak. He also seems to have a very low delinquency rate as far as non payment is concerned. 

    Tom

  • Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    Every time I've been to once of these for myself or to help others, there's been an onsite manager present, so no appointment was necessary.  If I had to make appointments, I would just move on to the next facility.

    While you could 'manage' the business remotely, the day-to-day operations needs a person onsite at the customer's time table.

  • Real Estate Investor · Grass Valley, CA · Member since 2014 · 124 posts · 85 votes
    10y

    You may want to also look in Kiosk that can rent units for you. Check out what Open Tech Alliance offers. As I understand it, they aren't cheap to start, but it may make sense for you in the long run. I have no personal experience but have spoken with other owners who've used them with good success. You could work a couple of days a week on-site and let the kiosk do the rest. If you have plenty of camera's then you could keep an eye on things remotely as well.

  • Rental Property Investor · Northville, MI · Member since 2015 · 179 posts · 92 votes
    10y

    Tom:

    Congrats on the opportunity.

    Industry standard for expenses in the Self Storage industry are 30% -35%. Now, I know that you are not a "true" self storage facility, but you should use some guidelines. 

    I agree with the other posters, you need an onsite manager who is going to do the day-to-day that the owner is currently doing. I would sit down with the current owner and have him explain what he does on a daily basis, or follow him around for a day. You will learn that he does a lot of stuff. 

    Actually you may need a couple people, one in the office and the others in the yard. I don't know what else is done there on a daily basis. It sounds like a lot more than would go on in a true self storage facility. 

    Good luck!

  • Investor · Fishers, IN · Member since 2012 · 520 posts · 499 votes
    10y

    Hey Tom, 

    Ditto to all the above, and while we're talking about the P & L you received from the seller, if he didn't include the Management (5% of Gross) AND the payroll to run the facility, you need to add that back in.  

    Also, if he isn't including those figures, chances are, he didn't include, or understated his Maintenance and repair, Lawn and landscaping, pest control... all because "I do it myself". 

    This can add up quickly, and as you know, when applying a cap rate, it can drive down the value exponentially - so make sure your P & L doesn't have any gaps, and if so, you need to apply some industry averages or determine what those costs will be going forward. 

    A kiosk doesn't make sense at this property due both the size and the nature of the business. You're looking at approx $15,000 for the kiosk and $250/month for the maintenance fee. The reduction in management hours and ROI on the expense for a facility this size wouldn't be there.

    I would definitely deploy a responsive website from Storedge or The Storage Group that allows someone to rent a unit and pay online through their laptop or smartphone would be a big benefit. 

    Keep us posted.  

  • Investor · Edwardsville, IL · Member since 2015 · 432 posts · 481 votes
    10y
    Here's a thought on having a free manager on duty. Could you offer free rent for a business to use the 750 sq foot office in exchange for oerating your business? Might be a win win for you and another business. I would definitely do some "secret shops" to make sure your potential customers are taken care of profesdionally.
  • Homeowner · Melrose, FL · Member since 2013 · 90 posts · 18 votes
    10y
    I've been in contact with the owner and he is pretty set on his price which does not figure in the expenses we've been discussing. He insists that you can have a retiree run it for a few hundred dollars a week as long as I give them a space to park their RV. He may be right, but I can't rely on that so I have to figure paying a full time manager. Additionally his price is based on the highest grossing year from the past 5 years which to me seems very optimistic. If you average the last 5 years of gross income, you come out with about half of last years income. So it seems he's built the business up to a peak and getting out at the top. Great idea for him, bad idea for me. I'm going to keep an eye on the price and see where he goes with it. I can't imagine it selling as it's currently listed. Tom
  • Rental Property Investor · Malvern, PA · Member since 2015 · 82 posts · 28 votes
    10y

    Hey @Tom Scott, I'm curious -- did you ever get any further with this property? Seems like the owner was being overly optimistic with his price, but it also seems like there was some major upside with this property.

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