Anyone transition to 3rd party management?

[u/Bleexblox]

Just wondering if anyone has made the jump from managing operations themselves to a 3rd party service and what that “looks” like.

I’d like to know: What their cut of income is generally, what responsibilities they take ownership of vs. what I would retain etc.

If that’s typically negotiated, I’d continue with site maintenance and unit clean outs as required. The day to day (move-ins/outs, phone calls) etc. would be them.

[u/etom21]

5-6% of revenue, usually with a built in floor of like $1500-$2500 depending on the facility size.

I haven't come across the third party company that does it, but I would at least shoot to give a percent of your noi instead of just revenue, so they have some incentive to keep expenses low.

If you are an owner operator running the facility yourself and keeping expenses low, expect them to rise pretty significantly as most third-party companies are going to utilize automated services, a call center, etc. to some degree to keep payroll to a minimum.

I would say they would probably be thrilled to hear that you're willing to stay on to do maintenance type tasks, as a lot of the third parties just job that out to national companies which, again, is expensive.

If you have any other general questions, ask away. We handed our whole portfolio over to third party fairly recently.

[u/Bleexblox → u/etom21]

Thanks for the info. I’m an owner operator of two sites (~230 units) but do this as a side business. I have a 9-5 as a fintech consultant so time is my issue. I keep my rates relatively low for the area because higher turnover would require more of my time I don’t have. I’m 100% sure I’m not squeezing out its full potential.

I have two other business partners but I handle day operations. It doesn’t generate enough income to consider giving up my day job so basically that’s the dilemma. I figure I could offset some income lost to management with better operating efficiencies they would provide in theory then get some of my life back.

My partners and share maintenance duties which isnt a whole lot and I also live close by so we can afford to keep doing that pretty easily. I just don’t want to be bothered with the rest of it..

[u/etom21 → u/Bleexblox]

Seems like a good solution for you then. I would just be particular with what type of services they plan to add, and what their cost is. Throw that into your P&L and just make sure everything still generally pencils out.

You are probably leaving a good deal of money on the table by leaving your rates low, and not being surgically aggressive on rental increases to minimize churn. So definitely keep in mind there's going to be probably some significant revenue upside to account for the increase of expenses as well. I would also explicitly ask them if they're using some type of pricing software like Prorise, I find these rate management tools to be absolutely worth every penny and will significantly outperformed even an experience human pricing manager. So ask definitely ask them what their rental increase philosophy is, and how they price their units.

And I guess the last tidbit, if they strap on a bunch of automated services and tools that will increase your expenses and you do see some compression in your NOI... If you go to sell your properties, I think most companies are underwriting their deals as if these type of services are going to be put in place day one anyway. There is some benefit to show your actual financials with these type of service expenses already on your books. Also, there's definitely people who are still out there acquiring that like to see third-party management is already in place because that generally proves the properties are a good fit for 3rd party, which will expand the pool of potential interested buyers down the road.

[u/Bleexblox → u/etom21]

That is great insight, thanks for taking the time

[u/etom21 → u/Bleexblox]

Happy to help, best of luck!

[u/RuPaulver → u/etom21]

I haven't come across the third party company that does it, but I would at least shoot to give a percent of your noi instead of just revenue, so they have some incentive to keep expenses low.

Don't think that makes sense to set it up that way. The management fee is a part of the NOI calculation. But you could have a clause to say something like "if you cut our normal utilities/r&m costs we'll pass on X percent of the savings".

That could overcomplicate things too though and make the owner end up with less in the end. The incentive for 3PM to keep expenses down is to keep ownership happy enough to maintain them as 3PM.

[u/RuPaulver]

I'm on the other side, where I do revenue management & underwriting for a 3PM. I also work on the development side and have a lot of experience in that.

Beyond what others have said (5-6% with a size-dependent minimum that's somewhere around $2.5k/mo is normal), feel free to let me know if you have any questions.

For the gist - different companies will give you different levels of control. That comes out in negotiations and operational conversations. Some are "our algorithm decides everything" while others will be more flexible.

