Storage Express, which operates more than 100 self-storage facilities in five states, has completed the expansion of its Clarksville, Ind., location. The property at 910 Woodstock Drive now boasts 85,000 square feet of storage space in 746 climate-controlled units. It also features a 24-hour rental center and 62 security cameras. The site is just off Veterans Parkway, minutes from Interstate 65 and the Interstate 265 beltway around metro Louisville, Ky., according to a press release.

“This Clarksville property will serve as our hub for metro Louisville. Several of our field-service reps will based out of this location, from which we’ll continue our expansion in the Southern Indiana/Louisville metro market,” said Jefferson Shreve, owner and president.

Earlier this month, Storage Express purchased a dozen Storage General facilities across Central Illinois from the Plummer Family. The acquisition added 370,000 square feet of storage space and more than 2,000 units to the company’s portfolio. It includes two new sites and 10 locations that have available land for expansion.

Founded in 1992, Storage Express operates 106 self-storage in Illinois, Indiana, Kentucky, Ohio and Tennessee. It has offices in Bloomington, Indianapolis and Jeffersonville, Ind. The company has a half-dozen expansion and new build projects underway throughout Indiana, the release stated.

Public Storage Inc., a self-storage real estate investment trust (REIT), has opened a new facility in Frisco, Texas. The two-story property is the second the company has opened in the city since 2015, according to a press release.

The location at 2047 Witt Road offers more than 750 climate-controlled units. It’s near Farm to Market Road 423, the Dallas North Tollway expressway, and Lake Lewisville, a reservoir in North Texas. It’ll serve the communities of Frisco and Little Elm, which saw 40 percent to 64 percent population increases between 2010 and 2016. The area, which is about 30 minutes from Plano, Texas, boasts a low cost of living and new housing projects, the release stated.

“People moving to Frisco are moving from cities across the country, and they’re turning to Public Storage because it’s a trusted brand name that they know,” said Miranda Balduf, a facility manager in North Texas.

Earlier this year, Public Storage purchased a six-property portfolio in the Dallas-Fort Worth Area. The facilities total approximately 430,000 square feet of storage space in more than 3,300 units. The REIT also opened a new facility in Richmond, Texas, a suburb of Houston, in late 2017. The five-story property features more than 1,200 climate-controlled units and serves the master-planned communities of Aliana Houston, Harvest Green and Long Meadow Farms.

Based in Glendale, Calif., Public Storage has interests in 2,392 self-storage facilities in 38 states, with approximately 159 million net rentable square feet. Operating under the Shurgard brand name, the company also has 223 facilities in seven European countries, with approximately 12 million net rentable square feet.

Source:
Business Wire, Public Storage Opens New Frisco, Texas, Storage Facility

Crowdfunding has become a popular way to fund various real estate projects; however, self-storage has been a bit late to the party compared to other asset classes. Here’s insight to how crowdfunding works, the various platforms available and its application to the storage industry. Can this type of financing work for your next investment?

An Alternative Source

Crowdfunding is a way of raising money online from multiple investors who typically invest smaller amounts and, therefore, have a smaller equity stake. It was made possible in April 2012 by the Jumpstart Our Business Startups Act, which removed the barriers to publicly marketing private securities. Title III, also known as the Crowdfund Act, has drawn the most public attention because it creates a way for companies to use crowdfunding to issue securities, something that wasn’t previously allowed.

This is of particular interest to self-storage investors and developers who face funding challenges as they look to grow their portfolios. Banks tend to vary in their appetite for self-storage loans, and many simply don’t make loans in the $1 million to $5 million range. Furthermore, many community banks, credit unions and even the Small Business Administration face regulations on the amount of loans they can make to any one borrower.

Crowdfunding attracts investors who can write a check for as little as $1,000 or $2,500 to participate in a project. The end result is a win-win: Developers and promoters enjoy a whole new source of funding, while invidividual investors who were sitting on the sidelines can contribute to commercial real estate investments.

How the Platforms Work

Crowdfunding has become popular as more people become disenchanted with the up-and-down nature of the stock market and investors who aren’t achieving their desired yields. It provides a way for investors to obtain a small piece of ownership in a hard asset such as a self-storage facility, which until recently, was only available to accredited investors or those who could afford the minimum outlay of $25,000 to $50,000.

Platforms like RealtyMogul, Crowdstreet, Fundrise and others fully vet the investment and the principals who are bringing it to market (the promoters) before making it available to their communities. They earn a fee for publishing the investment on their site and raising the capital, plus additional fees for underwriting, offering preparation and marketing services, investor portals and, in some cases, ongoing asset management.

