How much would it cost to buy huge forest of Oak trees? Likely more than you and I have to spend. But they all started with an acorn. An acorn that was free. To many people are wasting more and more good money trying to find the right “paid for marketing” that will make them oversized Self Storage Profits when they should be planting thousands of free acorns.
Take a look at this email I received from my manager last week. 8 Rentals in one day. Seven on the phone (notice the P for phone rental) and 1 walk in. Was this because we have a great manager? No, Kate is great, but this was just her third week on the job.
Was it because the nearby University of Connecticut is about to get out for the summer and all the students picked us because our prices are the lowest. Heck no, the guys right down the street rent a 5 x 10 for the summer for a total of $195 and we are $399 for the same summer rental.
So, what is the secret? We plant thousands of acorns every year. Here are just a few that led up to that one day of fun phone rentals. Which by the way are part of 150 rentals we will do in 45 days.
1 Our new manager of 3 weeks had a detailed manual that included rental scripts that must be followed.
2 Before she was hired Kate reviewed and practiced the scripts with us and agreed to use them word for word.
3 We did the hard work of role playing.
4 Our manual was clear it is our goal to rent over the phone to every caller. And if we do not, we get their number and call them back in 2 days.
5 On every call we promote our facility, “show them a unit on the phone”, confirm the size is the right size for them, provide the price and say “would you like to get one in your name before they are all gone”. Then we take a full month’s payments – we only rent – no reservations. FYI – next to none cancel and around 1 in ten transfers to a larger size.
6 Our manger is accountable daily and emails us every day detailing both the walk in and phone rentals and the walk ins and phone calls who did not rent.
To rent 8 units that day we had to more than be good at helping our clients finding the right unit for them. We had to get them to call or stop in, in the first place.
7 Month after month we add all move out emails and other town and university emails to our mail chimp site for our newsletter.
8 Two week earlier we sent out a mass email via mail chimp letting the UCONN students know we love them and would provide them a free lock if the prepaid for the summer.
9 Earlier in the spring we were the only self-storage to attended the University student fair. We handed out hundreds of cards and simply said have your mom or dad give us a call and we will take care of everything with them over the phone and they will just need to stop in and sign the lease.
10 For the last two weeks we had a table at two banks, one on campus and one in Town that highlighted our self-storage. We bought $200 of candy and other goodies to make sure we attracted everyone in the bank to our table. When my wife GP asked, did we really need to buy 50 lbs. of candy I reminded her each piece of candy is an acorn planted. If we rent just one extra unit because of the candy it will pay for all the candy. And many non-students will see our name one more time so when one day when they need storage they will think of us. And the great part is many students rent from us for 4 years!
11 We had already completed spring cleaning inside and out so both our employees and our renters are impressed.
12 Every morning we put out our Open banner and our sandwich board for thousands of people to see as they drive by. This month one side reads Spring is here! and the other “We love UCONN.
13 Not only do we have a huge candy bowl but we also have a premium candy like York Candy right next to it. Who could resist “Can you stop in this afternoon? I know you will be very impressed with our facility and I have York Peppermint Paddies with your name on them”
Have you been planting acorns day after day or just wasting money?
Why be motel 8 when you could be the Ritz?
By Marc Goodin
President of Storage Authority
Author of Cush Your Competition,
102 weeks of guerilla marketing for oversized profits for your self-storage.
Thirty-four items you don’t want to forget during the design process for a better and more profitable facility.
A colorful bright large retail office and showroom will increase your rentals. Remember the majority of the rentals are by the ladies. Believe it or not you are in the retail and fashion business and need to wow your customers.
Date: April 4, 2018
To: Self-Storage Property Owners
From: Heidi Henderson, Executive Vice President of Engineered Tax Services
Many real estate investors are unware of how the top industry professional utilize the tax code to their benefit. And most think that their tax professional is aware of every aspect of the existing code to advise them of any applicable credits or deductions they are eligible for. In reality, the tax code is complex and expecting your CPA to know every aspect of it, is like expecting your family doctor to be able to perform heart surgery!
