I find that one of the biggest concerns new storage investors have is how they will deal with the transition into ownership. It can feel a bit like a big elephant and knowing where to start can feel overwhelming. So I thought I would shed a little light on the situation. What follows is an exploration of what it might look like to take over a struggling facility and get it turned around and primed for success in just FOUR days. This is a real life example from one of my recent projects and be warned that I go into pretty good detail. This property was 40% full when we bought it....just 18 months later, we are 93% full and have raised rates by 15-30%...and we even one the fancy award you saw in the picture tied to this post:) Here's how we did it!
The ownership transition actually begins long before closing. In a perfect world, you will be able to gain “access” or even better, “control” of the facility (primarily the management software and phone line) 7-10 days before closing. Doing so will allow you to start migrating to the automated remote management systems that I will teach you about in future blog posts (be sure to subscribe below if you want to hear about that).
Let's start by talking a bit about all of the things that you should be doing BEFORE closing so that you can hit the ground running on day 1. These are the things that I used to reverse 4 years of neglect at my most recent project in only 4 days. I hope you will allow me to digress into an example as I think it will help me paint this picture better than simply creating a “To-Do” list for you. In April of 2018, I bought a 24,000 square foot facility in Florida, about 1100 miles from my house. As you may or may not know, I had two young kids at home (I now have 3!) and so my goal is to be away from them as little as possible. As such, I set my purchase trip to last for just 4 days. And this facility had been mismanaged for at least 4 years so this was not going to be an easy task. Now, I think sharing what follows is a bit “in the weeds” for this stage of the game but I thought you might find it valuable to see the actual “To Do” list that I created in anticipation of the Full Throttle Operational Overhaul that I outline for you in the latter half of this post. Please don't let the next two pages overwhelm you as it looks more cumbersome than it really is. My advice would be just to skim the list to get a "feel" for what the process looks like.
Bronson Self Storage – Closing Date: April 16th, 2018
Scan and send all signed docs to Woods Oviatt (attorney)
Before Closing: (April 1 – April 14)
Sales Tax – Await Certificate
Get NYS LLC Cert. Of Good Standing
File Foreign LLC Paperwork in Florida
File Fictitious Name Transfer
Bank of Castile – DBA after its filed.
Create New QB company with Mike's SW Card and B of C Savings
Transfer Phone
Name of phone provider: ATT
Phone number: 800-298-2020
Account Number: 1593XXXX87
Account PIN/Password: XXX
Account billing address
Bronson Self Storage, 500 Commerce St., Bronson, FL 32621
Shopping List:
Makita Lock Cutting Saw and blades, Drill and Circular Saw
Drill Bits
Push Broom
2 Locksets
Cheap padlocks/overlocks
Pressure Treated 2 x 4's
Screws/Washers
Metal twine to tie signs to fence
Contractor Bags
Cleaning Supplies
Air mattress and pillow/sheets
Saturday: Arrive around Noon
Home Depot/Walmart in Gainesville for above
Change Office Lock
Inventory all Units and create Master Lock Audit Template → Set up all ESS
Cut and re-lock or Trash out all Abandoned Units (photo of any abandoned)
Prepare Change of Ownership Letter in EasyStorageSoftware (ESS)
Prepare Late Letters and Auction Letters in ESS
Sleep in Office
Gainesville Craigslist for day labor?
Dumpster delivered in afternoon 352-353-0839: Do I need another?
Sunday:
Daryl DLB Landscaping 352-555-0099
How far does he live?
Maintain Grounds and ask for 1 lock cut per month (as needed) and 2 lock audits
Powerwash
Trash out and Clean Doublewide
Mail Change of Ownership Letters
Change Locks on Double wide
Monday:
Fix Skirting on doublewide.
ATT between 8 and 12 (Rich not to cancel until phone ports)
Email or Call Kelly to bind insurance
Pick up signs at 9 am?
Hang Signs and Remove Drop Box
Change over Utilities, Internet, Water
Greg from Gate and Camera between 2 and 4 (386-555-2329)
Call town hall to schedule with Building Dept.
