Author Topic: Advice/experience with renting storage units?  (Read 2718 times)

FrugalInTheBigSky

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Advice/experience with renting storage units?
« on: May 23, 2015, 09:04:38 AM »
We are considering purchasing an investment property. It has a few acres, a rental house and 33 small storage units. We live in a rural, low income area, so we are aware of the challenges of our community, but the rental market has always been strong. We have had good experiences so far as landlords. The property is pretty cheap, but in rough shape, has been sitting vacant.

Anyone have experience with renting storage units? Are there resources/posts you would recommend?

Although we are resourceful and can do nearly all repairs ourselves, we get stuck sometimes with the decision of leave the money in the market and relax, or take on the trouble/headache of rentals but get real cash flow from it.

I can include all the financial details if that helps...

Thanks in advance for your thoughts.

Another Reader

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Re: Advice/experience with renting storage units?
« Reply #1 on: May 23, 2015, 09:12:06 AM »
My first question is why is it vacant?  What's the market like for self storage units in your area?  No point in buying a business (these are businesses more than they are real estate) if there is no demand for the product.

There are industry publications for owners of self-storage units.  It might be helpful to read those to learn more about the self-storage business.  IIRC, the Appraisal Institute published a book on valuing self storage properties.

FrugalInTheBigSky

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Re: Advice/experience with renting storage units?
« Reply #2 on: May 23, 2015, 09:52:22 AM »
The property was split in a divorce, the spouse that got it moved out of state. It has been on the market since, but given that it is commercial property, a regular homeowner cannot get conventional financing. The down is too much for the average family around here. The price has dropped significantly so it is more likely to move.

I am asking around to get the idea of demand, but closer to nearby towns, new storage units sprout like weeds. Lots of growth.

ThatGuy

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Re: Advice/experience with renting storage units?
« Reply #3 on: May 23, 2015, 09:17:35 PM »
I don't know if this info will help you or not but here you go.

http://www.biggerpockets.com/forums/32/topics/25814-self-storage-units-as-investments?page=1


Another Reader

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Re: Advice/experience with renting storage units?
« Reply #4 on: May 23, 2015, 09:40:12 PM »
If a lot of better located new competition is coming on line, you need to be very careful estimating rents and occupancy.  The name brand units with an internet based rental process will drive prices down if they come to your area. 

What does your proposed financing look like?  Is someone willing to lend on a vacant property?

lakemom

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Re: Advice/experience with renting storage units?
« Reply #5 on: May 24, 2015, 10:40:17 AM »
In a small venue this can be a decent side income.  Make sure the units are all sound and factor in all deferred maintenance into the offer.  In a small town don't worry about online competition because our experience is that location is the key factor.  If you buy the units and rehab them and maintain them well they will provide a steady stream of income.  You need to be hard hearted and willing to sell off unperforming units regularly (thoroughly check your states laws).  Also (this may be too small of a place but) check into commercial lenders who specialize in self-storage.  You may be able to line up 100% of the purchase price financing and possibly even some rehab funds.  Two sources to search on are Inside Self Storage and the Self Storage Association.  Also, if its a few acres and there is local demand you will be able to develop further units and increase your income.  The basics (phone, web, yellow pages) stay the same regardless of how many units you have.  I do offer online payments through paypal but do not require any kind of credit card info to be housed on my website or at my facility.

We own a 105 unit facility and it provides us with a nice side income and I only work (office hours) 10 hours per week with a bit of phone time throughout the week and dh and I have maintenance days periodically where we will spend an afternoon working about the place.  We've found that for as many of our potential clients we "lose" to the bells and whistles place across the street, we gain and equal number of folks who HATE to put their personal info online (including a credit card on file) and will use our facility instead.  The one thing having competition move close by is that it has kept my income from going up in the last 3 years BUT his facility is now finished (no more buildable land) and rented up so we'll all be raising rents soon. 

FrugalInTheBigSky

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Re: Advice/experience with renting storage units?
« Reply #6 on: May 25, 2015, 02:47:51 PM »
Thank you for the input. This is the kind of day to day management information we are looking for. The rural and depressed nature of where we live makes the corporate/online type of rentals not really an issue. Right now we are stuck on whether we can get the purpose price low enough for this run down place, and whether managing it will be more headache than we imagined.

The lender doesn't care if it is vacant. But it is 30% down because it is commercial. There will be a high cost to an appraisal due to the commercial nature and likely not a lot of comps.

Managing the payment side of things, dealing with keys, unpaid rent, screening (or not) the renters-- those are the things I am wondering about. Do tenants tend to stay for a long time? Up to 33 individual parties is a lot different than one house renter on a year long lease. Do you get concerned about hazardous or nasty things in the storage units? Do you have them pay a security or first and last? Being a mustachian, we aren't familiar with how the storage unit world works!

lakemom

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Re: Advice/experience with renting storage units?
« Reply #7 on: May 28, 2015, 01:29:36 PM »
Managing the payment side of things, dealing with keys, unpaid rent, screening (or not) the renters-- those are the things I am wondering about. Do tenants tend to stay for a long time? Up to 33 individual parties is a lot different than one house renter on a year long lease. Do you get concerned about hazardous or nasty things in the storage units? Do you have them pay a security or first and last? Being a mustachian, we aren't familiar with how the storage unit world works!

We have 105 units and an office on-site.  I have office hours 3 days per week (Saturday morning a must but I close at noon on the dot) for a total of about 7 hours actually in the office.  There is an inexpensive software (quikstor) that will do everything you need to do and then some for a 33 unit building.  I have tenants that have been with me for a decade or more (several of these), others who rent more than one unit.  You do have to be aware of gross things etc but its in the lease and I have a prominent sign in the office listing what is not allow (nothing flammable, perishable, liquid).  I've had notices from various police departments when there have been things (mostly explosives) found in other areas on what to be alert for but we've never had a problem at our facility nor in our town.  I have all my payments due on the first of the month to simplify my paperwork and prorate on move-in/move-out.  Its a very straightforward business and generally quite easy to run.  You just have to have a hard enough heart (and you develop one pretty fast) to sell off nonperforming units.  And its NOT like the storage wars reality show either!  I love $200-500 on every unit I sell off but we deduct that on our taxes.  I sell about 6 per year.