I am a real estate investor myself and through many years in tax and accounting I have learned from the best on how to apply every aspect of the tax code to create the most tax efficient real estate portfolio, leading to continued success.
Recent tax changes under the Tax Cuts & Jobs Act expound on the benefits of real estate investing. Taxpayers can now capture immediate deductions for business related tangible property, your depreciation can be front loaded, and for energy efficient buildings the available credits and deductions were renewed in February of 2018 and assets removed during demolition can be written-off or donated for a charitable contribution on your tax return.
These are just a few of the complex tax code sections which can make the difference between a profitable business, and a losing proposition. Below is an article outlining 11 Frequently Asked Questions about Cost Segregation, which is one of the methods you can apply to your property.
We partner with business owners across the U.S. and have worked on thousands of self-storage properties nationally. Give me a call today for more information and to discuss the some of the tax strategies that might be applicable to your business or property. I can be reached at (801) 689-0325 or via email at firstname.lastname@example.org
11 Frequently Asked Questions about Cost Segregation for Self-Storage Properties
By: Heidi Henderson, Engineered Tax Services
Cost Segregation is the process of identifying personal property vs. real property, and individual building components for tax purposes, rather than treating a building purchase as one large asset. This determination allows a property owner to depreciate their assets over the useful life of each asset instead of assuming that the entire purchase amount applies to one long-term (39-year) asset.
All investment properties, including self-storage properties qualify for cost segregation. When a cost segregation study is applied, you are telling the IRS that you are simply choosing one acceptable method for depreciation (MACRS*) vs. another approved depreciation method (straight-line). Both are acceptable, however MACRS requires an analysis to identify the value of each individual asset you own, rather than looking at your property as one large asset.
Cost Segregation can be applied to a newly purchased building, a newly constructed building, or a building you have owned for around 15 years or less. If the property is not fully depreciated (39 years is the length of normal depreciation), then there is an opportunity to change the method with cost segregation. Although any property can be depreciated under MACRS, the costs of performing a cost segregation study may outweigh the benefits if the property was acquired for less than approximately $300,000.
Under straight-line depreciation a property’s total cost (less an allocation for land), is depreciated evenly over 39 years. Under MACRS the assets are identified and reclassified in 5-year, 15-year, and 39-year class lives depending on the IRS determination of its actual useful life. And whether the assets are used for your business use, or the basic function of the buildings use as a structure. Examples of 39-year property include; windows, walls, doors, roof, HVAC systems, plumbing, and electrical. Examples of 15-year property include exterior improvements such as; fencing, exterior signage, asphalt, curbs, landscaping, and exterior lighting. And examples of 5-year property are; carpet, appliances, specialty lighting, woodwork, unit partitions, individual unit locks and security, and business specific heating and ventilation systems.
Some property types will have a higher reallocation percentage than others. Interior, climate controlled self-storage properties will see a higher amount than a shed-row or boat and RV storage type. The allocations are based on actual assets and values or each of the components within the property.
Surprisingly, the information required to perform the study is limited. For a recent purchase, the closing statement or HUD is the only requirement. Blueprints are helpful but not necessary. New Construction projects require cost breakdowns and total costs for construction and development, but individual invoices are not required.
Choosing a reputable firm is a vital to ensuring that every aspect of the IRS requirements are met, and in the case of an audit the report is upheld without disallowances or associated interest and penalties. The IRS Audit Technique Guidelines dictate that a physical site visit is performed, the analysis is performed by a professional with cost-accounting or engineering expertise, and the method of determining asset value is an approved methodology. Make sure that audit defense is included in your study, and that the final report offers complete detail over every aspect of your property. Choosing a low-cost provide may be tempting, but the ultimate savings, detail and support of a reputable provider will far outweigh any additional costs. And finally, ask for references!
Cost Segregation is not a “trigger” for audit. The IRS issued automatic consent for deprecation whether applying a change from straight-line to MACRS at the time of purchase or retroactive for a property you bought 10 years ago. This means that taxpayers are allowed to make this change with the approved forms offered by reputable cost segregation firms. However, in the rare case of an IRS review, rest assured that a detail report with the proper IRS approved methods and audit support will affectively defend your tax filing position.