The benefit to the promoter is not having to handle time-consuming investor questions and concerns. He only communicates with the crowdfunding platform, which in turn communicates with its investor community.

Most platforms like to see existing self-storage facilities that possess a value-add component. In other words, they prefer deals that cash-flow out of the gate, or those that are projected to cash-flow shortly thereafter, as that’s what most of their community is seeking. You’ll also see development and conversion projects being promoted, but it’s usually ones that are further along in the process, with a shorter waiting period to stabilization. Again, the platforms take great care to perform due diligence before introducing offerings to their community.

The biggest challenge to crowdfunding a storage project is finding one with enough yield to offset the equity splits and asset-management fees charged by the platform. A traditional broker-dealer relationship involves a one-time fee or percentage for raising the capital; but because the crowdfunding group is charging multiple fees, the yield to investors is usually lower. As a result, self-storage promoters prefer to use crowdfunding on projects with higher yields and the ability for to not only cash-flow but to earn significant income in year one.

Improved Access

Gaining access to real estate is becoming easier and requires smaller minimum investments. In fact, RealtyMogul recently launched its first real estate investment trust (REIT), open to nearly all investors with a $10,000 minimum investment. The REIT intends to invest in a variety of assets, including self storage.

For storage operators who’ve been raising money from friends and family, the traditional brokerage channels, or institutional investors, crowdfunding offers an alternative. It takes the traditional model of raising capital and removes the middleman, connecting borrowers directly to investors. The majority of these investors are tech entrepreneurs, doctors or lawyers. Could they get five friends together to purchase and operate a self-storage facility? Perhaps, but the risks are too high, as they don’t have the time to learn the industry, find a suitable facility, and then operate it once they acquire or develop it.

A Case Study

Inspired by the peer-to-peer lending and crowdfunding phenomenon, U-haul International Inc. started its own “Investors Club.” The online platform offers asset-background directly to accredited and non-accredited investors in all 50 states. Called “U-Notes,” the investments are backed by specific assets such as U-Haul self-storage locations, trucks, trailers and other moving equipment. Opportunities are posted weekly, allowing investors with as little as $100 to start earning interest within a week of subscribing.

U-Notes have become a complementary form of borrowing for U-Haul and work in conjunction with the company's traditional financing programs. Another benefit is the self-directed nature of the program eliminates the need for traditional lenders and other money brokers.

Investors receive a fair return without paying fees or commissions, and U-Haul enjoys favorable financing terms on the capital that’s raised through the program. So far, the Investors Club has raised and invested more than $121 million for its members of U-Notes.

The Future of Crowdfunding

Crowdfunding will continue to grow exponentially, but there’ll always be those who prefer a traditional approach to investing. In addition, the self-storage market has been on a tear in recent years, and there aren’t enough deals being offered to the pool of capital that's chasing the asset class. That will change as interest and capitalization rates increase. Furthermore, there are fewer sellers, and they know they have to sell for less money. That will cause some of the equity folks to drop out of the market, and crowdfunding will become more attractive to asset managers and promoters looking to grow their portfolio.

No matter where you are on the spectrum—passive investor with some money to put into hard assets or a self-storage professional looking to grow a portfolio—crowdfunding has proven to be a beneficial addition to our economy and is worth learning more about.

Scott Meyers, founder of Self Storage Profits Inc., has been involved in the self-storage industry as a developer, owner, syndicator and operator since 2005. He owns and operates 22 facilities in nine states. His community, www.thestoragemastermind.com, consists of equal parts owner/developers and private-equity investors who partner on select projects nationwide. To reach him, e-mail [email protected].

Whether you’re looking to buy, sell or simply maintain your self-storage property, understanding the factors that determine real estate and business value is an important part of your investment. Written by valuation experts Michelle Gigowski and Timothy Moffit, “What's It Worth? Making, Managing, and Measuring Value: Self-Storage Facility” applies theory to help owners and investors understand how value is made, managed and measured within the self-storage asset class.

The authors have experience as educators, analysts, appraisers and turnaround consultants, which enables them to help readers connect the dots between valuation theory and practice. Topics covered in the book include facility financial statements, external and internal value drivers and destroyers, valuation creation and facility-turnaround tips, 10 reasons to buy self-storage, valuation approaches and models, and more.

