Raising Rents: Determining Your Best Strategy

It's time for some good news! As the economy slowly improves, we have observed an increase in rental rates and occupancy of self storage properties around the country. It is important to note that there are still some parts of the country that are struggling more than others, and even the improving economy will not solve an ill-conceived project as the market is more competitive today than ever before. Below I have outlined the basics of raising rents and the possible benefits it has to your bottom line. In today's age of revenue management systems and sophisticated operators, it is more important today than ever to have a plan in place when raising rents!

Once a self storage facility has reached a stabilized occupancy level, a common business practice for owners to explore is an increase in rents in order to increase income. Of course, controlling operating expenses and negotiating deals for supplies and services can improve a location's bottom line each year, but even in the best cases, it is hard to significantly improve NOI without raising rents on a regular basis. Now, the key word is regular, not annual, semiannual or other, but regular. Let's take a look at why this is important.

Let's assume that we have 500 units and our unit mix is as follows:

If we raise our rents by 5%, both for existing and for new customers, our monthly income potential goes up as follows:

Over the course of one year, this could result in as much as $29,670 in additional income and possibly even more should the unoccupied units get rented. Remember though,we said that regular increases are the key. Thus, let's assume that we raise our existing and new customers and after a three or four month period, the new customers are not resisting the new price. Should we raise the "board" or "asking" price again? The answer is yes. As long as we continue to push the rates and do not receive any new customer resistance, we should look at this each month and ask ourselves if we can raise them again. The hard question arises when raising the issue with our existing customers. How often could or should we raise their rents? Is one time a year reasonable, or can we push the issue and raise them every 6 or 9 months? The answer is not always clear-cut, but here are some questions to ask yourself:

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