Smart self-storage operators constantly are trying to figure out how to get the most money out of their units. But what’s the best way to raise the rent without raising a ruckus? Seasoned professionals offer their advice on how to simplify the process and get revenue-boosting results.
“Rent increases are something that most managers are afraid of, but it is a very important aspect of revenue management and probably one of the best ways that an operator can increase revenue and maximize their income,” said Lou Barnholdt, an area manager at Atlanta, GA-based Universal Storage Group.
When carried out correctly, rent increases can be fairly easy to accomplish with little to no pushback from tenants. The amount of the hike varies depending on a variety of factors, such as the current discounted rate a customer has, the current occupancy rate at the facility and comparable market rents for nearby properties.
Some statistics show that customers will tolerate a moderate increase of 8 percent to 15 percent every nine months, with little to no move-out activity taking place, Barnholdt said.
Many operators find it is easier to “train” customers regarding a pattern of steady rent increases.
“In most of our stores, we keep it pretty consistent. So, the customers are used to it,” said Shelly Gibson, an area manager at Universal Storage Group. “When you go into a store that hasn’t done rent increases in awhile, you’re going to get a little bit more feedback.”
No more across-the-board
The days when operators would impose an across-the-board rent increase effective on the same day for all tenants is gone.
“We are constantly reviewing and constantly managing our business. We don’t do across-the-board rent increases at any time,” said Todd Amsdell, president and CEO of Cleveland, OH-based The Amsdell Companies, a self-storage owner and operator.
As a standard rule, Amsdell’s facilities do not raise rents more than once every six months. However, that timing might depend on communication the manager has had with a customer. For example, if a customer says he needs a unit for only three months, the company might honor a three-month rate. But if a renter decides to stay beyond that three months, that might be reason to raise the rate, Amsdell said.
Universal Storage Storage typically handles its rent increases in one of two ways:
- A standard rent increase, which is based on the length of stay at the same rent for a current tenant.
- A “discount reduction,” which is aimed at lowering discounts in places where rents are below market rates. In effect, this raises rental rates.
An important tool: Software
One way to make the process easier: software. For example, Universal Storage Group relies on SiteLink software to generate an “occupied units report.” Most managers set the report to track renters who’ve been in a unit for at least 210 days (about seven months) at the same rate. Managers pull that report in the middle of each month to determine which renters are due for a rate increase.
The software generates a standard form letter notifying a tenant about that rent increase. Letters must be in the mail by the 22nd of the month for customers to receive them in time for the required 30-day notice period. That way, the increase will go into effect on the following month’s bill.
Universal Storage Group managers also can run a report that sorts customers based on the percentage discount that they’re receiving. For example, a manager could pull a report on customers who are paying a rent that’s discounted by 20 percent or more.
“So, you don’t need to necessarily wait nine months for a rent increase. In that case, the customer might be able to tolerate a rent increase every four or five months,” Barnholdt said.
Follow the lease
When communicating those increases, the key is to keep it simple and follow the guidelines of the lease, which is a legally binding contract for both the renter and the landlord. Most leases require 30-day written notice of a rent increase. The best practice is to send a standard form letter.
“Because of the contractual agreement that we have, it’s not a good place for managers to get warm and fuzzy and to insert or delete language. So, it is absolutely a boilerplate letter,” Amsdell said.
Raising rents can be a sensitive subject. At times, operators and managers must deal with customer complaints about rent increases. One good rule of thumb for managers and operators when they do get that feedback is to check the customer’s account. If he or she is a long-term customer in good standing, it can be worth it to offer a compromise, such as deferring the rent increase by two or three months or negotiating a small rent increase.
For those upset customers who do contact management about rent hikes, this is where customer service and salesmanship come into play, Amsdell said.
Oftentimes, customers might have legitimate arguments or concerns. “We don’t know the ins and outs of every customer,” Amsdell said. For instance, a tenant might be planning to move out in six months. “So, it is absolutely a sales situation, and our managers have a bit of leeway to work with those customers,” he said.