Published by Value It Press, the book is part of a “What’s It Worth?” series authored by Gigowski and Moffit. Additional titles examine valuation for mobile home parks and self-serve car washes.

Visit the ISS Store for full product details.

RDS Contracting Inc. is building Silverhawk Self Storage on a vacant parcel at 30470 Commerce Court in Murrieta, Calif. The 900-unit facility will be just a few blocks east of the intersection of Murrieta Hot Springs and Winchester Roads, in the French Valley area. The project was approved in 2003, according to the source, and is expected to open this fall.

The property will be operated by San Diego Self Storage (SSDS). It’ll feature the company’s “first price guarantee,” climate-control units, onsite resident management and use of a free move-in truck, according to the SDSS website. About one-third of the units will have drive-up access.

Based in Lakeside, Calif., RDS specializes in commercial construction including below-grade, conversion, multi-story, RV-storage and other self-storage projects.

Founded in 1972, SSDS has a network of 18 self-storage facilities in San Diego County. The company is locally owned and operated.

Source:
Temecula Valley Development, RDS building new storage facility in French Valley

Public Storage Inc., a self-storage real estate investment trust (REIT), has promoted Natalia N. Johnson to senior vice president and chief human resources officer, and appointed Ryan C. Burke as vice president of investor services to replace the retiring Clemente Teng.

Johnson joined Public Storage in 2016. She has more than 18 years of leadership experience, including senior-management positions in human resources (HR), technology and operation with Bank of America, Coca-Cola and Countrywide Financial. In her HR roles, she was responsible for strategy and execution for talent acquisition and management, organizational and leadership development, compensation planning, employee relations, and HR information systems, according to a press release.

Teng, who is set to retire next month after 13 years with Public Storage, will turn over his role to Burke as the REIT’s primary contact with investors and shareholders as well as those of its affiliates, the release stated. Burke has nearly 15 years of experience in consulting, investment banking and equity research. He was most recently a senior analyst at Green Street Advisors LLC, where he led the firm’s coverage of the self-storage sector.

“Natalia’s multi-faceted experience will position her well for continued success at Public Storage,” said Ronald J. Havner Jr., CEO and board chair of Public Storage. “We are grateful to Clem for his meaningful contributions and commitment to the company, and wish him all the best in his well-deserved retirement. We welcome Ryan to the Public Storage team.”

Based in Glendale, Calif., Public Storage has interests in 2,392 self-storage facilities in 38 states, with approximately 159 million net rentable square feet. Operating under the Shurgard brand name, the company also has 223 facilities in seven European countries, with approximately 12 million net rentable square feet.

Source:
The Virginian-Pilot, Public Storage Announces Management Changes

Update 4/27/18 – The Phoenix North Gateway Village Planning Committee unanimously approved the Brexton self-storage proposal with a 5-0 vote on April 12. Brexton representative Melanie Wollenberg promised the committee the facility would not be open 24 hours per day and would be closed on Sundays, according to the source. The developer also agreed there would be no outdoor storage allowed.

“We want to be a good neighbor, and we want the neighborhood to use our building,” Brexton said during the meeting.

The North Gateway recommendation means the project will move to the Phoenix Planning Commission, which will consider recommending the special-use zoning change needed.

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2/9/18 – Real estate developer Brexton LLC is seeking zoning approval to build a two-story self-storage facility in Phoenix. The proposal will be considered tonight by the Phoenix North Gateway Village Planning Committee, which advises city officials. No action or approval is expected, according to the source.

The proposal includes the development of a 117,000-square-foot building on nearly 4 acres near North Valley Parkway and Canotia Place. The facility would be between the Ironhorse at Tramonto apartments and Casitas at Tramonto, a multi-family complex under construction.

High Range Partners LLC proposed a similar project for the same lot in 2016. The developer withdrew its plans after residents opposed the project, the source reported.

Founded in 2001, Brexton specializes in commercial construction, financing services, property management, renovation and real estate development.

Source:
North Phoenix News, Tramonto Self-Storage Proposal Back on Table
North Phoenix News, Tramonto Self-Storage Plans Pushed to Phoenix Planning Commission

 

Self-storage properties are constantly changing hands, and Inside Self-Storage is regularly notified of these market transactions. Many are covered in detail on the ISS website and available for viewing on the “Acquisitions and Buying” topics page. Following are additional acquisitions and sales that weren’t covered.

