| Administration Fee | Self-storage facilities often charge a onetime administrative fee instead of charging a refundable or non-refundable security deposit. The administration fee is typically less than the traditional deposit amount. Some facilities collect administrative fees to offset the cost of processing paperwork for new rentals. |
| Abatement | Often referred to as free rent or early occupancy; may occur outside or in addition to the primary term of the lease. |
| Absorption Rate | The rate at which rentable space is filled. Gross absorption is a measure of total square feet leased over a specified period with no consideration of the space vacated during that same time. Net absorption is the amount of space occupied at the end of a period minus the amount occupied at the beginning, also considering space vacated. |
| Ad Valorem | A Latin phrase meaning according to value. This is a tax imposed on the value of a property, typically based on the local governments valuation of the asset. |
| Amortization Period | The length of time over which the principal portion of a mortgage loan is scheduled to be paid through periodic payments. The term of the loan is the length of time before payoff is due. |
| Assumption | Conveying property, with the buyer assuming liability for paying an existing mortgage loan. |
| Auction | A self storage auction is similar to a regular auction, but with extra rules. People will big how much they would pay for the contents of your storage unit, and whoever bids the most money pays that amount and takes the items home. |
| Autopay | Autopay is a software feature that automatically bills your customers’ credit card or bank account for the agreed amount on an agreed date. For example, your software would bill all of your autopay customers on the first of the month, saving you time that you’d otherwise spend collecting checks, counting cash, or otherwise managing your income. |
| Business Storage | Businesses often need extra space for seasonal items, pharmaceutical storage, and inventory. Self-storage is a good alternative to expensive leased retail space. |
| Call tracking | Call tracking is a software feature that monitors and logs every phone call that comes into or goes out of your facility. Call tracking can help you prove that you did contact a customer about their late payments, and it can help you see if your team is doing well following up on leads. |
| Cap rate | A cap rate (or capitalization rate) is a real estate term used to describe how much money a facility brings in every year (net operating income, or NOI) compared to how much the facility itself is worth. If your facility brings in $100,000 a year and is valued at $2,000,000, the cap rate of that facility would be 5%. The cap rate is mostly used by investors as a quick and dirty way to evaluate a facility. |
| Capital Expenditures | Expenditures that arrest deterioration of a property or add new improvements and appreciably prolong its life, as distinguished from expense items, which are considered part of normal operations. |
| Capital Gain | The profit on the sale of a capital asset such as real property, calculated as the sales price minus deductible sales expenses and the book value of the asset. |
| Capitalization Rate (Cap Rate) | The ratio of the first years net operating income (NOI) to the asking price, or the rate at which NOI is discounted to determine the value of a property. |
| Cash Flow | The revenue remaining after all cash expenses are paid. |
| Cash-on-Cash Yield | The relationship, expressed as a percentage, between the net cash flow of a property and the average amount of invested capital during an operating year. |
| Certificate of Occupancy | A document presented by a local government agency or building department certifying that a building or the leased area has been satisfactorily inspected and is in a condition suitable for occupancy. |
| Class B Properties | Properties with adequate design and construction quality (which may not be reflective of current standards and preferences). These typically command average rental rates and are generally well-maintained and desirable to most tenants. |
| Class C Properties | These properties offer adequate functionality but few amenities. Their physical condition is acceptable but may have some deferred maintenance. They generally command below-average rental rates and are usually in less desirable locations. |
| Class-A Properties | Properties featuring above-average design and construction quality. They generally command the highest rental rates and have a superior location in terms of desirability or accessibility. |
| Climate Control | Storage facilities that offer Climate Control will use reasonable efforts to avoid temperature extremes in these units. Units are considered Climate Control when units are kept warmer than the outside temperature in cold weather and cooler than the outside temperature in hot weather, through an HVAC or other system. Climate controlled units are ideal for items that are sensitive to changes in temperature and humidity levels. |
| Climate Control | Temperature control (with HVAC). |
| CMBS (Commercial Mortgage-Backed Securities) | Securities in the form of bonds or other financial obligations that are backed by a pool of mortgage loans on commercial real estate. |
