Lessons from a mini-storage owner

Larry Haug, owner of Haug Steel Construction, Crooks, S.D., knows a lot about the mini-storage business as both a contractor and a mini-storage owner. He has over 250 units in a rural community located about 8 miles outside of Sioux Falls, in a complex of about 10 buildings. The rental units are conveniently situated next to the offices of Haug’s construction company.

Haug says he became exposed to the mini-storage business in the 1980s when he started building for other people as a dealer for Butler Buildings. “That’s how we originally got into the business ourselves,” he explains. Today, he is a dealer for Sentinel Buildings, which also offers mini-storage buildings in its line.  

“We got in, in 1990 or ‘91 and we thought it was too late,” Haug says of going into the mini-storage business. “So we built a 40 x 100, just a little building, and that was 20 units. It took almost a full year to fill it, but we thought that was a good deal. So we put another one up and that one took less time. And ever since, with every building it has taken less time to fill.”

As he discovered, the 1990s were not too late, but in more recent years the climate has changed. “Anything commercial has declined – maybe that’s the financing and maybe it’s because people are leery of going to the bank, but we’re also in ag and that’s gone through the roof,” he observes.

And while the mini-storage business has changed for Haug the contractor, Haug the mini-storage owner hasn’t stopped building storage units. “As they fill up, and as the finances warrant, we build another building,” he says.  

“As builders, for us, the real reason we got into it was so we would have something for our crew to do every winter,” he says. “I’ve done that every single year since the first, and our buildings are 99 percent full right now.

Most mini-storage owners Haug encounters now are repeat customers. “The majority of our [customers] will be in communities under 15,000 people, and they’ll generally start with 20 units in a building and add to it.” It’s a method Haug suggests to newcomers.
He’ll also suggest that owners start with a building that has a majority of mid-sized units. “10 x 20 units, the most common unit, is easily rented,” he says. “Start with that until you start to get full, then expand to 10 x 25, because that takes care of boats, especially if you’re near any body of water, then you can grow to bigger units for mobile homes or contractor shops.”

Units in more populated areas can be smaller, but Haug doesn’t see a great advantage to units that are 5 feet x 5 feet or 5 feet x 10 feet unless it is conveniently located in a city of about 15,000 people or more. “It’s smart for those guys, on the end walls of their buildings, to have some 5 x 5’s or 10 x 10’s,” he says, “because they’re a good product where people are right there and able to come and rent them.”

If your units are 8 miles out of town, like Haug’s, however, smaller units are generally not worth it. “There are more defaults on smaller units than larger units. With the big units, they have a lot more to lose,” he explains.

A customer also is not likely to go extra distance for the few dollars a month they might save in rent. “If they’re renting a small unit for $20 a month, they’re not going to travel farther to save $3 a month to do that. But if they can save $15 a month by driving out to the country, they’ll do that,” he says.

If you do plan to build, Haug offers these additional observations and suggestions:
• “Have a maintenance program and follow up on things.” Most of your maintenance issues will be parking lots, driveways and electrical lights.
• Accept that theft is part of the business but be proactive with deterrents. “You’ll have people cutting doors and tearing doors off. You’ll have an ex-spouse breaking in; they don’t have the combination to the lock or key, so they might take a chain and pull the door off. All that good stuff comes with it.” He swears by good latches. “If it’s an extra $75 more a door, spend the money. You won’t have to spend it later on.”
• Use metal not wood. “I’m a steel building dealer through Sentinel and I’m wood frame dealer through Lester,” he explains, “and I will not build anything other than an all-steel mini-storage building. It absolutely has to have a raised foundation with sealed poly under it, and blanket insulation to prevent drippage. You’ll get frost under the floor if you don’t have a seal in the concrete, you’ll get dripping from the ceiling if you don’t have a vapor barrier.”
• Map out your property. “Know what you’ve got, know where your expansion area is, and then talk to your builder, someone who’s done it, otherwise you waste a lot of square footage. We looked at a lot of units before we went into the business and we saw a lot that were too tight and there was a lot of damage to the doors. We’ll produce $2.70 square foot return on the building itself, so the more land you waste the more yearly income you waste. But if the customer can’t get in or they can’t get out, they won’t come back.”
• Mini-storage can be a nice secondary income. “If you’re an existing business, this is a nice add-on, especially if you’re close to your existing business.”

As a final word, Haug has some tough-love advice to potential mini-storage owners: “A lot of guys will say, ‘that’s a pretty good business, isn’t it?’ And I’ll tell them: You know what? It’s a business. It’s like any other business: it’s as good as you can make it or it’s absolutely as tough as any other business. You have headaches, you have repossessions, you have deadbeats, you have all the stuff that goes with a business, and there is no such thing as easy money.”  – By Sharon Thatcher, Rural Builder magazine

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