Tired of the juggling act? Owning a self-storage facility comes with its own set of challenges, and deciding between on-site and remote management is a big one. In this episode, we delve deep into both options, exploring the pros and cons of each. Tune in and learn what’s the best solution for you based on your specific needs. Whether you end up going on-site or remote, you’re going to take away a lot from this episode!

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Self-Storage Facility Management: On-Site Vs. Remote

Remote Management Vs. Onsite Management

I was going to go over some management stuff because I was talking to another realtor about another property we were thinking about listing. He was talking about the difference between remote management versus onsite management. One of the properties we’re thinking about selling is 25,000 square feet. He was asking, “Do you manage this property on-site or do you have remote management?” We do remote management for all facilities.

The question that I was thinking about, and it came up in the conversation, was, “Can you afford to have an onsite manager? For what type of properties can you really afford it?” An onsite manager is different from a boots-the-ground person. An onsite manager is when you’re driving up to the facility and then somebody’s there if you have any questions. This was like, “ When can you afford an onsite manager and when can you not?”

In the last couple of years, this whole concept of contactless came into play. Contactless was not even thought of until COVID happened. We didn’t have the word contactless in our vocabulary. I always said virtual or electronic. Remote wasn’t even a word in the industry as well. We had storage facilities in our little area around Peachtree City. I managed all six of them remotely. I sat at my house and managed the facilities all right together with Bonnie who has been with us for a long time. Either I would go out and do the work or, eventually, we hired one boots-on-the-ground person for one facility. This concept of being remote or going online and booking units and stuff is a new concept even for the bigger players.

 

I remember specifically during COVID, a lot of storage facilities had to shut down. You guys tell me about this if you guys have ever done this. The only way that you could rent a unit is if you went to the facility and signed the contract, which is weird. Storage is honestly a very slow industry. It wasn’t up to par. It wasn’t up to virtual standards and stuff. The whole concept of being virtual was a new thing.

When we bought our first facility in 2016, I got storEDGE. storEDGE is the software that we use internally to manage all sixteen of our facilities. When I first got started in storage in 2016, there was SiteLink. This was the older version. Pretty much everybody in the industry used SiteLink. There was another one that was very old. It was called Commander. Nobody uses this anymore because they haven’t ever been dating it very much. It’s super clunky and stuff. Older people who want to have a storage facility buy this one. Nobody buys this anymore. If you’re buying this software, you’re missing out on good software out there that is the same price.

There is ESS, which is Easy Storage Solutions. There’s a ridiculous amount of property management software. This is where it was in 2016. storEDGE was this newer software. It had been around for a couple of years. It had a very good, nice interface. I liked the way it looked. It wasn’t like SiteLink, which is older. A lot of bigger players use SiteLink. A lot of people love SiteLink, but it’s a lot of people who have been in the business for a long time. That’s why they love SiteLink.

ESS or Easy Storage Solutions was the basic version of storEDGE. It wasn’t owned by storEDGE or anything. It was basic and cheap software. It was easy to use for somebody who had maybe 1 facility or 2 facilities. All they want to do is manage the tenants. That was it. I knew that I’d be buying a lot of storage facilities, so I either was going to use SiteLink or storEDGE.

I’ve only been around for eight years. A couple of years ago when I did the demo for SiteLink, they only had a desktop version. They did not have the online version. This time, they have an online version. If you think about it, a couple of years ago when I did the demo, software in the storage industry was new. The newest software has come out in the last couple of years.

We signed up for StorageReach, which has nothing to do with any software at all. These are all property management software, but StorageReach does reviews and surveys. We signed up for StorageReach, which is a back office API system that connects to storEDGE and does reviews and gets reviews from your tenants. It’s a whole back office system.

This software came out in May 2023. It’s a brand-new software. The owner built it out and then started offering. He’s starting to build it up. He’s a really nice guy. This is going to be good software. The point is that software is very new in this industry. The storage industry fits my personality very well, which is like slow and steady wins the race. That’s how even the software industry is.

In self-storage, slow and steady wins the race. Click To Tweet

We signed up for storEDGE. storEDGE, SiteLink, and ESS were all bought by Storable over the last couple of years. Storable is a vertically integrated company within the storage business that offers all different types of different things. It’s a turnkey system for storage facility owners. Their goal is to be vertically integrated. Whatever a storage facility owner needs, Storable is going to offer that.

For instance, Storable bought a boat and RV property management software. Somebody built it out. Storable comes in and buys it, and then they add it to their portfolio of all the things that storage owners are going to need. A lot of people don’t like it. They’re like, “I don’t like that.” The thing is that they do offer everything that you need and are very open to listening to the needs of people like me, the owners.