| Comparables | A tool used to determine a propertys fair market lease rate or asking price, based on other properties with similar characteristics. |
| Computer Controlled Access | Storage units secured by doors/gates that are accessed by the tenant entering their pin code in a gate access system (the personal code is typically entered into a keypad -see keypad for more information). |
| Concessions | What landlords offer tenants to induce them to lease space, most commonly cash or the equivalent in the form of rental abatement (free rent). |
| Conduit Loan | A loan usually made by a securities firm that sells bonds to investors to raise money for the purpose of lending. The conduit is a financial intermediary that makes or purchases loans from originating lenders under standardized terms, underwriting and documents. When sufficient volume has been obtained, the conduit pools the loans for sale to investors in the CMBS market. |
| CRM | CRM stands for Customer Relationship Management, and this type of software helps businesses keep track of customers and potential customers. A good CRM will give your business new capabilities to interact with customers and leads. |
| Customer experience | Customer experience is the entire interaction a customer has with your business, from first learning about you until your relationship ends. This idea encompasses much more than simple customer service. A good customer experience means your customer was able to find and purchase what they need easily, that they were happy with the product provided, and that you were able to quickly solve any troubles they had. |
| Debt service | Debt servicing is the act of paying back your loans on schedule – this means keeping up with interest payments so you don’t fall further behind. This term is used often in real estate to benchmark the lowest amount of money you need to make to stay afloat. |
| Debt Service Coverage Ratio (DSCR) | The annual net-operating income from a property divided by the annual cost of debt service. A DSCR of 1 means the property is generating cash flow equal to the debt payments. Most lenders prefer to see a DSCR of 1.25 or better. |
| Default | Failure by renter to keep any of the promises in a storage unit rental agreement in a timely manner. |
| Defeasance | A provision in a commercial mortgage loan that allows the borrower to prepay the loan by purchasing U.S. Treasuries. In defeasance, the lender replaces the cash flow of the original loan with treasury securities paid for by the borrower; the property is released as collateral with the treasuries becoming the new loan collateral. |
| Drive-Up Unit | This unit type is often accessible from a main driveway. These units are positioned so tenants can drive right up to the storage unit door for easy loading and unloading of belongings. Drive up storage units are generally larger units (10×15 to 10×30). |
| Due Diligence | Activities carried out by a prospective purchaser or mortgager of real property to confirm the asset is accurately represented by the seller and not subject to environmental or other problems. |
| EBITDA | Earnings before interest, taxes, depreciation and amortization. |
| Economic occupancy | Economic occupancy is the measurement of the amount of money you’re making from your facility compared to the theoretical maximum. If you’ve been charging below-market rates, not increasing customers’ rates as your street rates increase, or not collecting all the money you’re owed, your economic occupancy will be low. |
| Effective Gross Income | The potential gross income less a vacancy factor and a collection loss amount. |
| e-sign | In self storage, e-sign stands for “electronic signature,” which is a legally binding signature completed on a smartphone, computer, tablet, etc. Self storage operators use some sort of electronic signature software to take a signature and verify that it is authentic when renting their units online. |
| Gate Access Code | Storage facilities that have a security access system will give tenants individual access codes (commonly referred to as PIN #’s) which will open the gate/door that secures the storage property. Individual access codes help to prevent non-authorized individuals from entering the facility. |
| GBP | Your business’s GBP is your Google Business Profile. This functions like your storefront on the web, and is the only way to show up in Google’s Local Pack rankings. This used to be called Google My Business. |
| Gross Building Area | The total building area, generally including all rental area plus any common areas such as the management office and apartment. |
| Hallway or Interior Unit | Units located in the interior corridor of a storage building. Vehicles cannot directly access these units. Most hallway/interior units are accessed through exterior service doors or by elevators. In most cases, these units are smaller in size ranging from 5×5 to10x15’s. |
| Hazardous Materials | Hazardous materials are items that are unsafe to store. Some examples of hazardous items include flammable or explosive materials, chemicals, fireworks, and gasoline. |
| Household Storage | If your household lacks closet space, a garage, or a basement, self storage is a good way to store your extra goods such as seasonal clothes or decorations, extra furniture, bikes, and cars. Self-storage is also useful if you are moving or trying to sell your house and need to clear clutter. |
