Joe Downs walks through raising self-storage rents without losing tenants: give 30 days' notice, test increases on 10-20% of units first, aim for 5-10% annual bumps, and offer 12-month rate lock-ins to keep good ones around. Handle pushback by acknowledging complaints then presenting the numbers.
Chapters
Welcome to day 95 of the Storage 100 series. I am Joe Downs with the Storage Moguls. All right, I'm guessing this is the episode everyone's been waiting for— how to raise rents without triggering a mass exodus. Spoiler alert here, it's easier than you think if you do it right. And folks, we're building and launching a community that will talk about this and frankly everything we've talked about so far in the Storage 100, and you can join it at storagemoguls.ai. And And it's free to join. I promise you, there isn't even a way for us to take payment yet. And it's an AI-powered community with GPT tools and multimodal learning across every storage vertical. Some folks have asked what I mean by multimodal. Well, when we launch in a few short weeks, you'll be able to learn and consume all of these topics in different modes or ways at your own pace. So via video, infographic, mind map, podcasts, more. And that's what I mean by AI-powered and multimodal. I don't know of another platform like it, and you can start for free and then level up at your own pace. All right, enough of the shameless plugs here because I know you want to get to the topic of the day, raising rents without losing your tenants. This isn't just about making money, it's about smart business. So I'll show you a system that truly works and it helps you increase your income while keeping your occupancy high. So this is a proven system to navigate the challenges of rent increases. So let's get started showing you how to make this happen for your business. Because once you're stabilized, you absolutely must raise rents. This is not optional for a healthy business. Inflation eats away at your purchasing power every single year. Your expenses like taxes, insurance, and labor, they're always climbing. If your rents stay flat, you're actually losing money over time. This isn't about greed. It's about basic business survival. So raising rents ensures your business remains viable and profitable. But first, let's address the biggest fear associated with raising rents. The fear of the mass exodus. It's a real fear, I get it, but it's usually overblown. Many owners worry that a small rent increase will cause everyone to leave, but the reality is most tenants stay put. Moving is a huge hassle for them. We're in a sticky business. They might complain, but they rarely pack up and leave for a small increase. Think about it— paying $10 more versus spending $500 and a whole weekend to move— that doesn't usually math for people. Not to mention the hassle. And look, we all know a few people that'll do it on principle, but they're the penny-wise and dollar-foolish people usually, or they just don't value their own time, or they've never thought about putting a value on their own time. And if they did, they'd realize it doesn't math. So they exist at every facility. We know some, I know some, you know some, and, and you, you will have them as customers. You already do have them as customers. And they'll leave. That's okay. They're not the majority. They're the tiny minority. All right. So how do we actually implement these increases? Well, it starts with a notice. Once you decide to raise rents, the 30-day notice rule is your guide. On day 1, you send out the notice both by email and physical mail. This dual delivery method is going to make sure they receive it. The I didn't get it excuse Doesn't work when you got proof. So there's a legal 30-day waiting period, but after that, day 31 or 32— no, I guess still day 31. I was thinking days of the month, but it doesn't matter. It's 30 days. The new rate becomes effective. All right. Now let's look at a smart way to roll out those increases. The phased approach, I think, is a smart way to go to raise rents without risking mass vacancies. So first, what I mean by that is you test the waters by raising rents on just 10 to 20% of your units. Focus on those units that are the furthest below market. Wait 30 days to measure the impact. See if anybody leaves. If the results are good, then you can roll out the increases to the next batch. This method prevents a huge mistake on pricing from impacting your entire occupancy. Before you send the notice, though, we need to determine how much you should actually raise your rents. First, always do a market check. You want to make sure you're not already significantly above Street rate. Most facilities are actually underpriced, so this check often reveals room for growth. Our goal is to match the market, keeping pace with inflation without shocking your tenants. The industry standard for annual increases is typically in the 5 to 10% range. That is the safe zone because it feels small enough for tenants to pay. It's also too small to justify the hassle of moving all their belongings for most people. For example, $100 unit going to $108, That's manageable, right? But we need to communicate this increase effectively to keep it in the no big deal category. The best way is through a simple but effective letter script for informing tenants of the rate adjustment. Notice how it's professional and brief, avoiding any apologies or overexplaining. Phrases like we're sorry, but or lengthy justifications are unnecessary and they invite pushback. Actually, keep it direct. State the new rate and the effective date. Keep it simple. This approach maintains professionalism and minimizes potential friction. But even with a professional letter, you're going to get angry calls. This is outrageous. I'm moving out. Yada, yada, yada. It's important to have a strategy for handling those situations calmly and effectively. Acknowledge their frustration first, but then pivot to the facts. I understand. We haven't raised rates in 1 year or 3 years, while our taxes and insurance have gone up significantly over that same time period. This provides context without being defensive or apologetic. As a last resort, you can offer a lock-in, you know, something like, if you stay, I can lock in this new rate for 12 months. This can often de-escalate the situation and retain the tenant. But these conversations Actually, this is to a broader perspective on rate increases. Let's consider the overarching philosophy. Raising rents is your duty to the business. This isn't just about profit, it's about protecting the asset value. So you need to do it on a regular cadence, but do it professionally. Consistent small increases are better than large infrequent jumps. This approach ensures the long-term health and profitability of your facility. It's a fundamental aspect of responsible asset management. All right. If you're watching this and you haven't raised rents in a year, please like this video. Actually, first do your market research, send out your rent increase notice, and then like and share this video. Also subscribe so you don't miss the daily drops that will help you like this one. And if you're on your way to becoming a storage mogul, you should definitely share this and every other video to show your network you're becoming a storage mogul. It'll help build your reputation as a serious operator who manages their assets effectively. All right, next up, day 96, and we dive into the rate optimization strategy that adds 15% to your NOI. That's right, 15% to your NOI. Remember folks, rent increases are the single fastest way to increase that NOI. Therefore, your property value. So stop being afraid of them and become a storage mogul by joining our Storage Mogul community at storage moguls.ai, where we share our actual rent increase schedules, letter templates, and data behind our approach. You can join for free, storage moguls.ai, plus you get that free GPT if you're one of the first 500. Forgot to mention that. I think we still have some left. Uh, okay, 11 episodes left in Storage 100. Crazy. And then we're launching, uh, right into the Boat and RV 100 immediately right after. If you made it this far, you're going to want to see what comes next.