The cost is usually based upon the type and use of the building, size, and location of the property. Beware of cost segregation providers who charge a percentage of the tax savings. The tax savings is relative to the entity type, number of owners, the year of acquisition and other factors, so the actual cash benefit can vary. Most providers will offer a quote along with projected tax savings, so you and your CPA have the information necessary to make an educated decision.
The tax savings realized with a cost segregation can vary depending on the type of building, your total acquisition cost, and length of ownership. Self-storage properties vary in type and size and may see reclassification percentages from 15% to as high as 40%. Request a detailed benefit analysis from a qualified and experienced firm who has a history with self-storage properties.
The Trump administration passed the TCJA which is the largest tax reform bill passed in over 30 years. There are significant changes that offer tax cuts for real estate investors. The largest change being the adoption of 100% bonus depreciation for tangible personal property acquired after September 27, 2017. Tangible personal property is defined as assets with a useful life of 5, 7 or 15 years. Therefore, when cost segregation is performed to identify the personal property (5, 7 15-year property) apart from real property (39-year assets), it allows the property owner to capture bonus depreciation on those reclassified property and immediately expense the entire value in the year purchased!
*MACRS: Modified Accelerated Class Recovery System
Marc Goodin, President of Storage Authority LLC,
Ed, you must be excited to have started construction on your self-storage facility?
Ed: Absolutely. We have put substantial time and research into this project and the team is excited to open Storage Authority Houston-Walters Rd.
Marc: First I want to congratulate you and your wife Jenny. It was not that long ago we met as strangers in a Houston hotel lobby and you shared your goals with GP & I. Now we are friends and you are well on your way to making your self-storage dreams come true.
Can you provide us a short background on yourself?
Ed: I do remember that meeting with you and GP and it has been a pleasure working with you all on this project. I have been in the transportation industry working in an executive role for many years and I have also been involved in a few technology startups, but I always have had a passion for real estate.
Marc: I know you are all ready to starting your marketing for your grand Opening. What is your projected construction time?
Ed: Approximately 6 months
Marc: How helpful was the Storage Authority preferred Houston Area real estate broker Richard Anderson?
Ed: Richard was both a resource and an advisor through the entire process. He has an extensive commercial real estate and development background, so his experience was invaluable.
Marc: How many acres did you buy? And How many square feet of self-storage did you get approved?
Ed: We bought four acres of land and will be building a 60,000 sq ft facility in two phases.
Marc: You and I did some conceptual early on and then once your offer was accepted we worked together with your architect & engineer to come up with the final layout for both the buildings and the individual units. It’s a tradition civil engineers (like myself) get a little tough on Architects but other that did you feel the Storage authority process helped you understand the options and choose the right layout for you?
Ed: Yes indeed. You were involved in all reviews of the design process and we made many updates to the plans that gave us a much better final layout that I am confident is positioning us for a strong opening.
Marc: You actually had a very smooth design and approval process but what surprised you the most about the design or approval process?
Ed: Although the internal side of the design/approval was manageable, like any real estate deal I believe staying creative and alert to the details of the transaction is critical. We encountered several hurdles finalizing the deal that brought us to the close.
Marc: What advice would you offer a new franchise owner starting the design process?
Ed: Tap into Storage Authority’s experience and knowledge, while being sure to be mindful of local storage development trends. Bounce ideas off of Marc and collaborate to develop the best solution.
Marc: Obviously getting a loan is one of the very important steps of self-storage development. How does it feel to have your first multimillion-dollar loan?
Ed: Exciting and challenging. I believe the due diligence that we performed, feasibility studies and local research were all keys to forming a solid working partnership with my lender.
Marc: Many people don’t realize there is a lot of work between the site plan design and having the final construction bid & permits the bank requires. Sometimes inexperienced developers wait until after final site plan approval to start, the building design by the Architect and getting complete bids. You had your Architect and Contractor on board during the site design process. Do you agree this was critical for your project?
Ed: It was essential. I believe the site design process is essential to understanding the full scope of a deal’s feasibility.
Marc: What did you find the most challenging so far and why.
