Most management companies charge a percentage of gross revenue and a separate, often much greater, percentage of the tenant insurance revenue. For example, in 2017 Extra Space was taking 6% of gross revenue before tenant insurance and 100% of the tenant insurance revenue as part of their standard fee. Some limited service management companies charge a fixed fee. Others, like Crescendo Self Storage Management structure the fee as a percentage of gross revenue (typically 6%) and a percentage of the tenant insurance proceeds, but customize the proposal based on the details of the specific engagement.
Because of the various approaches and types of properties managed, the answer to “How much does full-service third party self storage management cost?”, is often “it depends”.
The biggest factor impacting the cost of management is the size and gross revenue of the storage facility. The smaller the facility the higher the fee as a percentage of revenue, and the larger the facility, the more the management fee can be negotiated.
The reason for this is that the work to manage a storage facility doesn’t drop dramatically if it is a small facility with a small revenue stream. In most cases, there is still the same staff to recruit, train, and manage. There are still contractors to hire to take care of the gate, driveways, pest control, landscaping, roll-up doors, HVAC, roof, and building. There are still computers and printers that stop working. There are still financial statements to produce and monthly reports to write and deliver to the ownership.
Thus, if your storage facility is averaging less than $50,000 in monthly gross revenue, then you may need to consider building other performance-based compensation into your management agreement so that if the management company performs well, they have an opportunity to be adequately compensated.
The converse is also true. The more revenue the facility produces, the more open most management companies will be to manage for less than the industry standard fee of 6% of gross revenue and a share of the tenant insurance. Aside from an increased burden of customer service, the cost and effort to manage a large modern facility is not much more than the cost to manage an average-sized one. Since the cost and effort doesn’t usually grow in equal proportion to growth in revenue produced by a large facility, there could be room for you to negotiate a reduction to the standard fee.
The complexity of your operation and the scope of your requirements also impact the cost of management. For example, if your facility does $60,000 in rental truck revenue, management companies know from experience that type of operation requires more staff and adds complexity, and would be something we would consider when making a proposal. If you require your management company to complete numerous capital improvement projects beyond the scope of general repairs and maintenance, that would factor into the proposal.
Crescendo Self Storage Management’s pricing is in line with other professional management platforms. You can see here the many services that are typically included in our standard third party management relationships. If you would like to give us a test run, take a look at the various consulting services we can perform for you.