| HVAC | Heating, ventilation and air-conditioning. |
| Ingress/Egress | Relates to the capacity and convenience of the entrances and exits of a property to vehicular traffic. |
| Institutional-Grade Property | Properties generally owned or financed by tax-exempt institutional investors such as REITs and pension funds. |
| Insurance | Self-storage facilities are generally not responsible for the contents of your unit so it is always a good idea to insure the goods you are storing. Self-storage insurance is almost always available to you at the time you rent your unit through the self-storage facility or through an independent third party who is referred by the self-storage property. Before you buy insurance, check with your own agent. In many cases, your homeowner’s or renter’s policy will cover you at no extra cost. |
| Internal Rate of Return (IRR) | A discounted cash-flow analysis used to determine the potential return of a real estate asset during an anticipated holding period. Put simply, it is the average annual yield on an investment, taking into account projected cash flow (usually after taxes) during the holding period and projected sale proceeds at the end. The sum of the cash flow and sale proceeds is divided by the initial investment (down payment) to calculate IRR. |
| Keypad | A security device generally tied into an access entry control system. This entry control system requires storage customers to enter a private access code in order to gain access to the self-storage property. For security purposes, most systems track when customers enter and exit the property. |
| Late fees | Late fees are monetary penalties that operators charge their tenants for paying late. So, if payment is due on the 1st of the month, and they haven’t paid by the 10th, they owe you X more dollars on top of the rent payment. |
| Lead | “Lead” is a marketing term referring to a potential customer who has made contact with your business. This can be someone who has called your facility, someone who has started a rental online, or simply someone who has visited your web page. |
| Lease | A self storage lease is an agreement between the storage operator and their tenant in which the tenant can use a storage unit for a certain period of time in exchange for paying a certain rate. The lease must be legally binding. Talk to your state storage association if you need help writing your lease. |
| Leverage | The use of credit to finance a portion of the costs of to purchase or develope a real estate investment. Positive leverage occurs when the interest rate is lower than the cap rate or projected IRR. Negative leverage occurs when the current return on equity is diminished by the employment of debt. |
| LIBOR (London InterBank Offered Rate) | A common loan-pricing index similar to the prime rate; the interest rate that international banks charge each other for large loans. |
| Lien | The operator of a self-service storage facility shall have a lien on all personal property stored within each leased space for rent, labor, insurance or other charges in relationship to the property. Additional information on storage unit liens are included in the storage rental agreement. |
| Lien | A lien is a legal right to assets used as collateral against debt – in layman’s terms, storage operators have a lien against the property stored in their units. If your tenant doesn’t pay the obligated rent, you can legally sell the stuff in the unit to make up the difference. If a unit is under default (meaning it hasn’t been paid for), it will be said to be “in lien” or “under lien.” Storage operators will follow a specific process of alerting the tenant, waiting, and eventually sending the storage unit to auction to recoup some of the money they’re owed. |
| Lien letter | A lien letter is a legally required contact notifying your tenant that you’re placing their storage unit under lien. Usually, this is in the form of certified mail or some other verifiable method of delivering the letter. |
| Loan-to-Value Ratio (LTV) | The ratio of the loan principal divided by the propertys appraised value. |
| Locker | A term used to describe the storage space a person rents. Lockers are also referred to as units, space, store rooms, or storage units. Depending on the storage facility, lockers or storage units come in a variety of sizes from a 5×5 (closet size) to a 10×20 (single car garage) and larger. When trying to figure out what size locker or unit you may need, it is often best to call your local storage operator. |
| Management Fee | The amount charged by an independent company for the day-to-day management of a property, typically based on a percentage of the propertys income. |
| Market Value | The highest price a property would command in a competitive and open market under all conditions required for a fair sale. |
| Mini Storage | A common term used to describe self storage, which is used by individuals or businesses to store household and commercial goods. Mini Storage is also commonly referred to as moving storage, mini warehouse, public storage, storage locker, storage center, or self-storage. |