Bargain Storage in Glendale, Ariz., was sold for $3.13 million. The property at 4616 W. Grand Ave. comprises 45,146 square feet of storage space in 325 units. The buyer and the seller were represented in the transaction by Bill Alter, managing director for Rein & Grossoehme Commercial Real Estate.

Big & Safe Self Storage in Leander, Texas, was sold to Montfort Capital Partners LLC, a Dallas-based real estate investment and brokerage firm. Built in 2004 and renovated in 2014, the 4.6-acre property at 11800 Hero Way W. comprises 60,475 square feet of rentable space in 482 units. The buyer and the Vermont-based seller were represented in the transaction by John Arnold, Bill Bellomy and Michael Johnson, brokers with Bellomy & Co.

Drexel Hill Storage in Drexel Hill, Pa., was sold for $465,000 to a private investor. The 0.3-acre property at 690 Burmont Road features three buildings. The buyer and the seller were represented in the transaction by Investment Real Estate LLC (IRE).

An Extra Space Storage facility in Totowa, N.J., was sold for $19.5 million to a public company. The property at 930 Riverview Drive comprises 91,000 square feet of storage space in 1,500 units. The transaction was brokered by The Hampshire Real Estate Cos. and Tulfra Real Estate.

Fairfield Self Storage in Fairfield, Calif., was sold. The facility at 606 Parker Road comprises 66,720 rentable square feet of storage space in 515 units. The buyer and the seller, a private investor, were represented in the transaction by Devin Beasley, investment advisor, Luke Elliot, director, Daniel Kuchugurny, associate, and Michael Mele, investment specialist, with Marcus & Millichap (M&M).

Fenton Road Mini Storage in Grand Blanc, Mich., was sold. The property at 7298 Fenton Road contains 260 units as well as an office/warehouse building. The buyer and the seller, a limited liability (LLC) company, were represented in the transaction by Tom Berlin and Zach Munce, investment specialists with M&M.

Kennedale Self Storage in Kennedale, Texas, was sold to a Dallas-based owner/operator. The 2.29-acre property at 813 E. Kennedale Parkway comprises 36,810 square feet of storage space in 324 drive-up units. The buyer and the seller, a local private investor, were represented in the transaction by Danny Cunningham, senior vice president, and Brandon Karr, first vice president of investments, for M&M.

Midway Storage & Rentals Inc. in Augusta, Ga., was sold to a private investor. The facility at 1735 Barton Chapel Road comprises 21,664 rentable square feet in 175 units. The buyer and the seller, a private investor, were represented in the transaction by Mele and Brian Fulton, an investment specialist, with M&M. Fellow broker Michael J. Fasano assisted.

Rita Ranch Self Storage & Car Wash in Tucson, Ariz., was sold for $4.2 million to a Phoenix-based LLC. The 5.6-acre property at 7850 S. Rita Road comprises 23,350 square feet in 230 units. It also contains 161 vehicle-parking spaces, and a carwash. The storage units and the self-service portion of the carwash were built in 2000. An automated carwash and other services added in 2009. The seller, a Tucson-based LLC, was represented in the transaction by Cameron Glinton and Christopher R. Secreto, investment specialists with M&M.

Secured Self Storage in Waterford, Mich., was sold to an out-of-state buyer. Built in 1982, the facility at 4303 Highland Road comprises 72,125 square feet of storage space in 555 units. The buyer and the seller, an LLC, were represented in the transaction by Gabriel Coe and Brett R. Hatcher, investment specialists with M&M. Fellow M&M broker Steve Chaben assisted.

Sierra’s Glen Self Storage in Harrisburg, Pa., sold for $2.25 million to a private investment group. The 4.6-acre property at 5407 Locust Lane is comprised of two buildings, a rental home and an office. The facility contains more than 235 drive-up storage units. The buyer and the seller were represented in the transaction by IRE.

SpaceMax Storage in Greenville, S.C., was sold to an out-of-state buyer. The three-story property at 305 McAlister Road comprises 74,360 rentable square feet of storage space in 702 units. The seller, Childress Klein Properties Inc., was represented in the transaction by Ashley Compton, national director with Collier’s International.

Springfield Storage Depot in Springfield, Ohio, was sold to an out-of-state buyer. The 6.4-acre property at 1215 N. Belmont Ave. contains 12 buildings comprising 69,275 rentable square feet of storage space in 509 units. The buyer and the seller, an LLC, were represented in the transaction by Coe and Hatcher.

