Many times, when self-storage owners and operators think of ancillary income, they may be thinking about earning a few hundred dollars more per year on selling boxes and packing tape.
The truth is, if you’re treating avenues for ancillary income as serious revenue streams, you can make serious extra revenue.
“People tend to overlook it, but overall, ancillary income can add 7-10 percent of total income to your property,” says Chriss Michalopoulos, director of operations for Pogoda Companies in Farmington Hills, Mich. “Ten percent of $1 million is still $100,000 without a lot of effort.”
Examining The Types of Ancillary Income
Of course, additional services you can offer at your self-storage facility will depend on the type of facility and where it’s located. If you also offer RV and boat storage, for example, you can create additional revenue streams by offering wash bays, propane tanks, dumping stations and selling wheel locks and camping/boating supplies.
Here are 5 types of ancillary income sources Michalopoulos says one Pogoda property collects:
- Administration fees: “This is a critical piece of revenue,” says Michalopoulos. “It’s a one-time fee we charge for the time and processing of a new customer.” If you decide to charge these fees, it’s also important to note what competitors are charging, review it at least annually and increase if warranted. Michalopoulos says the company just increased their fees from $15-$25, which is still competitive in the market, but below the administrative fees the REITS are charging. Michalopoulos says the amount of revenue administrative fees can generate each year is based on the size of property and turnover, but looking at a typical 500-600 unit facility, it could generate $6,000-$8,000 per year.
- Late and lien fees and auction income: Michalopoulos says another large revenue producer are late fees, added to tenants who haven’t paid their rent by the 6th of the month. He says in Michigan, where many of their properties are located, they are allowed to charge the greater of $20 or 20 percent. Michalopoulos says these combined fees can add up to a whopping $50,000-$60,000 each year, based on a $1.2 million property. If tenants fail to pay and their delinquency advances to the lien stage, they are charged $100 for lock cutting (recently raised from $75). Auction income, which typically amounts to 25-30 percent of the bad debt can add another $15,000 of revenue.
- Retail: Of course, based on the nature of your storage facility and location, you could provide more retail inventory, but the basics of boxes, packing tape, bubble wrap, locks and other supplies should be offered. Michalopoulos says this income is typically “on the lighter side of your ancillary income streams,” but can still average $9,000-$12,000 per year.
- Insurance commission: As many self-storage facilities require their tenants to now carry insurance on their stored items, it only seems logical for the facility to partner with an insurance carrier while getting a commission on the policies. Michalopoulos says 90-95 percent of their customers take the insurance offered at their facilities and while $3 per policy may not seem like it would add up, he says it can bring in up to $4,500 a year in extra income.
- Truck rentals: Some facilities have their own trucks they lend to new tenants. However, if you offer truck rentals, Michalopoulos says you can make an additional $5,000-$16,000 per year. “It all depends on the location, it really helps if you’re by a college town,” he says. “We partner with U-Haul, Penske and Budget.”
Properly Training Your Employees
Of course, most of these items aren’t going to sell themselves. Michalopoulos says their managers are especially trained to not only sell the proper unit sizes their tenants may need, but anytime they speak with a customer on the phone or who walks in, they bring up the fact they are a “one stop shop” for all their moving needs. “We not only want to make additional revenue, but we want to provide these services to our customers,” he says.
He says when managers are showing a unit to a prospective tenant, they will pull a lock from the retail store and when they make the sale at the unit, they go ahead and secure the unit with the lock.
Michalopoulos says it’s like leaving money on the table if your managers aren’t trained to sell your ancillary products.
Of course, since late fees are a high revenue source, managers should also be trained in collecting fees and only occasionally waiving fees for tenants.
Creative Ideas In Ancillary Income
- Vending machines: Depending on your property and where it’s located, vending machines may be a good option, especially for tenants in hot climates looking for cold drinks or RV and boat tenants looking to take a few snacks on their road or fishing trip.
- EV charging stations: Also depending on where your facility is located, you could partner with companies on revenue sharing for EV charging services. This is a very new idea in the United States but is already being implemented in other countries. As well as possibly producing another small revenue stream, it could also attract people to your property that you can convert into self-storage customers.
- Shelving for units: Especially if you have many commercial tenants who need to store files or pharmaceuticals, offering shelving units for a monthly rental could add to your ancillary income.
- Partnerships with moving companies: This may seem like a no-brainer, given the symbiotic relationship between moving and self-storage, but it is an idea that hasn’t been pursued as often as it should. Like truck rental partnerships, these can produce a handsome revenue stream while also endearing you to stressed tenants who need help.
- Cell towers: While not a new idea, it is often an overlooked one. Many cell companies will approach you if you have land that is ideal for a new tower. However, you can also investigate options with cell companies that service your area.
- Specialty and vault storage: Many specialty storage options, such as wine storage, require a significant investment, but some do well in areas with many collectors. Another specialty storage option is vault storage, which may allow tenants to store guns, art or other expensive items.
Have other ideas of your own on how to make ancillary income? Let us know in the comments.
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Kerri Fivecoat-Campbell is a freelance journalist based in the Ozark Mountains. She is a regular contributor to Mini-StorageMessenger. Her business articles have also appeared in Entrepreneur, Aol.com, MSN.com, and The Kansas City Star.