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Self Storage Owners: Benefit of using a Collection Agency
Posted 12/30/2010
Author Stock Markets Review
Link www.stockmarketsreview.com/realestate/2010/12/29/self-storage-owners-benefits-of-using-a-collection-agency/
 
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Owning a Self Storage facility can be one of the best investments you will ever make. Due to the economy of scale, Self Storage units can provide great cash flow for a real estate investment. Many Self Storage facilities require a payment in advance from the renter. This is great for a Self Storage owner because they know how much money is coming in for the next three or six months.

As the economy begun to dip in recent years, Self Storage facilities had to start conducting aggressive marketing campaigns to make sure they will continue to rent units out and keep the positive cash flow coming in. A good example is two free months with a twelve month contract. Another would be one month free with a twelve month contract. Another side effect of the downward spiraling economy has been that customers are not willing to commit to contracts despite the savings. Instead, they want to pay on a month by month basis. Self Storage owners are in survival mode, so they are willing to take on these types of agreements, but are exposing themselves to a very high risk group with not guarantees of consistent business.

The risk is that renters of units will default on paying rent on time. Renters are pulled in by several different reasons. Many are either unemployed or working for much less than they were in recent years. Some renters will be habitually late, but as long as they are paying within a reasonable time frame it will be accepted especially when late fees are factored in by Storage owners. However, what happens when the unit goes 60 days past due? Owners have mailed out the past due notice, managers have made the weekly calls, but nothing is working. Owners may also find that the contact number is disconnected or the letters are being returned to sender. Eventually an owner can cut the lock and auction the unit off. With this type of action extensive red tape and numerous man hours are involved. Many times the original rental amount will not be recovered after all other cost are considered. Before it gets to this point, Self Storage facilities should consider hiring a debt collection agency.

A local debt collection agency can contact the renter and in most cases even if the number on the original contract has been disconnected. Collection agencies have access to skip tracing tools that will usually locate the customer with a good phone number. In many instances, the past due renter will explain why they have went past due and will agree to set up a payment plan or pay the amount back to a current status. If a self storage facility is going to take on the additional risk to increase occupancy, they must be ready to have an aggressive collections plan in place or they will be swamped with past due units that are not producing positive cash flow. Another good tip is to have additional slots on the application form for contact phone numbers or a nearest relative contact.

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