We’re beta testers for storEDGE because we own a lot of property, so they ask us to test out certain types of things they’re coming out with. My husband’s the type of person that is always suggesting stuff. I like Storable. Honestly, I really like them because I feel like they’re at least addressing the needs of what we as owners need. Whether or not it’s expensive or not, they’re all the same price. ESS used to be super cheap. A lot of people went with ESS because it was the cheaper version. They went with ESS. ESS does not offer a lot of things that SiteLink or storEDGE offers. A lot of people have left ESS as well too.

I always point this out when I’m teaching. When you’re doing your demos for your software, you want to make sure that you are thinking ahead to where you’re going to be building your portfolio. If you’re only going to own one storage facility, there are specific software that are good for that. If you think that you’re going to be buying 2, 3, 4, 5, 10, or 20, then you need to make sure that you’re doing that. I do have several students that got into ESS and they moved to another software. It is a nightmare because you have to get all those contracts signed. You’re going to do everything. It’s horrible. Think ahead.

We got our software. When we got into storEDGE for our very first facility, one of the reasons I picked storEDGE was because of how many different kinds of automation it already had compared to ESS. It was also web-based. This was my thought process. I could be anywhere in the world and I could manage my storage facilities. That’s why I went with storEDGE.

I was the one that went to the units and swept out the units. When you buy these small facilities, you can’t afford to have either onsite or remote management. That is why I got storEDGE. It is because I knew that I needed to automate as much as I possibly could and not have to do it. The only thing I really couldn’t automate from storEDGE was a couple of things. In the beginning, the auction process and then also the boots-on-the-ground person.

When you have these smaller facilities, you can’t afford to have an onsite person unless you do what we did. We ended up buying six different facilities within a 30-minute radius of each other. We then hired a boots-on-the-ground person to manage all of those facilities. It’s about 600 doors within a 30-minute radius of each other. It’s because of that that we could afford to hire a boots-on-the-ground person who could manage all those. If we had only had a couple of those facilities like the ones that I’m selling in Noonan, Franklin, and Warm Springs, if I still only had those, we would not be able to afford the boots-on-the-ground person or the remote management.

Breaking Down Expenses

Let’s do expenses really fast. When you buy a facility, these are the basic expenses that you’re going to have for every single one of your facilities. You’re going to have your property tax. You’re going to have your utilities and your insurance, like the building insurance for the building. You’re going to also have your merchant fees, software, any marketing that you’re going to need to do, and then your boots-on-the-ground person, any repairs, and your phone person or you could say admin. It could be the same person. That’s somebody who does your auction. This is what your property looks like in terms of expenses.

Some people may add pest control. We never did pest control. We never did anything with pest control. My husband typically is spending money on a lot of Home Depot stuff, which falls into repairs. Other than the software and the merchant fees, we do like Google ads and SpareFoot. Also, under marketing, you do your sign. In the beginning, you pay for signs and stuff. That’s it. Overall,  those are the expenses outside if you had some major CapEx stuff.

Especially if you buy a mismanaged facility that isn’t making the income that it should be making, you are coming out of pocket for a lot of these facilities. If you’re buying a mismanaged facility that’s not producing the income that it should be producing, you are coming out of pocket most likely for these items. Your goal is to produce enough income to pay for all of this so that you can break even or make money after that. That’s how you look at it.

If you can’t afford some of these things, then they have to go. For me personally, I would not get rid of the software or the merchant fees. You want your facility to be as passive as it possibly can. You don’t have to go and meet your tenants. Remember. Back in the day, they didn’t have a lot of this software. People were going to meet the tenants. Pretty much every facility that I’ve ever bought in the first twelve facilities pre-COVID, people were going to meet the tenants and get contracts signed. That’s how it was. After COVID, everybody signs everything online, it’s all electronic. This was not the way it was run pre-COVID.

For me, this is something you have to have. The website plus the software is around $300 a month. You have to have a website in order to make online reservations and stuff. You have to have software to manage your facility. It’s $300 on average. There are some cheaper versions out there. Remember. ESS was a cheaper version. There are some newer cheaper versions that are out there.

I do have a lot of students who buy a lot of smaller facilities. They use a couple of other software that are coming out. There’s more software for cheaper versions and then even more expensive ones. If you have a big facility of 50,000 square feet or bigger, then you use a certain software. If you have only twenty units, then you use a different software. That’s available. Back when I started, this was not available.

