Thread: Rate Increase Discrepancy From A User Standpoint

Curious what you all's opinion is on this...
I, living hundreds of miles from my own storage facility (self, and RV) store my things in a nice facility nearer to me. I actually have two 48 foot long units with electric roll-up door tall enough to park my motorhome in. I had an ongoing problem with one of the doors sticking in the raised position - the mgmt called out a door repair company but even after they worked on it, it would stick. Once I had to move everything out into my other unit because the door stuck open and they couldn't get someone out to work on it for a week.
So I went to them a little over a month ago and asked if they had any available same-sized units I could move to, as I could not afford to move all my things again in 90 degree heat if the door stuck again. They had one, and I moved to it. When I went into the office to sign the lease agreement, the mgr (new) noted that she was beginning a new agreement so my rate on that unit would remain the same for another year.
Then when I got the billing at the end of the month, I noticed the other unit which was at the end of it's year lease, was noted as having a rate increase of a little over 4% effective with the next month.
All was fine - until I received a letter from the owner telling me my rent on BOTH units would be going up about 5.5% with my next billing.
So altho I have a signed (by the new mgr) lease showing my rent to be one rate for the next twelve months, and a note on my billing that the rent on the other unit would be going up effective with the next month, the owner is telling me in a letter that the rate increases are now higher than what they just noted and I agreed to.

Sure, I have a strong case in civil court if I chose to make them stand by the first, lower amounts, but I fear that the new mgr may have chosen to give me a break by giving me the new agreement on the one unit for no increase for the next 12 months WITHOUT the owner's knowledge. And technically, the second unit altho having the rent noted as being a different increase for the next period, is not bound by an agreement now, so they could change it to the higher amount the period following.

I sent a note to the owner explaining all of this, and offering to work something out as a professional courtesy, but in reality I'm a bit perplexed as I have intentionally kept my rates the same throughout the economic crisis, and also, if my person on site tells a tenant something I honor that, even if it doesn't agree with what I would do.

So curious how my fellow storage folks would see this - from both sides of the fence, as that is how I try to look at these situations...

MRV

I've worked at 2 facilities in the current (long and seemingly never-ending) economic crisis. Both facilities which were owned by 2 different companies raised rates regularly.

As far as the rest, I would give the owner a little time to respond. It sounds to me like one hand doesn't know what the other one is doing, and that's what happens when too many people are involved in the rate increase process.

I would agree with Lisa. Other managers we know have raised their rates all along. Your electric goes up, your insurance goes up, etc. I am sure you did not purchase the facility as a hobby, so it should make money for you.
I would also give the owner some time to respond, maybe call him and talk with him to see if something can be worked out.

I know I'm in the minority when it comes to rate increases - I suppose since I utilize storage as a tenant too, I tend to be more sympathetic than most with the plight of tenants who tire of continual rate increases. And, I have more than one tenant who left the orange door folks because they got tired of continual and regular rent increases - now when I sign up a new tenant I guaranty them no rent increases for at least a year, and point out that I haven't raised my rents to existing tenants for eight (yes 8) years. Think about the political capital (and referrals) that garners - if you signed up with me eight years ago you're still paying what you paid then. One reason I'm sure I have VERY low turnover, which means I don't need 7 day/week office staff -so altho I don't get more revenue from increased rents, I see similar gains from not having the employment issues other owners have. (and when I do lose a tenant through attirition, I raise the rent on that space or unit)
Like I said, I realize that this is not the norm in the industry, but since it's my business, it's how I choose to run it!

Back to the issue - the owner wrote me back a very nice letter letting me know he would honor the rates as set up/quoted earlier, and would get with the office staff who generated the letter. My response to that was to offer to pay more than quoted on one unit in the spirit of cooperation and professional courtesy. (I'm taking my motorhome out of one unit to use it for six months - I could have opted to cease renting the unit, but because of his kind and timely response, I'll continue to rent it as I might use it for something else - and now he won't be absorbing any electricity costs as these units have power to them that I use to charge the motorhome batt's)

The lesson here - when there's a discrepancy in what was quoted versus something sent later - stick with the first quote and you'll always get a lot more bees with honey than you will with vinegar!

(oh yes - if you're an owner, you might think about not continually raising rents - just because you might be able to get away with it doesn't mean you need to be one of the one percent'ers! LOL)

Wow, no rent increase for eight (8) years? And you think this is a good thing? You do realize you are loosing money. In eight years the electric bill for this property has gone up just under 30%. Your electric has not gone up? Your insurance and property taxes have not gone up? Everything that goes up, that you do not pass on, cuts into the profits of your company. Please tell me where you are, so we can retire there, where nothing ever goes up.

Like I said, it's my business and that's how I choose to run it. Life at some point is not all about money...and, as I noted there are positive trade-off's for how I run things. I was in the service business for 30 years and made sure I continually made a ever-increasing profit through various efforts, but after retiring and getting into this business, decided to do things differently. Guess what? I'm happy (and financially comfortable), and my tenants are happy! What more can I ask for?
FWIW - I have cut costs in other ways so that the increase in electric, for example, didn't cut into profits - sometimes when you buy these businesses there is a lot of waste and if you cut that, you can realize substantial gains. As for insurance and property taxes, for a variety of reasons those have stayed fairly level through the years, and I'm in Silicon Valley!
But I also realize if I ever go to sell it, due diligence will show that I've left a lot of money laying on the table - which could hurt you when selling. (or can help - a smart buyer would know they could raise rents right away and, still keep most tenants, and make more money)

Just to clarify - I'm not "losing" money, or I wouldn't be in the business. And remember, I said I do raise rents on vacated space/units, so I get increases in revenue that way. And trust me, since I only need office help two days a week, my costs are much lower than a facility that needs someone in the office six or seven days a week - that savings there is tremendous. Labor is generally the highest cost in a service business - my labor is so low you wouldn't believe it.

Since for about half those eight years I've been at or close to 100% occupied, I've had the luxury of doing things a bit differently - and the fact that it's my business, and I'm retired, allows me more freedom.

Originally Posted by RichardandBeverly

Wow, no rent increase for eight (8) years? And you think this is a good thing? You do realize you are loosing money. In eight years the electric bill for this property has gone up just under 30%. Your electric has not gone up? Your insurance and property taxes have not gone up? Everything that goes up, that you do not pass on, cuts into the profits of your company. Please tell me where you are, so we can retire there, where nothing ever goes up.

I'm with R&B here. We have been doing rate increase every 9 months and have steadily been at 96%+ for over a year now. That doesn't include the 2 standard rate increases we have implemented in the last 20 months. Our referral program is stronger now then it has been in 3-4 years. Why? It's because we offer GREAT customer service. We bend over backwards for them. We work with them when they are late.
Between saving in cost cutting, about 21K annually, and increases we have saw an increase in profit of nearly 55K in 2012 while maintaining occupancy.
All this to say, it's your business, the worlds not about money and its an honorable thing not to raise your rates but to cut services etc..

Advantage IT - just to clarify, I haven't cut services - just never increased them from the minimal office staff we and the prior owners always stuck with. But tenants have my personal phone number if they have an issue my on-site watchman can't handle, and I try and remain very accessible to everyone.
If it's any consolation, every year I do think about raising rates, and maybe this year I will!

That's way more accessable then any owner I have ever heard of....

MRV, we seem to be in the same spot as far as occupancy. We stay between 98 and 100%, I raise the rent on the yearly anniversary. I would think that in the future it will bite you. If not when you go to sell, and the prospective new owners figure out that after all this time with no increase, when they do it, there will be hell to pay. Or when you want to refinance. Also you price per square foot numbers will be in the dumps.