There are few true win/wins in life, but “Tenant Insurance” is one of them. It has big benefits for everyone.
In our main market, we have just recently been allowed to sell tenant insurance in our facilities. Before that, we could only give out information and hope the new customer called the provider.
Now we can sell it directly to them.
If you can sell it, you can measure it. This is the fifth, and final, Key Performance Indicator ( KPI) we measure.
To be totally transparent, we are just starting to measure it because it’s so new for us.
Tenant Insurance has a lot of benefits for both the tenant and the facility.
In my experience, if a real disaster does hit – tornado, hurricane, etc. – the tenants with tenant insurance will have no issues.
Your problem as an owner will be all the tenants that don’t have tenant insurance. They will be the ones that are upset.
In New Orleans after Katrina, within 48 hours our tenant insurance provider had set up tables at facilities and started cutting checks. The people who “didn’t need it because their homeowner’s insurance covered their items” spent years battling it out with their insurance companies.
Many companies, including REITs, require tenant insurance to rent at their facilities.
We don’t (yet), but I’m beginning to wonder why not.
Public Storage made $13 million dollars in 2013 selling tenant insurance. Imagine your numbers over the next year if 25%, 50%, or 75% of your tenants had tenant insurance. That would be a minimum of a $5 per month income increase per unit with no price increase.
Not to mention the benefit they get in the event of a disaster.
We currently have some managers who sell very little, and we have some who sell a lot.
Here is what I do know: if they start measuring it, they will start improving it.
There are two ways to measure it. We are just starting out so we measure sales per move in as a percentage. In other words, if the manager sold 10 policies last month, and there were 20 move-ins, that was a 50% tenant insurance sales ratio for the month.
Some may not have been sold to new tenants. It may have been an existing tenant that purchased a policy, but that’s ok. Just use this measurement as a way to compare apples to apples. Smaller and larger facilities, facilities that are stabilized as well as facilities in lease-up can be compared and compete with each other.
Eventually, I want to get to the point where we’re measuring the percentage of the facility that has insurance. In other words, if we have 250 policies in force this month, and we have 500 units, we would have a 50% tenant insurance coverage.
We’re not quite there yet, so we use the percentage of move-in’s as the KPI.
One good practice we’re putting into place is having the manager do a reality check around the 20th of the month (more on this next week). If they are coming up short on their income goal, they can send emails or make calls to existing customers who do not have tenant insurance to increase sales.
The manager is doing the tenant a real favor every time they sell tenant insurance.
For an Owner, this money is usually around a 50% commission rate. Granted the commissions are small, but they make a real difference. And this is money that costs you nothing and can be used to bonus managers.
This extra income adds real value to the facility.
Let’s look at some minimums. After one quarter, let’s say you have 20 new policies in place paying a small commission to you of $5 per month each.
Using my high-powered calculator, that’s $100 more per month, or $1,200 per year. How much money does $1,200 per year add in value to your facility? At an 8% CAP rate that’s $15,000.
For just an extra $100 per month!
Let’s say you use a quarter of that money to bonus the manager who sold it? Do you think an $300 per year bonus for selling tenant insurance would help motivate your manager to continue selling it?
Like truck rental income, this money costs you nothing and goes straight to bottom line. In my world, there’s no better way to generate money for bonuses.
So there you have it, our five KPI’s. Do you remember them all?
2. Occupancy rate (or net sq. ft absorbed in lease up).
5. Tenant Insurance sales per move in as a percentage.
Keep your eye on these five KPI’s and you will have a great self storage business.
Keep your eyes on these and you will be Creating Wealth Through Self Storage.
