All Forum Posts by: Terry Campbell

@michael bishop, some of the ways to drive up NOI in self storage is through inceasing rents, selling ancillaries such as tenant insurance, packing and moving supplies, using technology to become unmanned, and plain old revenue management....for example, if you come in Monday morning and find that you have one 10x10 available, that unit may cost 10% more than it normally does because of supply and demand. Sometimes people fixate on being fully occupied and if you are, you aren't charging enough! You never want to be 100% occupied because that's like being a convenience store with no bread or milk. You can, in some states, add solar to the roof. Massachusetts is one of the best states to do thIs because of tax incentives and subsidies and that rates that you can sell the electricity. If you have space, you rent out office space for meeting, have mailbox services, rent land to cell towers, etc.. if you have right of ways or easements that you can't build on, you can place portable units or have parking for boats/RV/vehicles. Lots of creative ways to drive up the NOI. Also, you can add truck rental for extra income.

Some of the disadvantages are that you could possibly get stuck with a unit full of tires, or some other undesirable items that you have to get rid of. Competition that moves in and builds in your market when there isn't enough market to support you both. Having to do an auction is a pain. Storage wars makes it seems glamorous and that yo can make big bucks, but, that sort of thing rarely happens in real life. In fact, before that show came out, most auctions didn't result in the debt for the forclosed unit being covered. At one point, there was a lot of meth labs being operated in self storage units but that has sort of went away for the most part. Illegal activity can happen like it does in MF, but if you have cameras set up, it can help to discourage it. 

Lots more positive than negative!

I can only speak about self storage, but after 23 years in the industry, as a supplier to the industry as well as an owner, I can say that it is a great business. It is less expense to build and operate as other forms of real estate based businesses and you don't have the normal 'problems' that you have with MF and rents properties. The increase in value that you can create is great. Personally I like the model where you grow the equity, do a non-recourse refi with a cash-out, which isn't taxable and then use the money to invest in another project while still owning the original asset which will keep covering the payment. A lot of people have moved over from MF to SS for many reasons. Low overhead, low maintenance, very few, if any, employees, good returns.....great business.

Adam, you are correct that they should do a 3rd party feasibility study, but sadly enough, there are still banks that will do a loan on a self storage without it just for the sake of making a loan. I don't understand it....thanks not good for the industry. We definatley won't do one without a study by an industry expect and I wold advise anyone, regardless of your experience, to get that third party study. 

More good points by Cody. I'm also possibly going to build a self storage in another state that I live in that will be unmanned. That is a different BUSINESS model than the normal self storage model, but is becoming more popular because your single largest expense after property tax is the cost of the manager/management. Some markets/locations may not work as well as others for this option. There are great software options that allow this as well as kiosks and other hardware, but the smart phone is becoming the kiosk in your pocket.

Tom has some good points.

Self storage originally was used years ago as a land bank until there was a better and higher use. Fast forward to today and it is a business that creates huge value based on its NOI , not necessarily the value of the property, although many times they go hand-in-hand. Self storage operators use revenue management techniques that maximize the NOI and value, that has of the last couple of years, compressed rates to sub five in some markets. Make no mistake. It is a business, but it needs a good location (real estate) to be a successful as possible.

 I have watched the industry change over the last 23 years to be much more sophisticated. I have been a partner in a large facility that is now owned by a large real estate investment trust. I am involved in one now that we are building on some very valuable real estate, but that is because that is where the market is. It will be ran like a business and will create huge value based on that income not necessarily because of the value of the real estate,  but you can see by this example that the real estate does play hand-in-hand as to why will be valuable. 

 Someone in this thread mentioned SBA loans. This asset class was not able to be financed with SBA loans until late 2010, so that would indicate that the federal government started recognizing it as a business and not just a passive real estate play.  I am passionate about this industry and sharing knowledge as well as helping people get into this industry. There are also other folks on this site that do that same and I work with them as well.  Obviously, I can't put a link to my website on here (although someone at another bank is getting a mention in this thread) .

@scarlett mulligan, As far as 3rd party consultants, I prefer to give those on a one to one basis as I don't want to alienate any of them as I do a lot of referrals with most of them. It usually depends on the locations as to whom I recommend. 

There is a shortage in many places for boat and Rv storage. This can be a very good business but you need to get land at a reasonable price to work best. Unlike self storage , your market area will be larger because people are willing to drive several miles to store their toys. The property should be several acres and if you are going to build structures, you will need to allow adequate drive space between buildings. For example if you'd be building fully enclosed buildings you will need to have drive aisles of at least 125% of the width of the largest building on the drive for turning radius. If you are building canopies you can have drive aisles that aren't as wide because you can angle the parking under these structures. Depending on the size of the facility you may be able to operate it as an unmanned facility using technology.

@kenjernigan, if you are doing a single level conversion, the ballpark costs for the doors, hallways, partitions and security mesh, will be around $8-10 per sf and a rough rule of thumb for abnormal conversion without any major MEP, roof, structure, etc will be roughly $18-22 per sf. If you're planning to do this in Wilmington I'd love to learn more about it since that is my home market. I always want to keep my finger on the pulse at home.

I would suggest a feasibility study done by a self storage feasibility expert. They understand the industry and what you need to know. Things such as what the current competition is, how many sf the market can bear, how many sf you should build, what your rates should be, how fast your lease up should be, how much climate, non-climate, boat/Rv etc. also, be sure you you consider early on how to manage the property. You need to have the right person operating the facility. I've seen way too many people pour millions into a facility and then hand the keys over to someone you wouldn't give your car keys to.

I can tel you that the states that have the most activity are Texas, Arizona, Florida and the mid-Atlantic. Keep in mind that self storage is a micro market business. Usually 3-5 miles. You can be in a state or city that is considered to be overbuilt and still find pockets within that area that can use storage. If you are buying an existing business, look for those that under managed and haven't had revenue management In place and you may find what you are looking for.