Activate Sparefoot
Create Google Adwords – separate account
Tuesday: – Take Good Pictures for Website including buildings, gate, cameras and signs
Electric Changeover:
Take photos of both meters with reading and meter number
Bring warranty Deed or Settlement Statement and Driver's License to:
11491 NW 50th Ave, Cheifland FL, 32626 (352-555-2511)
Make sure they have po box as mailing list
Online account and autopay to SW card
Gainesville Craigslist for storage ad
Call all Delinquents (Cash or after ESS payments are active?)
Friendly Late Letters to anyone under 30 days late
Auction Letters to anyone over 30 days.
Wednesday: Flight bright and early.
Using the to do list above, the goal should be to render your facility as rentable as possible as quickly as possible (in this example, four days). By nature I am a roll up your sleeves and get it done kind of guy but turning around a facility that needs the kind of work required to double or triple value, requires that you delegate grunt work and “manage” the labor you have at your disposal. No one person can clean out 40-80 storage units by themselves in just 4 days! Craigslist is an incredibly valuable tool as you turn your old facility into a new one.
Using your “Lock audit list” (make many copies), start identifying which units are rented. Even if delinquent, don't touch these. You have to go through the proper process to deal with units that the previous owner had as rented on their rent roll. Some “empty” units will end up having stuff in them. You have to decide how to best deal with the contents. Some units will just need to be swept out. Other units with “Less than $100” of stuff can be disposed of—double check your state laws as the dollar amount varies by state! Decide if you should toss that stuff in the dumpster (costs you money) or if you can auction the stuff off (makes you money). Now bear in mind that the earliest you can have an auction will also be state dependent but will usually be at least six weeks away so there is a “cost” to holding the stuff for that time in that you can't rent that unit. If you have many other units of that size open, this might be a non-issue. You might also consider, consolidating the contents of several units into one and auction it all of as one. This way you free up several units for rent while not filling your dumpster with stuff that someone might actually pay you for at auction.
You might also sell or barter or give away stuff during your visit. Believe it or not, I was able to give away 14 mattresses at our Florida Facility. I simply put an add on craigslist for FREE and people came and took several at a time until they were gone. This was after I was quoted a $650 disposal fee from a junk removal company. I did the same with 9 old CRT televisions. The cost to recycle these at a recycling center was $20 per unit. I found them all a home in under 24 hours and saved that $180. Remember your roll is to decide how to process each unit and then pay someone (from Craigslist) to execute your instructions. As your laborers do this for you, you will be doing the tasks that only you as the new owner can do. You will be getting utilities switched over, forwarding the mail to your PO box if appropriate, meeting with service providers and contractors to get bids and interview them. You will also want to be continually updating your master lock audit list as your crew turns unrentable units into “rentable” or auctionable” units. And you will update your newly running management software to reflect the status of those units. Remember the goal is to have most if not all units “rented”, “rentable” or on the auction block by the time you leave.
After finalizing your lists, you will want to draft and send various letters to the appropriate customers. You will send a change of ownership letter to all customers introducing yourself and giving them instructions on how to get enrolled in your new online customer service portal. You will also send late letters and auction letters as appropriate. You want to move as fast as possible but also keep in mind that you are working to restore your facilities reputation and you want to be aware of how “aggressive” collection tactics will be seen by your customers. I like to give all customers a chance to reach out to me between each letter so that I can avoid sending the next letter to anyone who is being responsible and working to get caught up. I am also pretty flexible with honoring people at their word when they say they paid the old owner but didn't get credit. Of course this has to be done within reason but I rather lose $50 in rent than leave a bad taste in a customers mouth by accusing them of lying. They are not only a customer but if you can impress them, they will become a referral source for you too! Whenever customers come to the facility while you are there, stop whatever you are doing and go win them over. Make sure they know you have no immediate plans to raise rates and your only goal is to fix all the things that were wrong with the previous management. Tell them you are committed to serving them in any way that you can. Also tell them that you will pay them a referral fee for anyone who rents a unit from you and uses their name as a referral source.
Along these same lines, tell everyone you meet that you just bought the Storage Facility down the road and are looking to spread the word. Talk about it in the diner while getting your morning eggs, tell the lady behind the desk at the post office, tell the mailman who comes to drop your mail, etc. Where appropriate, offer these folks...as well as any service providers a referral fee as well.
I hope you are finding some value in my storage musings and would love it if you'd post comments or questions below. And please be sure to subscribe below so you don't miss out when the next post goes live!