The merchant fees are 2.9% of whatever you make, so 3% or whatever. It’s calculated 3%. You have to pay for that. You’ve got your marketing. This is the one thing that if you don’t market, you’re not going to find tenants. How do you find tenants? You market. You can’t put a sign up unless it’s in a super small town. For instance, Warm Springs. In Warm Springs, we don’t do hardly any marketing. We’ve tried to market Google ads and stuff. It does work, but then you have to pay for it. It’s expensive to pay for that. If you’re in a secondary market, then you have to do marketing. This is in the budget.

If you don't market, you're not going to find tenants. Click To Tweet

For boots-on-the-ground, this is the one where it’s like, “Do I have to pay for this or can I do this myself in the beginning until I decide I don’t want to do it?” That’s the question. You’re paying for repairs or whatever’s coming up. Especially in a mismanaged facility, you may have broken doors, springs, or latches that don’t work. You want to have money for stuff like that as well.

Who is going to do your auction process? I’m going to do auctions and then bad debt. What I mean by that is that it’s the sixth of the month. In the state of Georgia, you are late. This is how it goes in Georgia. Your rent is due on the 1st and you’re considered late by the 6th. On the 7th is when we start calling people. We start getting people that haven’t paid to pay. That would be considered bad debt. Bad debt is anybody who’s late after the due date of your late payment. You can do fees and things like that. Auctions are typically towards the end of the month. If you haven’t paid by day 25, then you do go into the auction process.

These with your software are automated. This can be automated in storEDGE. I don’t know about the other software. In storEDGE, this could be completely automated. You mail letters out. You could do everything. You could hire a third-party service to do these as well. There are third-party services that have come onto the market.

There are a couple of older ones, but there are a lot of new ones that have come on. They’ll do your bad debt calls. They’ll do your auction calls. The way that works too, which is interesting, is that you can pass that fee onto the person that’s late and say, “It costs me $3 for me to call you and get this payment so I’m passing that fee onto you.” There are a whole bunch of little tricks and stuff you can do. This is a very important process.

Part of owning a facility is collecting bad debt or getting into the auction process as fast as you possibly can and not letting things drag on because what happens is that’s money that you’re going to lose anyway. After a certain amount of time, nobody pays off your debt. After 60 days or 90 days, people do not pay their debt off. You’re losing money if you’re not getting these people out. You try to stay on top of your auctions and your bad debt. This is important.

 

With answering your phones, how many times have you called an owner to see if they want to get an offer and they never even answered their phone for the storage facility? All the time. This happens all the time. If they’re full, they do not answer their phone. They said they had their tenants leave a voicemail. If they have any issues, then they’ll call them back. You want to answer your phone. You cannot miss out on any calls because that costs you money as well.

Missing a call costs you money. Not doing your auctions costs you money. Bad debt costs you money. Taking cash costs you money. In your mind, you’re thinking, “I’m saving all this money, so I’m pocketing it.” The truth is it’s costing you money. Anything like that, you want to keep. You have to pay your property taxes. You have to pay your insurance. You have to pay those every single month, on an annual basis, or however you’re doing that

For your utilities, sometimes, facilities have utilities and sometimes, they don’t have utilities. This could be something that you may or may not have to pay. The question is who is going to be doing this? The person that’s doing this can manage all of this. They can manage everything. Do you want to hire somebody to do this for you or are you going to be the person that does this for you?

The boots-on-the-ground person is going to be at least $20 an hour. Nobody works for less than $20 an hour. You plan $20 an hour. They got to come out at least once a week. You got to go to your facility once a week. You have to pick up all the trash that everybody left. If they’re moving out, somebody’s leaving something. It rarely ever happens that a tenant doesn’t leave anything.

What To Do When You Have Small Facilities

You have to over-lock anybody that’s late. If somebody pays, you have to go back and then unlock them. You can buy a bigger facility. You can do this over the phone and manage over the phone. We’re talking about little tiny facilities. Can you afford to have a boots-on-the-ground person? Can you afford to have a phone person? When can you have somebody managing all this stuff?

You buy a facility that’s 50 units. We’re going to do it super easy. It’s 5,000 square feet. That means you have 50 10×10. Each of those 10×10 was at market rate. They were at the nationwide rate of what a 10×10 is. When you’re in a tertiary market, most likely, you’re not going to be at this rate, but we’re going to make it easy. The national average for a 10×10 is $0.85 a square foot. You could have it up to $1 or over $1 in some areas, and you could have it down to maybe $0.50 on average. $0.50 is the cheapest that I’ve seen. Maybe in Missouri, Louisiana, or Arkansas. In some of these tertiary areas, you can see as low as $0.50 a square foot.

