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Gabfocus Session | New to the Industry

New to the Industry: A beginner’s guide to self storage

Coming into self storage fresh? We're here to help! There's a lot to learn, but we'll highlight the important parts of the industry, running a facility, and the most common challenges for new owners. AND, we were joined by Lindsey Self Storage's John Lindsey as he shares insights from the industry and his new book, The Sexy Side of Self-Storage: an Insider's Guide to a Necessary Commodity.

Featured Speakers: John C. Lindsey & Adam Armstrong
Moderators: Melissa Huff & Tommy Nguyen

Category: Operations
Focus: Owners & Investors
Aired: July 8, 2021
Duration: 1:13:14

Overview

If you don't have time to watch the whole Session, here are some of our favorite parts:

  • At 5:50, John and Adam break down why self storage is different from so many other industries and why it's the most flexible real estate investment
  • At 7:40, John shares how the industry has changed in the last 15 years, how it's developed into a Class A Asset
  • At 13:45, they share the best ways to learn about the industry and remind us that "you always have to keep your finger on the pulse"
  • At 17:10, John tells us how to evaluate a self storage investment and how to align a self storage investment with your goals. Adam tells us why he took the plunge and the boxes an investment has to check for him
  • At 20:00, our panelists remind us that "you don't know, what you don't know" and why someone new to the industry should buy an existing facility before they build a new one
  • At 27:45, John and Adam break down what all is involved in a successful self storage operation and where the biggest liabilities are
  • At 34;50, they share their tips for finding the right technology for your facility (hint: ask operators you respect)
  • At 41:15, Adam shares what the first year of running a facility looks like, and John shares what to expect in the long-term
  • At 46:05, John discusses the smallest viable facility and his take on oversaturation in major markets
  • At 52:00, we discuss John's book, The Sexy Side of Self Storage, what it's about, why he wrote it, and who he wrote it for
  • At 1:07:15, our panelists answer the Question of the Week

Question of the Week

We asked our experts: What are the biggest mistakes people new to the industry make?

"Underestimating the financial expentiture of owning and operating a self storage facility. It is more costly than you could ever budget for. I'm not saying it's not financially feasbile, but you'll see these pretty Proforma's done by brokers that only account for the bare bones. There's a lot you have to take into account. The number one piece of advice I'd giving somone looking at buying a new property, especially in this day an age, watch for propery tax increases that will go in when you close your propery. It's different in every state and county. We've seen it go up as much as 4x times the prior value in one day. So please be aware of that. Do your homework. And get ready to spend more than you ever thought, running a site." - John C. Lindsey
"Know thy state lien laws. Please! A lot of people think they can come an interpret laws themselves. You can get into a lot of danger from the way you interpret it. Spend the extra money to consult with a self storage attorney who has experience. Find the self storage guys and gals and get them in your corner. Spend the money. And do it right." - Adam Armstrong

Gabfocus Takeaway

Not only is self storage one of the most flexible, lucrative real estate assets, but also it's an industry full of helpful, good people. It's easy to get started, but takes a lifetime to master. Like all fields, there's an endless amount to learn and experience. Time and time again, our panelists reminded us that taking your time, doing your due diligence, and working with self storage specialists is essential. Self storage isn't a "get-rich-quick" investment, it's a "do-it-the-right-way" business. Those who work hard to build something stable will outlast those who are moving too fast and cutting corners.

What are Gabfocus Sessions?

Gabfocus Sessions are virtual workshops for self storage owners, managers, and operators. Brought to you by the team behind Gabfest: StoragePug and Affordable Storage Guys Management.

Each session features hand-picked industry pros who will dive deep into relevant topics surrounding our industry, share best practices, and explore trends in the market. It's our hope that these sessions help you navigate your self storage business better during these uncertain times.

Want to learn more about self storage? Join us on select Thursdays for Gabfocus.

