Timed the hours on a storage facility against a six-unit, and passive doesn't hold up

Question

I've been trying to decide between a small facility and small multifamily, so I asked two owners to log a month for me and I built the comparison out.

The 118-unit facility, self-managed, came in at 31 hours for the month. Nine of those were rate management, going through the roll and deciding who gets an increase. Six were delinquency, notices and phone calls and one auction prep. Five were lead response, because storage leads go stale in about four hours. The rest was vendor coordination, gate issues, and one lock cut.

The six-unit building came in at 19 hours, and eleven of those were a single water heater. No leasing that month, no turnover, nobody late. The owner said a bad month is 40 hours and a quiet month is four.

The pattern that came out is that storage hours are steady and small and constant, and multifamily hours are lumpy and occasionally awful. Storage never really goes to zero because the pricing work is continuous. Every unit is on a month to month agreement and every one of them is a decision you're making monthly.

The defensive argument for storage is real, the demand comes from life events that don't care about the economy. But the guide calls this passive ownership and I'm not sure 31 steady hours a month qualifies unless you hand it to third-party management, and at 118 units the fee stack makes that hard to justify.

So which is actually the passive one, and does the answer change if you're not managing it yourself?

carlos_nunez · Answer

31 hours sounds low to me for self-managed at 118 units, and I'd bet the log missed the interruptions. The hours aren't the cost anyway. The cost is that storage hours can't be scheduled. A lead comes in Tuesday at 2pm and if you answer Wednesday it's gone. A water heater can wait until you've finished lunch.

tashaford30 · Answer

Quarry's point about scheduling is the one that would decide it for me. I'm planning around a job. Nine hours of rate work I can do Sunday morning. Five hours of lead response I cannot, because the leads don't arrive on Sunday morning.

marcus_hale41 · Answer

The answer changes completely once management is involved, and that's where I'd focus. On the passive positions I hold, my hours go into reading reports and asking why a number moved, not into operations. That's maybe three hours a month per position, and the trade is the fee and the loss of control. At 118 units third-party economics are genuinely bad, which is why the truly passive version of storage tends to be either a much bigger asset or a position in someone else's, and both of those are different risks from the one Kestrel is comparing.

priya_n21 · Answer

This thread is answering the question I actually have, which is whether either of these is income without a second job. Sounds like neither, at that size.

luis_carrera · Answer

Marlow, I don't think that's quite it. 31 hours a month is a bit under an hour a day. That's a hobby, not a job, and the work is sitting at a computer adjusting rates rather than driving somewhere with a wrench. What I'd want to know is whether the rate management can be automated down. The revenue management software exists, and if it takes nine hours to three, storage wins the comparison on hours and wins it on tenant risk too.

devon_pierce · Answer

Software cuts the hours and adds a judgment problem. Automated rate increases don't know that your market has two competitors half empty and undercutting you. Somebody still has to look.

kevin_lombard · Answer

Basic question, why is there rate work every single month? With a rental the rent is the rent for a year. Is it that storage leases are month to month so you can change the price whenever, and so you kind of have to?

ehernandez74 · Answer

Juniper, that's the mechanism. Month to month means both sides can move, so street rates get adjusted with demand and existing tenants get periodic increases, and the whole revenue line is a series of small decisions instead of one annual one. It cuts both ways. You can reprice into a strong market within weeks, which apartments can't do. You can also lose a tenant in 30 days with no lease to hold them. Kestrel, the number I'd add to your log is dollars per hour rather than hours. Nine hours of rate work on a 214k gross line is probably the highest paid work either owner did that month.

Timed the hours on a storage facility against a six-unit, and passive doesn't hold up

8 replies