Hello again! I want to share something interesting with you. In the last few weeks, I’ve been studying some new ways to look at self storage investing.
As investors, we tend to look at big numbers – NOI, monthly profits, and – even if our facility is not on the market – CAP rates. I’ve been playing around with financials from a different point of view based on some reading and research I’ve been doing over the last month or so.
Simply put, the idea is simple – we always look at big numbers in real estate and, honestly, it can make you immune. After all, $50,000 a year and $58,000 a year really don’t “seem” that big, but slice that into smaller numbers.
If you have a self storage facility (or a portfolio of them), take the number of customers you have annually and divide that by your NOI. I can hear you now, “But Scott! Why wouldn’t you divide it by the number of units?”
Well, like I said, I got interested in smaller numbers, not bigger ones. In fact, a lot of businesses are now tracking similar metrics – they call it “turnover” and while that’s similar to what we’re talking about, turnover is a bad thing in a business.
It’s not necessarily a good thing in self storage, but by concentrating on the individuals you served instead of the units, you begin to see how valuable every customer of yours is.
Think about it like this – you have a 100 unit facility that is returning $43K annually. Digging into your numbers, you realize that you ended up with 168 customers last year. That means every single person your team served averaged $268.
Now, there are a lot of different ways to look at this – you could try to determine how to increase that number from, say, $268 to $300 (expansion of services, higher rents, etc…) or you could try to manage the number of customers down (stability through longer-term rents) while increasing the dollar amounts those folks spend in your facility.
The idea, though, is to be able to realize the very real profits associated with every man or woman who walks into your facility.
(That’s actually another number – how many prospects did your team have to speak with before one rented a unit?)
The key takeaway from this little exercise and the studying I’ve been doing is simple – people do business with people. When you understand the real value of your clients, you begin to see how important it is to serve them the way they want to be served. The other side of this goes back to many years ago and a very seasoned investor I once knew. He would laugh and tell me, “Scott, I LOVE talking to people about real estate. Every time I sit down with a buyer or a seller, I simply look at that moment as the chance to open another briefcase filled with money. Who couldn’t be excited about that?”
Starting today, I want you to become passionate about knowing the numbers in your facility – even the “non-traditional” ones I’m talking about today.