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Questions Answered in this Session

  1. What makes self storage different from other industries?
  2. How has the industry changed in the last 15 years? Where is it going?
  3. There’s a lot to learn about the industry. Where do I start?
  4. How do I decide if investing in self storage is good for me?
  5. Should I buy an existing facility or build a new one?
  6. What are the most important marketing strategies for self storage?
  7. What all is involved in the operations of a self storage facility?
  8. What are the major areas to learn about? What are the big pitfalls?
  9. How do you find and decide the right technology for your facility?
  10. How involved should I expect to be in my facility? How do you find the right team?
  11. Do I need to be a self storage expert to run a facility?
  12. What will the first year of owning a facility look like? The first 5?
  13. What does it look like to grow a self storage business?
  14. What's the smallest facility that would be viable?
  15. What are your thoughts on the oversaturation we are seeing in different areas?
  16. Tell us about the book, why you wrote it, and who it’s for?
  17. What are the biggest mistakes people new to the industry make?

Live Poll Results: What tools are most important to provide to your employees?

poll-manager-skills

 

 

Meet your speakers

john-lindsey

John C. Lindsey

Lindsey Self Storage Group

Website: https://lindseyselfstoragegroup.com/
Email: john@lindseyselfstoragegroup.com
adam-armstrong

Adam Armstrong

A&G Storage Solutions

Website: https://www.agstoragesolutions.com/
Email: Info@agstoragesolutions.com

Got questions or comments for the panelists?

Our panelists will be happy to answer any questions you have. We hope you enjoyed this Gabfest Session. Talk soon!

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Resources from this session

Awesome Quotes

“Once your operation is in place, you can become more dynamic with your pricing, but that requires data. You need some method of being able to record the data that you need to know whether your price is in the right place - whether you need to move it up or start giving some concessions.” - Warren Lieberman
“I never want to downplay to what someone else is doing. I'm better than they are, then I'm going to be worth a higher price. That's what value is. If you go out to a restaurant and get really good service, would you go back? Yes! What if it was pricier? You'd still go back because you got better service and a better product.” - Jim Mooney
"It's good to be informed on your competition. I don't want to ignore them, but I don't want to respond too strongly to them either." - Warren Lieberman
"We did a survey of 10,000 facilities on their pricing. We found out that two-thirds of those operators didn't change the price of a single unit of the course of a month." - Warren Lieberman
“Rate increases and value pricing are the number one ways to grow your revenue.” - Jim Mooney
"Tenants in more convenient units tend to be less price sensitive." - Warren Lieberman
"The size of the unit is only one aspect of what people are willing to pay for." - Warren Lieberman

Highlights

Foundational marketing strategies to have in place - whether leasing up or stabilized:

  • Website
  • Set up listings (Yelp, Google My Business, Apple Maps)
  • Social Media
  • Establish Local Partnerships

Lease up marketing strategies:

  • Lead Generating Strategies (like digital ads)
  • Aggregators (Sparefoot, Storagefront, etc.)
  • Awareness Campaigns (like billboards, flyers, and sponsorships)

Your average customer value
Find the average stay length of all tenants. Next take your economic occupancy and divide by how many units you have. That will tell you what the average customer pays.

Multiply the average length of stay by what the average customer pays, and that's the average value of a customer.

For example, if a customer stays for 12 months and pays $100 per month, then their value is $1,200.

Your average lead value

Figure out your closing rate (or conversion rate) i.e. how many leads do you turn into tenants? Multiply that by your average customer lifetime value to figure out what your leads are worth. 

Pro Tip: see which lead sources are converting the best. It may be that certain sources have a higher conversion rate, so those leads are worth more to you than a source that barely converts.

Typical Lease-up timeline

According to our panelists, it's typical to see a 3-4% increase each month, putting your facility at 36% after the first year, and 72% after the second.

Alternately, you can look at your lease up goals through the lens of your units, aiming for 20 units rented per month.

For Nick and StorageMax, they pro forma their economic occupancy at 85% with their sweet spot at 92%.

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