Everybody wants to be in Georgia. Everybody wants to be in Florida. $0,85 a square foot is a good number. Think about that. If you have 5,000 square feet of storage and you can get $0.85 a square foot for each of that, let’s say that’s $4,000 a month maybe. If you were 100% full, you would be at X amount of dollars. That’s 5,000 times 85. That’s at 100%. You’re never at 100%. You’re always at 80% to 85% or maybe 90%.

A  couple of years ago, everybody was always full. I was on a webinar with CubeSmart and Extra Space. They were going over their inventory and stuff. Even in the primary market, they said that they’ve never ever been above 90%. Hardly ever in their whole span have they ever been above 90%, but they were 95% full. That was during the COVID years. We’re in a downturn, so occupancy is harder. Getting people to stay in and pay is harder. It didn’t come back up. In the next year or two, it will be fine. It will come back up to where we were.

85 times 5,000 is $4,250. Let’s say $4,250 at 100%  a month. We know that if we were full, we’d be at $4,250, but we’re not full. We’re at 85% occupancy. What’s 85% of $4,250? Let’s say $3,825 is 90%. Typically, 80% to 85% is maybe $3,500 or maybe something like that. Let’s say $3,500, is that 80%? This is what you’re making on a monthly basis. It’s $3,612. We’re right around there.

You have all these bills. It’s $300 for this and 3% for this. If you have a marketing budget, you’re typically going to be maybe $100 to $500 a month. We are at $500 a month. Boots-on-the-ground is $20 an hour, 1 day a week. $160 a day times four is $640. You then have some repairs. Let’s say $100 a month for repairs or something.

You have your phone. Who’s answering your phone? Is it you or somebody else? If it was you, it’s not a charge, but if it was somebody else, let’s say it’s maybe $100 a week to answer the phones. That’s $400. It’s going to cost you about $400 to hire somebody to answer your phones. It’s going to cost, let’s say, $500 a month for somebody to do the boots-on-the-ground. That’s $900 a month. Who’s taking care of your auctions? That’s you. You could save that money. This admin person that you have may help you do some of that as well. You add another $100 or $200 on that a month.

For property taxes, we all know it’s different for every state. Utilities are around $50 a month. Insurance is expensive. For insurance, let’s say it’s $200 a month on average. In Florida, it’s maybe even more than that. It depends on how big the facility is. It’s a little tiny facility. Let’s say $150 to $200 a month. $2,400 a year is a little bit expensive, but maybe $1,800 to $2,400 a month is what’s going to cost. $250 plus another $1,000 is $1,250. Plus your $500 and $800, that’s already at $2,000-plus or $2,400.

Typically, for a facility of less than 100 units, it costs around $2,000 to run and manage. You’re paying for all of this right here, $2,000 up to maybe $2,500. If you can do the marketing, it’s $2,500. You’re at $3,500 and then you have $2,500  for your expenses. You’re only at $1,000 a month, which is your mortgage if you have one. Let’s say an offer is $1,000 for these little tiny facilities.

Remember. You could take off this $1,000 for your boots-on-the-ground and the phone person, so then you do net $1,000. That means that you have to be 80% full at $0.85 a square foot and you have to decrease your expenses. The goal is to decrease those expenses and increase your income. It’s not hard to get a mortgage. It’s hard to get a good mortgage because interest rates are so high, so that’s eating at your expenses every single month.

Overall, these little tiny facilities, if you’re going to buy one, that’s how you’re looking at it. You’re looking at, “What can I afford out of all of these expenses? What can I afford? I have to pay the property tax. I have to pay for insurance. I got to pay for my software.” A lot of people will be like, “I’m not even going to get software. I’m  going to hand-do it or whatever.” I recommend the software so that you can automate everything.

We have property, taxes, insurance, and software. You then have to decide, “Am I going to have any money for marketing? Am I going to be able to afford a boots-on-the-ground person? Am I going to be able to afford an admin person to help me or am I going to have to do that?” That’s $1,500 a month that you can take away if you can do it.

When you think about these little tiny facilities and you’re thinking, “I want to get my foot in the door,” and we all want to get our foot in the door, if you can only afford a small facility, there’s nothing wrong with that at all. The closer that facility is, the better. Most likely, you’ll have to manage a lot of that stuff because there’s not a lot of room for all of these expenses. Does that make sense?

 

My personal opinion is if you can afford a $500,000 or less property. L et’s say you find something for $500,000. It’s hard to find something for even $500,000. If you get a bank loan, you have to put 30% down and get 8% interest, which is typical terms. That means that you have to come up with at least $150,000 down. You have to come up with that and then finance the rest.