| Month to Month Lease | When choosing a storage facility, this is something storage customers should be aware of. A month to month lease means the tenant pays monthly for as long as they need storage. This type of storage lease does not lock a tenant into a long term lease agreement. Most month to month leases start and are payable on the first of every month. |
| Move Out Notice | Required notice of tenant’s intent to vacate that is given to the storage manager. Specific move out notice requirements will be outlined in the storage rental agreement signed with the self storage facility. Refer to your rental agreement for move out notice requirements. |
| Net Leasable Area | The portion of the building designed to be occupied by tenants and upon which rental payments are based, also called rentable square feet. |
| Net Operating Income (NOI) | Total income less operating expenses, before mortgage payments and income taxes. |
| Non-Climate Control (Cold Storage) | An enclosed storage unit secured by the tenant’s own lock and key that is not protected from humidity and temperature extremes. This type of storage is ideal for items that are not sensitive to humidity and temperature swings. |
| Nonrecourse Debt | A loan that, in the event of a default by the borrower, limits the lenders remedies to a foreclosure of the property that collateralizes the loan. |
| Occupancy rate | In self storage, an occupancy rate is a measurement of how many of your storage units are full, compared to how many you have. There are different ways to measure this, but the simplest occupancy rate (called your physical occupancy rate) is the percentage of units you have rented, ignoring their size, amenities, and any other factors. |
| Occupancy | The percentage of space actually occupied by tenants. There are generally three ways to measure this Unit occupancy is the number of occupied units divided by total units; Physical occupancy is occupied square feet divided by gross leasable area; Economic occupancy is actual income divided by potential gross income. |
| Operating Expenses | The actual costs associated with operating a property, including maintenance, repairs, management, utilities, salaries, advertising, property taxes and insurance but excluding debt service, depreciation, amortization, capital expenditures and income taxes. |
| Overlocking | Overlocking a unit is applying a second lock over the top of the renter’s lock. Storage operators need to overlock a unit when the tenant hasn’t paid their rent – otherwise, the tenant could simply come take all of their stuff and disappear. By placing a second lock on the unit, which only your management team has the key to, you can demand that the customer pay rent before they take their stuff out. |
| Perishable Materials | Perishable materials should not be stored in a self-storage unit. Examples of perishable items include food or live animals. |
| Pharmaceutical Storage | Pharmaceutical representatives often store supplies in self-storage facilities; however, some products require climate control storage (for more information on climate control – see above) |
| Phase I | An Environmental Site Assessment (ESA) report prepared by a professional consultant that reviews the propertyland and improvementsto ascertain the presence or potential presence of environmental hazards. This typically involves the review of previous uses of the subject property and others in the immediate vicinity, a site inspection, and a report on findings by a qualified engineering/ environmental firm. This report includes recommendations for further testing (a Phase II), if deemed necessary. |
| Phase II | May be required if the Phase I uncovers potential environmental problems. Procedures typically included at this stage are subsurface-soil and water-sample tests and testing of any building materials suspected to be environmental hazards. This report confirms or disavows the presence of an environmental hazard and, should one be found, recommends additional review or mitigation efforts. |
| PMS | A PMS is Property Management Software, which is the foundational piece of software that runs a self storage business. Your PMS keeps track of tenants, information, billing, email, and more. Everything else you add to your facility needs to work with your PMS, like your gate software, your accounting software, etc. |
| POS | In self storage, POS stands for point of sale, and refers to the system you use to take payments from your customers. Usually a cash register, credit card scanner, bar code scanner, and computer constitute your point of sale system. Your POS should record transactions, print receipts, and actually process the transfer of funds from the customer’s bank to your account. |
| Payment processing | Payment processing is the act of your software system asking the customer’s bank to transfer money to your business. All of this is done online in moments through your point-of-sale system. If your customer is using a credit or debit card, accepting payment requires payment processing. Whenever you use your software to accept a card payment, it will send a request to the issuing bank or card company via the internet. The company will respond by approving the payment or rejecting it, and your system will let you know which happened after a moment. |
| Prepayment Penalty | A fee charged by the lender to allow the borrower to retire the loan earlier than its stated maturity. |
