19 Feb 2020
It’s easy to categorize self storage as just another piece of real estate. But it simply isn’t true. Self storage is a business. In this article, I try to differentiate self storage from traditional real estate to help others see self storage in a new light.
Before my partner and I created our self storage company and sought to acquire our first facilities, we poured over industry data, attended trade shows, examined local markets and analyzed the potential competition.
My theory was simple: self storage isn’t a real estate asset; self storage is a business.
This theory proved to be extremely beneficial in that it allowed us to look at the self storage business through a much different lens than what most others were doing.
We learned that many get into self storage to create passive income from the real estate, not realizing they’re missing out on 50 percent (or more) of the opportunity by focusing on their customers.
We believed we could purchase a decent self storage facility, even if it was underperforming, and revive the business aspects.
If you’re thinking about getting started in the self storage business, or maybe you’ve already started and aren’t getting the results you’d hoped for, this article will help you to adjust your mindset on how to run your self storage business.
Viewing self storage as a business opposed to a traditional real estate asset became our working strategy and our foundation for how we made all our decisions.
We knew if the theory proved true, our efforts would be rewarded. Our goal was to prove that the financial performance of a real estate asset could be greatly improved through changes in operation, marketing, and management.
Contrary to traditional real estate assets, self storage performs more like a retail store. You have a store in which you sell products. Customers come in and out daily and have unique needs and circumstances.
In the potential self storage markets we studied, most of the product didn’t meet the needs of the client base. Over time, the customers had changed, but the businesses hadn’t. As we looked more closely at the industry, our focus was on the customer, product, and competition.
Too often, owners and managers look at square-footage (physical occupancy) as a gauge of facility success.
After all, the primary goal isn’t to have high occupancy but to achieve high revenue.
None of our potential acquisitions were similar in terms of traditional real estate metrics.
By looking at the room to improve and revenue potential, you’ll find a business that can lead to great success.
This article was provided to RadiusPlus by AJ Osborne and CashFlow2Freedom. Photo by Bram Naus on Unsplash
