Few things worry a self storage owner more than rate increases. You worked so hard to get the tenants to sign the lease and move their stuff into your facility, and now you are worried that there will be mass exodus the second the rate increases hit their mailboxes. Did you know that most rate increases only yield a 1% move-out?
Most owners worry about the mass exodus that never happens, and while they are worrying, they aren’t increasing rates, which means they’re losing money. How much money can you afford to lose before you finally decide to increase rates?
Here are some tips if you are ready to increase your rates.
- Make a list
Most storage programs have automatic rate increases, which allows you to set a certain level of increase each month and not worry about it. Everything that I have ever read on rate increases preaches a standard increase across the board, no matter who the tenant is. I see the value in this recommendation because it removes the personal aspect of feeling guilty that you are raising sweet Mrs. Jenkins’ rate. You know she just lost her husband and is battling cancer and what kind of monster would increase her rate $10? If you will have trouble looking at the tenant names and making the decision to increase rates, then by all means, just do a standard increase across the board and get on with your day.
However, there is some value to making a list and raising rates according to the tenant. Making a list of your tenants according to the last time they had an increase is a great way to increase rates more than you would with a flat increase setting in your storage program. You know who can bear more of an increase and who can’t. There is no rule that says you have to raise everyone’s rates 6%. While some can handle a 10-15% increase, you may be more comfortable with a 5% increase for sweet Mrs. Jenkins.
You also need to decide WHEN to do an increase. Look at your move-in/move-out history, and find out when you historically have a busy month of move-ins. A great time to do price increases is the month BEFORE a busy month. If you have increased move-outs due to the rate increases, you will get a move in at a higher rate the very next month since your street rate is likely higher than what the old tenant was paying.
Depending on your location, weather can help time those move out. No one in the South wants to move their stuff out of a storage facility in the middle of the summer over $5, and Northerners will avoid moving out during the winter. Be sure to read your lease agreement and see how many days’ notice you are a required to give before changing the rate.
Train your staff on what to say if tenants call and complain. What is the reason for the raised rates? Did property taxes go up? Did you make improvements to your facility? Have you kept rates the same for two years and it was time to increase? Make sure your staff has all the information about when the last price increase occurred so they can handle the calls with ease.
Decide ahead of time if you will allow concessions to be made for customers who complain. Will you allow staff to split the increase with the tenant for six months or do you just want staff to listen to complaints and make the tenants feel heard?
Want to develop a rock solid revenue management program that you can feel confident about? Check out my course “Price With Confidence: Self Storage Revenue Management”
Did you miss the first installment? Click here to read Revenue management – Part 1: Renting your units for what they’re worth and here to read Revenue management – Part 2: Prospect management
As a former self-storage manager turned CPA, I work exclusively with self-storage businesses. My services include monthly accounting and bookkeeping, operational audits, site inspections, and process analysis. Please email me at email@example.com to get started with having more freedom and more money in your storage business.