| Pro-rated Rent | When you move in, you will pay a pro-rated first month’s rent. For example, if you move in on August 12th, and your rent is $100 per month, you will pay (20/31)*$100 = $65. |
| Prorating | Prorating is when an operator charges a tenant only for the days they actually use a unit, rather than requiring the tenant to pay for a full month, even if they move out on the 3rd, for example. Some operators prorate rent, while others won’t. Be sure you have a plan in place before your tenant asks! |
| Recourse Debt | A loan in which the borrower is fully at risk (personal guarantee) to the lender for repayment of the obligation. |
| Rehab | Extensive renovation intended to cure obsolescence of a building or project. |
| REIT | If you go to a self storage association event, you’ll hear people talking (or complaining) about the REITs. REITs are real estate investment trusts, which use vast quantities of investor money to buy, build, and operate self storage facilities. You’ve probably heard of them – CubeSmart, Extra Space Storage, Public Storage, Life Storage, and National Storage Affiliates Trust. |
| REIT (Real Estate Investment Trust) | A business trust or corporation that combines the capital of many investors to acquire or provide financing for real estate. A corporation or trust that qualifies for REIT status generally does not pay corporate income tax to the IRS. Instead, it pays out at least 90 percent of its taxable income in the form of dividends, thus allowing its investors to avoid double taxation. |
| Rent | Payment made by the tenant for storage rental. In the self-storage industry, rent can be due on the first of each month or on the tenant’s anniversary date (date customer rented the unit). |
| Rental agreement? | A self storage rental agreement is an agreement between the operator and tenant to exchange money for use of a storage unit over a period of time. Rental agreement and lease are often used interchangeably, but rental agreements tend to be month-to-month and renew automatically, while a lease refers to a specific, usually longer, period of time. |
| Rental Lease / Rental Agreement | A legal contract signed by the tenant. A rental lease or rental agreement is required by most-every storage facility in order to rent a storage unit. |
| Replacement Cost | The estimated current cost to construct a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout. |
| Replacement Reserves | An amount set aside to pay for the eventual wear of short-lived assets such as HVAC equipment, asphalt, carpeting, roofing, etc. |
| Resident Managers | Managers who live on-site at a storage facility (referred to as on-site resident managers). |
| Revenue management | In storage, revenue management is a general term referring to paying attention to what rates you’re charging tenants and increasing them if they fall too low compared to your street rates. This can happen if you don’t increase the rates your long-term tenants are paying. However, raising your rates is a touchy subject! |
| Security | Devices or measures taken by a property owner to help protect storage tenants’ belongings. Common security devices include cameras, computer controlled access systems, door alarms, perimeter fences, resident managers and more. |
| Self Storage | Abbreviated term for self-service storage, and is commonly referred to as moving storage, mini storage, mini warehouse, public storage, storage locker, storage center, or self store. Self-storage facilities lease space to individuals storing household goods and other valuables, to businesses storing archived records, excess inventory, or pharmaceutical supplies, and to individuals storing recreational vehicles such as boats, campers, trailers, all terrain vehicles, and snowmobiles. |
| SEO | SEO stands for search engine optimization. It is the process of trying to make your online presence show up when potential customers search the web for storage. Google is the most important search engine, as it is used by the greatest percentage of people (89% or more). In general, SEO tries to put your website (or GBP) high up on the page of Search Engine Results (SERPs). |
| Square footage occupancy rate | Operators often talk about square footage occupancy because it provides different information than physical occupancy. Instead of the percentage of storage units currently rented, square footage occupancy measures the total space being rented compared to how much space you have. |
| Stabilization | When the income generated from a property is stable, consistent, and reliable. |
| Steel Lock | An individual lock that is weather resistant, corrosion resistant, and features anti-pick tumblers. |
| Trailing 12 | Income and expenses realized during the past 12 months, often used to determine net cash flow for self-storage properties. |
| Transfer Fee | A processing charge generated when a tenant moves (transfers) from an existing unit into a new unit at the same facility. |
| Vacancy and Collection Loss | An amount or percentage reflecting income loss (from potential gross income) due to vacancy and non-payment of rent by tenants. |
| Value-Added | A phrase generally used by advisers and managers to describe investments in underperforming or under-managed assets. |
| Zoning | The creation of districts by local governments in which specific types of property uses are authorized. |