If you only have $50,000 or $100,000, it’s hard to even get a bank loan. L et’s do an SBA loan. You can get an SBA loan. SBA loans are 10% down. It’s a variable rate. It’s upwards of 13%. You can put 10% down to $500,000, so you can put $50,000. The less amount of money that you put down, the higher your interest rate. The more money you can put down, the lower your interest rate.

This is $4 million or less in profits. When you get into bigger properties, there’s a little bit more wiggle room on this. Especially if you get into $2 million-plus, there’s a lot more wiggle room. The bigger the deal, the more options you have. These little tiny facilities that we’re all trying to get into to get started, this is the scenario. Dan says, “Plus loan costs.” It costs a ridiculous amount of money to close an SBA loan. You have to pay that as well too.

The bigger the deal, the more options you have. Click To Tweet

Overall, I’m not trying to make you not want to do this. I want to try to make you be realistic about this. Being realistic about this is looking at the average price per square foot of your property or the average price per square foot in your area. In my mind, I’m thinking, “What’s the average price for a 10×10 in this area?” If I know that number, I can figure out how much money I’m going to be making at 90% or 80% full occupancy. I know that these small properties are going to cost me roughly around $2,000 to $2,500 a month. If it is only making $2,500 a month, then I know that I’m breaking even on expenses, and that does not include any mortgage.

The question I ask myself is, “Do I want to come out of pocket? Is there enough upside on the backend for me to feel comfortable to come out of pocket on a deal knowing that I can double or triple the value of that property if I want to?” That is exactly what happened to all of the properties that I bought. With the first 12 properties that I bought, I was coming out of pocket for the first 6 months. I was then slowly starting to make money where I could break even after 1 year and then make money after 18 or 24 months on the property.

I am selling my properties and tripling the value of what I purchased it at. I managed all those myself until we got enough properties to where I could hire somebody to do that for us in the area. That is really the process or strategy that we went through until we could afford a $1 million, $2 million, or $3 million property.

The question is when can you afford onsite management? You have to remember that you’re going to be paying for onsite management for $20 an hour and they’re going to be there full-time or maybe part-time. You have to calculate that out. If they’re going to be there 40 hours a week, that’s $800 a week. Times 4, that’s $3,200 a month. Anywhere between $25,000 and $40,000 a year is going to paying the person who is managing the property for you. You can’t do that with these. You can do those with bigger properties. That’s it.

You know all the expenses and you add this extra person or this extra $40,000 to have somebody manage it. If your expenses are coming out to $2,500 a month for the facility, add another $3,200 or whatever for this onsite person. It’s $3,000-plus or maybe $2,500. You need $5,000 to $6,000 a month to break even to have somebody on site. That’s how you think about it too.

Leslie’s putting out, “40 times $1,000 is $40,000.” That’s $40,000 a year to pay somebody to be there all the time. You also have, on top of that, your $25,000 a year for your expenses. The bigger the facility, your boots-on-the-ground person may work more than one day. It may be 2 or 3 days. Their expenses go up. A lot of the other stuff may or may not go up, but maybe a little bit more on marketing and stuff. Expenses don’t go up a lot.

I talked to one student. He said that he managed everything himself. He was the boots-on-the-ground person and the phone person. His expenses were at 27%. You have the other side like us where we have a boots-on-the-ground person, a phone person, and an admin person. Our expenses are 38%. There’s a 10% difference in your expenses depending on how you are going to manage it. At least on the bigger ones, you can do more. I hire whoever I want. That’s why a lot of people want to do bigger ones, but not everybody can do that. This is how you look at it. It’s like, “How can I decrease my expenses and increase my income?” That’s how you look at it.

That’s why in investing in storage facilities, the one thing that’s great about it is the upside on the backend. You are real estate investing. You have this piece of real estate that is making money for you, but on the other side, it’s a business as well. You have to think of it in terms of plus income and minus expenses and run it as lean as you possibly can in the beginning.

That is the onsite versus the remote. That’s where it’s at in the industry. That’s how it’s looking. I went over that. Hopefully, that gives you an idea of how if you can afford a small facility or you want to afford a small facility, is that something that you want to do? I appreciate you guys tuning in. I’m here every Wednesday, teaching. I posted on here before to get the course, Super Simple Self-Storage, get the Deal Analyzer, come to the Wednesday trainings, and join the Facebook group. You’ll be rocking and rolling. I appreciate it. Take care, everybody. Bye.

 

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