Day 86: Self Storage Move-In Costs and Deposits: What the Industry Standard Actually Looks Like

And welcome to day 86 of the Storage 100 series. I'm Joe Downs with Storage Moguls. So what should you charge at move-in between deposits, admin fees, first month, last month? Today we're going to break down what the industry actually does versus what works. But first, a quick plug, because Storage Moguls at storagemoguls.ai is free to join, and it's an AI-native platform with GPT tools and multimodal learning. Across every storage vertical. And bonus, the first 500 people to register will get a free AI tool we built and use. It's called the Deal Analyzer GPT, but you need to be one of the first 500. So you might as well register now because you can start for free and advance at your own pace, however you want to do it. And because it's a community that we, when we launched or when we launch, we'll answer common questions like the one I'm posing and covering today. What exact— what exactly should you charge a customer when they move in? And while the answer is simple, the reasoning behind it is critical to your success. So we're gonna break down moving costs and deposits and focus on the why behind the industry standard. Understanding this key is key to maximizing your conversions and minimizing your headaches. All right, so let's dive into what the industry considers best practices for move-in charges. The industry standard is actually pretty clear across the board. Charge first month's rent Only folks, this is the golden rule for a reason. We want the lowest possible barrier to entry for the customer. Asking only or asking for only the first month's rent means no security deposit and no last month's rent. This low barrier translates directly into higher conversions for your facility. You want to make it incredibly easy for the customer to say yes and complete the transaction. So let's look at why eliminating that deposit is so important. It's simple. We want to keep it simple, and the deposit adds friction. Asking for extra cash upfront kills conversions because tenants will choose the facility with the lower moving cost every time, almost. Beyond that, deposits create enforcement hassle later on. Tenants expect that, that money back, and arguing over a $50 cleaning fee creates conflict. It's bad. It leaves them with a bad taste on the way out, which leads to bad reviews and wasted management time. So reality is you don't need a deposit because your state's lien laws protect you anyway. If they don't pay, you auction their— the auction process takes over and you auction their stuff and it usually covers your losses. All right. So it's just, it's added friction and it just, it makes the move-in process more difficult, the move-out process more difficult. It's just avoid it. All right. Now, how do you handle that first month's rent when they move in mid-cycle, middle of the month, let's say? If you want to keep your billing cycle to the— to be the first of the month when you bill, then the answer is proration. Prorating the first month is a simple way to make the move-in even more affordable and attractive. You should charge rent from the move-in date to the end of the current month. The full month billing cycle then starts cleanly on the first of the next month. If you look at the example here, they move in on the 20th and only pay for 10 days, not the full month. This makes the initial cash outlay much smaller, which again drives higher occupancy. It's pretty standard practice. There's a few rare exceptions where deposit might be warranted though. While we preach simplicity, those rare cases when charging deposit makes sense, or you should consider charging deposit for high-risk tenant maybe. Someone with bad credit history, if, if you're in the business of pulling their credit and you happen to know it, or a history of evictions. You might also consider if a tenant refuses insurance coverage, letting the deposit act as a small buffer for potential damages. And then finally, if they're storing high-value items like boats or expensive equipment, a deposit could increase your protection there. But remember the core principle: most of the time, don't charge deposits. Simplicity wins. While deposits are friction, specials are fuel. You want to give the customer a reason to sign the lease right now, not a reason to hesitate and shop around. Instead of asking for a security deposit, offer a move-in special like the classic $1 first month move-in or 50% off first month. This is a conversion tool. A vacant unit earns $0, but a unit with a special earns Full run next or full rent next month and every month thereafter. You're trading a small discount today for a long-term revenue stream. Remember, our lien laws make security deposits unnecessary, so focus on getting that customer in the door. All right, now let's take a look at another option fee that can boost your revenue. Optional fee, I should say, and that is the admin fee. This is a one-time charge, typically. $10 to $30. It's collected at move-in, covers the cost of processing paperwork, setting up the gate code, and creating an account. It's a legal fee in most states, but you should check your local laws just to be sure. It's a small number, but it adds up quickly. If you have 20 move-ins a month at a $20 fee, it's an extra $400. That $400 might cover your electric bill that month or something, or internet service. It's a simple revenue boost that doesn't create friction because it's a small one-time change or charge. So what does the final bill look like when you combine all these pieces together? You want to remember, it should be simple and transparent, no surprises. The primary charge, first month's rent, which is your core, the core of your revenue. Then you add the— you can have a small one-time admin fee we just discussed. Then finally, you might include cost of tenant insurance, or if you sold them a disc lock or whatever being charged, but it's simple, right? Notice that when it's Complete— or what, what we're not talking about here completely is deposits, hidden fees, stuff like that. The simple, clear structure removes friction. Remember, we want to get them in. We want to speed up that leasing process. Simplicity is the key to high conversion in self-storage. All right. And it's the industry standard for a reason. All right. Core message here today. Keep it simple. Bears repeating. It's the industry standard just to charge that first month's rent. That's it. You should not be charging a security deposit. Should not be charging last month's rent. This is not residential real estate. Deposits are last month's rent are unnecessary friction. Slows down your conversion rate. Just remember that. Remember this mantra too: simplicity fills units. The easier you make it for a customer to say yes, the faster your facility will stabilize. This approach is proven across the industry. All right, final thought for the day. I've shown you why the deposits are obsolete and how simplicity drives revenue. So if you know someone in the industry who's still charging deposits. And last month's rent. Share this information with them. They're leaving money on the table and creating unnecessary hurdles for their customers. Also frictionate at potential friction when their customer leaves, which leads to bad reviews. Remember, we want the peak-end experience here. Best, great finish even when they're leaving. You want them coming back and, and not saying bad things. Help them understand the power of simplicity and the efficiency of the Lean Law when you share this. Please like, subscribe, and share this content, not just because sharing is caring, folks. Show the world you're a storage mogul. Now's the time. Start showing the world you are a storage mogul because you invest time into videos like this and best practices. They will thank you later for helping them improve their business. Remember, your move-in pricing strategy directly impacts conversion rates and cash flow. Get it wrong and you're leaving money on the table or scaring tenants away. If you found this information helpful and are looking for a community that talks about stuff like this, As I said in the beginning, I'm gonna say it again. Join us at Storage Muggles Community. We got you covered. There's a seat there for you. You can join for free at storagemuggles.ai. Storage muggles.ai. If you do it soon, you just might be one of the lucky ones to get that free deal analyzer GPT. See you tomorrow.