One of the biggest questions we get asked is, “How much does full-service third-party self storage management cost?”
To help shine some light on this for you, let’s look at what typically happens with most self storage management companies. Typically, most management companies charge a percentage of gross revenue and a separate, often much greater, percentage of the tenant insurance revenue. For example, Extra Space takes 6% of gross revenue before tenant insurance. Then, they take100% of the tenant insurance revenue as part of their standard fee. On the other hand, some limited-service management companies charge a fixed fee while others, like Crescendo Self Storage Management, structure the fee as a percentage of gross revenue (typically 6%) and a percentage of the tenant insurance revenue. However, we customize the proposal based on the details of the specific engagement to find a structure that is reasonable for both parties.
Due to 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 Size of your Facility will Impact Self Storage Management Cost
The biggest factor affecting the cost of third-party management is the size and gross revenue of the storage facility. The smaller the facility, the higher the fee will be as a percentage of revenue. On the other hand, the larger the facility, the more room there is for the management fee to be negotiated.
This may sound backwards, but the work to manage a storage facility doesn’t drop dramatically for a small facility with a small revenue stream. In most cases, there is still the same number of staff to recruit, train, and manage. Also, there are still contractors to hire to maintain the gate, driveways, pest control, landscaping, roll-up doors, HVAC, roof, and the building as a whole. Furthermore, there are still computers, printers, and other technologies that stop working and need to be replaced.
From a financial aspect, no matter the size of your facility, there are still financial statements to produce and monthly reports to write and deliver to the ownership. These reports are produced through the daily accounting tasks that are also managed by our team. No matter the size of your facility, big or small, many of the operating procedures still exist and must be executed.
Thus, if your storage facility is averaging less than $50,000 in monthly gross revenue you may need to consider other ways to compensate the management team to ensure they are being adequately compensated. For example, building performance-based compensation structures into your management agreement will help motivate the management team and ensure they are being fairly compensated for the work they put into your facility.
The opposite is also true. The more revenue the facility produces, the more open most management companies will be to manage your property for less than the industry standard fee. So, instead of looking at spending 6% of gross revenue and a share of the tenant insurance, you could negotiate less.
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 to manage a larger facility doesn’t usually grow in equal proportion to the 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 affects the cost of third-party management.
Another factor that affects the cost of third-party management is the complexity of your operation and the scope of your requirements. For example, if your facility does $60,000 in rental truck revenue, management companies know from experience the complexity that is added by that one revenue stream. From a staffing perspective alone, you’re looking at a more complex operation than a large facility with no rental truck revenue. Thus, this is one of the things that we consider when making a proposal for third-party management services. An additional example of this would be if you require your management company to complete many capital improvement projects beyond the scope of general repairs and maintenance. This too would be factored into the proposal.
We can assure that Crescendo Self Storage Management’s pricing is in line with other professional management platforms. You can find the many services that are typically included in our standard third-party management relationships in the link provided
It would be our pleasure to provide you with a proposal for third-party management services. Please call or email our team and share the details of exactly what you’re looking for. In the meantime, here’s a look at what it’s like to work with us.