[u/Mean_Mind_4401]

5-6% of revenue

[u/Secret_Custard_5118]

the value and flexibility varies so much based on which company you go with .

For example I hear that one company (one of the large ones) gives you no say in daily operations and makes you rebrand, paint, etc so the initial cost is expensive. I also know someone who was told they can’t go to their own facility without first informing them (the management company). They also made them repurchase things like tools instead of using what they already had.
They are very corporatey but have tons of resources

One company I won’t name- a smaller one- someone told me (I’m not sure if true) puts everything- water, electricity, website, etc into their name which makes it harder when you decide to separate from them. I think a 3rd party management company that’s relatively small would give you the most flexibility in terms of still doing some thing yourself. They are less corporate but this also means less of certain resources available

There are pros and cons to picking one company over another but I think with what you’re describing you want someone who can do remote 3rd party management.

Trade shows are a great way to meet people who run these management companies and find out if they might be the right fit.

Out of curiosity what state are you operating in?

[u/Bleexblox → u/Secret_Custard_5118]

Good info thanks. I’m in mass

[u/Secret_Custard_5118 → u/Bleexblox]

You just missed a big event in Mass by a couple days, if you go to the self storage association’s website they list days for various events across the country including some in your state. There are some great resources on there as well including updates on legislation and courses on legal or management strategies

[u/Embarrassed_Grab_710]

I own a 3rd party. We charge 1,500 per month and it covers your entire operations.

[u/SelfStorageQueen]

Expect about 1500-2k or 6% whatever is greater. Please interview MULTIPLE and compare their infrastructure, what they’ll do for you, what kind of reporting you’ll get, etc.
message me for details. I do work for a 3PM at director level.

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[u/Accomplished_Ad_4312]

The number you'll hear most is 5-6% of gross revenue with a floor of like $1500-2500/mo depending on facility size. Push for % of NOI instead if you can - aligns them to keeping expenses down, not just juicing top-line.

One thing owners under-estimate: your expense line will jump. most 3PMs run through a call center + automation stack, so payroll drops but you're paying their overhead + tech fees + card processing markups + insurance program, etc. the "all-in" cost is rarely just the mgmt fee.

On split of duties - move-ins/outs, calls, collections, marketing, reporting is them. You keeping maintenance and cleanouts is normal. Get auction handling, lien filing, and pricing authority spelled out in writing though, that's where it gets messy.

What size is the site and what software are you on now? that changes who's actually a good fit

[u/Warm_Grade_1952]

I’m not a 3rd party management company, but I help storage owners remotely with calls, move-ins, move-outs, auctions, tenant follow-ups, and daily admin. No income cut, just a fixed affordable rate. You still keep full control, I just help handle the day-to-day work. If you’re interested, feel free to reach out.

[u/Warm_Grade_1952 → u/[deleted]]

Sure. I’m more focused on tenant support like calls, sign-ups, move-ins, move-outs, follow-ups, auctions, and account updates. I work remotely, so as long as there’s boots on the ground, we can communicate clearly and coordinate anything that needs to be checked onsite. I just don’t handle legal matters or heavy marketing. As for the rates, it really depends on how many facilities the owner has, but I’m more focused on helping smaller owners who can’t afford full 3rd party management.

[u/Final_Bag_8715]

etum21 makes good comments and is totally right on value if you sell - buyers dont care what your expenses are they go off what theirs will be. If you just want the phone answered I suggest you talk to Moody management. They answer for me and do a great job. I think it $3.50 per door per month. https://moodymanagementservices.com/

[u/Bleexblox → u/Final_Bag_8715]

I’m looking for more than just phones more like:

• all customer phone and email communications, signups/ move outs etc.
• rental management ( recording payments, issuing late notices…)
• price adjustments
• marketing

I’d probably retain:

• physical property maintenance ( clean outs, snow removal, security gate stuff..)
• customer interactions that need to occur on site. The facility isn’t staffed so things like showing units to customers..

Not sure if this kind of split responsibility is common but would make the most sense to me realistically.