Ed: Keeping a detailed checklist, timeline and prioritizing all of the items was a challenge as we neared the final stages of the project. Large companies have teams that manage this process, and, in our case, it was me and the Storage Authority team.
Marc: Did Storage Authority meet your expectations? And what can Storage Authority do better to assist the next Storage Authority Owner?
Ed: Storage Authority exceeded my expectations. As for what can be improved, you all are already doing it. From enhancing your web platform to providing new operating guidelines your team is innovating to help me the other Owners be successful.
Marc: Thanks for share your experience and thoughts. One last question for now. Are you excited to start your self-storage marketing and renting up your facility?
Ed: Marc, we are ready to get this one leased up, so we can get back to work with you and the team on our next project.
Why don’t most self storage implement a marketing plans? Simple it takes a lot of self storage marketing experience, time and money just to develop a marketing and even harder to get your staff to implement. This is great news for Storage Authority Franchise owners because not only do we know what works, you will have your sales and marketing plan ready day one but even more important is we have the secret sauce of how to implement a successful marketing plan.
We Bring the Ritz Carlton Experience to the Self-Storage Industry!
Simply put Storage Authority Platforms & Systems makes for happy customers and allows Storage Authority Franchise owners to charge premium rates for higher profits. Storage Authority Franchises are the market price leaders, often renting up much faster at rental rates higher than their competition.
Sales and Marketing is 50% the environment and 50% people driven. Storage Authority Franchise owners start with the next generation facilities designs and the platforms, systems, tools, training, manuals and a detailed facility-specific marketing plan. The Storage Authority Manager driven system is backed up by both the franchise owner and Storage Authority experts available 24/7. Storage Authority has replaced the losing one-month free marketing strategy (which costs a facility over $50,000/yr. in profits) with “it just feels right” feeling, sales and marketing.
The Storage Authority over the top sales, marketing and customer service philosophy is shared in detail with every potential franchise to confirm they believe in our marketing strategies and plans and are ready to embrace them before they are approved.
Manager Training & Marketing:
Managers are hired for their friendly personality, and sales and marketing abilities and are taught the Storage Authority sales and marketing. Some examples items managers learn starting day one:
Storage Authority managers have detailed scripts they must learn and adhere to including the following scripts:
Storage Authority managers have a list of daily, weekly & monthly marketing duties they must adhere to that is completed because they are completed regular they become a habit. Examples:
Special Marketing projects and new marketing projects.
Storage Authority New Generation Facilities
Storage Authority Mulbury FL
Storage Authority New Generation Service:
Storage Authority provides:
Storage Authority New Generation Marketing
Storage Authority -Target Marketing Partners:
Co-operative marketing and referral partnerships opportunities
Great for cross-marketing
For their move-in Packages – Self Storage Rack Cards with a coupon for move in packets, helps leasing consultants overcome an objection of downsizing to an apartment.
Do they do move in Packages? Resource Center?
Auto/Boat/RV – (their clients may need a place to store these) Homeowners – Buying/Selling – they call their insurance provider – may need temp storage or downsizing.
What marketing opportunities with local school to participate in.
Families need quick storage to clear out the house for sale, time to grieve and then go through stuff and decide to keep or give away.
Think retail. Would you put retail on a back road or behind another development? No and the same goes for new self-storage developments.
Too many people tell me they are about to build self-storage on land they own or located because self storage is needed in the area. And they are right about half the time. Not a good enough percentage to move forward with a multimillion dollar investment. In the end, new developers are going to need help to make the final decision. But you can rule out some properties with a bit of effort and determine which property in an area would be the best one to choose for a feasibility study.
First you need to determine the existing population. The population can be provided by many realtors or is often provided with many property listings. There are also several on line programs that can provide the population.
The unknown is the demand of square foot of self-storage per person. And there is not one size fits all locations correct answer since demand can and does vary from state to state and even area to area within a state. Demand in the end is not a square foot per person but rather a square foot/person where facilities reach equilibrium (90% -+ full) at acceptable rates. In other words, demand cannot be determined in a vacuum and must be used in conjunction with a review of the existing market occupancy rates and prices. Be careful not to assume full means there is a need for more facilities. Full with a regular 10 x 10-unit renting for $70 is not a good sign while 10 x 10’ renting for $160 is a great sign.
