One of the many fantastic features of self-storage is the ability to generate significant amounts of additional revenue besides rental income that dramatically enhances the value of your facility.

I will go so far as to say we can create an additional $250,000 in value for a typical facility you may purchase. That may sound very bold, but let me show you how.

The first thing I suggest is become a truck rental dealer. You will have no money in it and all the proceeds go straight to the bottom line. We rent U-Haul’s in almost every location we go to. It is not because we love U-Haul, but more people use that brand than any other. We also give the manager who handles the U-Haul rentals a percentage of the business, so they take ownership. As a bonus we can use that found revenue to help compensate for that persons salary.

Our U-haul income ranges from $450 per month to over $3,500 per month. Let’s say within a year you are generating an additional $650 per month or $7,800 per year.

Retail items are also awesome income generators. I know a manager at one of our facilities that can count on one hand the number of people who will rent a unit and don’t purchase at least a lock in a quarter. She can average close to $15 per move in at that facility. So in a facility of approximately 60,000 square feet you will have let’s say, 25 move ins per month. $15 times 25 is $375. That makes $4,500 per year additional gross income. We are at $12,300 so far for the year in additional income.

Tenant insurance is a real win-win proposition for the tenant and the Owners. Both win if the tenant purchases it. When Katrina hit in New Orleans, the people with tenant insurance had their money within 48 hours of the hurricane (according to Bader Insurance). Tenants who were covered with their homeowners insurance fought for years to get anything. Even if you get your insurance payment from your homeowners for any loss in a storage unit, you have a deducible and your premium usually goes up. Tenant insurance is a real winner for a tenant.

Suppose you sell it to 50% of the people that move in and your 50% commission is $5.00 per premium. Using our 25 move ins that would be an additional $60 per month (very low) or $720 additional income per year.

Lastly, a low hanging fruit type of additional income is late fees. Have them in place and do not give the managers too much leeway in not enforcing them. Our experience is that if someone is not on auto pay, at some time in their occupancy, they will be late. Good operators can get approximately 5% of their gross rental income in late fees. Let’s say you get 3%. On a 60,000 square foot facility at 85% occupied and averaging $9.75 per square foot, that is $14,917 additional income per year.

So if we total up our additional revenue sources it looks as follows:

Truck rental: $7,800 per year
Retail: $4,500 per year
Tenant Insurance: $ 720 per year
Late Fees: $14,917 per year
Total: $27,937 per year

So there you go. An Additional $27,937 per year additional revenue. Now if you take that additional revenue and divide it by the market rate CAP rate, which is what an appraiser will do when appraising your facility, you get the value to the project that additional income creates. Let’s do that.

$27,937 divided by let’s say a 7% CAP would be an additional $399,100 in value (27,937/.07). Let’s be very conservative today and use an 8% CAP rate. That adds a value of $349,212 extra to your project.
You can now see the value of adding additional revenue streams to your project. Almost every new Owner I have worked with to some degree has been resistant to doing this. They see it as additional work that takes away from their main business of renting units. Then like the Browns, a husband and wife team I helped in South Carolina, they started adding one additional income revenue stream per quarter. Because of the proximity to vacation lakes and their selling boat accessories, within three years they had added over $500,000 additional value on truck rentals and retail alone to their facility.

Make a list of the ones you want to start. Put one per quarter in your facilities that don’t have them. If you are new getting in the business, if the first facility you purchase doesn’t have additional revenue sources, put one new one in per quarter. We did not even talk about car, boat and truck rental or the host of other additional revenue possibilities that are possible. I have only hit on the very obvious ones.

This is one of the reasons the REITS can pay so much for a facility today. They have it down to a science what revenue they are going to generate off a facility, and it is usually a lot more than the current Owner is. What may be a very low CAP rate to the current Owner is an acceptable CAP rate on the income they know they are going to create. Much of the additional value comes from this process right here, adding additional income sources. Don’t let the next Owner get the benefit of this additional revenue, you get it.
What is your plan for this?