3 ms·
It's actually the opposite, it's more akin to a SaaS company. I've worked with Owner-Operators of facilities and the ones who do it right are printing money. T
by dddrh 9y ago
It's actually the opposite, it's more akin to a SaaS company. I've worked with Owner-Operators of facilities and the ones who do it right are printing money.
The smart ones optimize towards revenue per square foot and can pull in upwards of $30,000+ of profit per month. And that can be on a single facility. Typically the smart ones own 2-3 facilities. They buy an underperforming facility and optimize its functions and reap the rewards.
How do they do it? One method (of a few) is by constantly pushing the rates up and churning customers that have lower rates. Once their occupancy hits a certain threshold (typically above 85%) they start really trying to push customers out with higher rates. If the occupancy starts to dip below their target, they start to offer deals. That way they can keep the monthly recurring revenue flowing while still optimizing towards revenue per square foot.
Edit: This is why there are specific REITs that focus on self-storage.
- mathattack 9y agoI though REITs focused for the opposite. I wonder if it’s driven by the city? Are the storage units you’re looking at in low cost or high cost areas?
- dddrh 9y agoIt depends on how the Trust wants to focus its funds. Similar to how a VC fund might focus on enterprise software or B2C. For a reference of Self-Storage REITs, this is a good start(1). Different markets are definitely hotter than others. Houston, Miami, Austin, Los Angeles are some of the more lucrative markets, but even small markets have strong players. Self-storage is fairly democratic in the markets served. I've visited facilities in rural town that are wildly successful for the owners, as well as small facilities outside of Manhattan Beach. (1) https://www.reit.com/what-reit/reit-sectors/self-storage-reits https://www.reit.com/what-reit/reit-sectors/self-storage-rei...
- opportune 9y agoI love reading about interesting business models such as this. A similar one I've read about before is vending machines. Apparently a well-run vending machine business (ignoring labor costs) can easily achieve 50-100% ROI per year per machine. The vending machine owners don't usually have to pay for the electricity of the machine and each machine only costs $2-3k. Maintenance/restocking has relatively low labor requirements and the stock itself is so cheap it's almost a negligible cost.