For many urban areas where there are numerous self storage facilities to choose from the draw/competition area of 3-mile radius is commonly used. And the demand of 8+_ sf per person can be used as a temporary starting point.
So, if the 3-mile population is 30,000 the total self-storage demand would be:
30,000 people x 8 sf/person = 240,000 sf of self-storage needed.
Next you need to determine the location, number and size of the existing self-storage in the 3-mile radius. Most novices underestimate the number of nearby facilities. You can use google earth pro or “google nearby” to help you find the 3-mile facilities. On google earth pro you can draw a 3-mile radius and visual search for the self storages. For a given address on a google map you can enter self-storage in the nearby tab and it will show the nearby self storages. But it does not go over town lines, so it is tricky to get all the facilities. This is considerable work to make sure you get it right but can often give you a quick count. You may be able get the existing square footages from the land records or scale from google earth pro, again a lot of work. Or you could use a real rough estimate of 50,000 sf of self-storage for each facility with a square footage check as part two of your demand study.
So, if you had 3 existing self storages in the three-mile radius you could temporarily assume that: 3 facilities x 50,000 sf/each = 150,000 sf of the existing demand has been met.
The needed demand for this case would be:
The total demand of 240,000 sf – 150,000 sf existing = + 90,000 sf. demand needed.
You would also need to subtract the demand for any facilities under construction or in the approval process.
You can see a sample mini demand study at the Storage Authority News Room
The good news is there are programs that can quickly determine the population and the existing self storages and even the square footage of the facilities, so the existing and unmet self storage demand can be determined quickly as part of a preliminary study.
One developer who recently contacted me did his own demand calculations. When I emailed him back our check of his findings with an online demand review he said “ Wow what you did in 10 minutes took me over 2 day to do by hand.”
Below is a screen shot of the Radius program we use to determine the existing self-storage demand & population. It also does a ton more, from providing the existing self storage square footage, the names of your competition and the rates of your competition.
The program is available at : https://www.unionrealtime.com/radius.html
I suggest you set up a demo with James de Gorter the co founder of Union Real time. Here is a link to set up an appointment on his calendar https://calendly.com/radiusteam/radiusdemo
This location is a 3-mile radius review for one of the FL Kmart locations closing this year. While it shows the existing self-storage is 7.36 sf per capitol (see bottom left hand side) the key is the fact that there is only 0.69 sf/person of climate control. So, this is a great location to investigate further for a big box conversion to climate control self-storage. If you want to learn more about this program or even conversions email me at email@example.com
Of course, Storage Authority and our national brokers will help find and review your potential sites, saving you mega hours. Better yet we will even help you determine the best areas to look for land in your neighborhood.
The occupancy of the existing facilities (and their rates) can tell you a good deal about the local market demand. You should stop by a couple and call a couple to get their rates and see if they will tell you their occupancy even before you start looking for land.
In the end, there are many important factors in addition to demand so a feasibility study is highly recommended. For your planning purposes, each can cost $6,000 to $7,000. If you need preliminary assistance with your initial investigations or need a recommendation for a feasibility expert email me at marc@storageAuthority.com and I would be happy to help.
The shape of the land, topography, wetlands, drainage, flood limits, neighbors, building design, and zoning requirements can have a significant impact on the final building square footage. Some towns, for example, only permit 50% impervious lot coverage for the buildings and pavement, other towns do not permit a new self storage within 3 miles of an existing facility. Regulated wetlands setbacks or wetland buffers often vary from 50 feet to 150 feet from the wetlands in many locations. On site storm drainage detention, if required can require a half acre or more land. High parking requirements in some towns can also limit the amount of buildings. In other words, the regulations can significantly reduce the amount self storage permitted. Often self storage is not even permitted in residential zones and other zones.
If you don’t have city sewer you will need extra land for a septic system. If you do not have city water, you will need room for a well and significant building fire walls will be required that will add substantially to the project cost.
5 acres were used on this 9-acre site. The rest of the land was not usable.