Stor-U-Self in Peabody, Mass., was sold to Utah-based Wasatch Storage Partners LLC, a private-equity group. The 1.6-acre property at 119 Foster St. contains a three-story building comprising 39,600 rentable square feet of storage space in 488 units. The seller was represented in the transaction by Kenneth Cox, executive managing director, Geoffrey Millerd, vice chairman, and Aaron Swerdlin, vice chairman, for NKF Capital Markets.

Storage Depot in Beaumont, Texas, was sold to a West Texas investor. The 3.1-acre property at 6320 College St. comprises 58,970 rentable square feet of storage space in 506 indoor, climate-controlled units. The seller, a local developer, was represented in the transaction by Loeffler Self-Storage Group.

StorageVault Canada Inc. has agreed to acquire three facilities in Ontario, Canada, from separate sellers for $68.7 million. The purchase price is subject to adjustments, and is payable by the issuance of $12 million of StorageVault common shares, with the remainder paid with funds on hand and first mortgage financing. The acquisitions are subject to initial conditions.

With offices in Atlanta as well as Austin and Houston, Texas, Bellomy & Co. focuses on the sale of self-storage, industrial, office and retail properties nationwide.

Colliers is a global commercial real estate services firm employing more than 16,000 professionals who operate out of 554 offices in 66 countries. The company offers a variety of services for investors, business owners and developers.

Hampshire is a privately held real estate firm and real estate investment-fund manager with more than 60 years of experience.

Since its inception in 1998, IRE has provided brokerage, construction, development and management services to self-storage owners and investors.

Loeffler specializes in self-storage real estate in California and Nevada, having closed more than 80 transactions in those states.

Founded in 1971, M&M is a commercial-property investment firm with more than 1,500 investment professionals in offices throughout Canada and the United States.

NKF provides brokerage transaction and financial services to the self-storage industry. The group has completed more than $6 billion in transactions across more than 540 properties.

Founded in 1993, Rein & Grossoehme specializes in the sale of investment properties and retail as well as office and industrial leasing.

Based in Rochelle Park, N.J., Tulfra is a real estate firm specializing in commercial and municipality properties.

Sources:
PR Web, NKF Capital Markets Self Storage Group Announces Sale in Boston Suburb of Peabody, MA
Nasdaq, StorageVault Enters Into Agreements to Acquire Three Self Storage Stores in Ontario for $68.7 Million
Rebusiness Online, Tulfra Real Estate, Hampshire Companies Complete Sale of 91,000 SF Self-Storage Facility in New Jersey for $19.5M
Rejournals, Marcus & Millichap Sells 260-Unit Self-Storage Facility in Michigan
Commercial Property Executive, Hatcher Storage Group Brokers Sale of OH Facility

One of the greatest risks to owning a self-storage facility is employee theft. Not only can it result in loss of income, it can lead to an improper lien sale if the rent the customer paid is being pocketed instead of deposited into the business bank account.

To minimize this risk, self-storage owners must get comfortable with regularly auditing their properties or outsourcing the task to someone who’ll take responsibility for it. Audits aren’t only important to detect theft but to prevent it, and to close the gaps in staff training. You should also audit to confirm your policies and procedures are followed, generate more money, and ensure the business runs smoothly.

Factors to Theft

Although employee theft can occur anytime, there are three factors that make it more common. They are motivation, rationalization and opportunity.

Motivation occurs when financial pressure increases, causing a staff member to consider theft when he otherwise wouldn’t. When bills are piling up, a spouse or child is sick, or someone in the family loses a job, he may consider stealing to make ends meet. This isn’t to say that all employees will steal when these situations occur, but when motivation is present, the likelihood of theft increases.

Rationalization is when an employee makes the theft make sense for him. If he’s been employed by you for a long time and sees the amount of money deposited each month, he may feel entitled to his “fair share.” People who steal will rationalize that the money belongs to them because they’re working hard for it. They may also plan to pay it back or think you won’t notice it’s gone.

You don’t have much control over someone else’s motivation or rationalization, but you can control the opportunity! This type of theft happens when regular audits aren’t conducted. Even if your staff aren’t stealing, they may be giving away more in discounted rent and waived fees than you’d like. It’s much easier to have a customer stop yelling by waiving a $20 late fee than to explain why he has the fee and try to resolve the situation another way. If the policy on late fees isn’t clear, your staff may think it’s fine to waive it, but those fees add up.

Conducting regular audits, reviewing reports and giving feedback to staff on their performance will help avoid theft and ensure employees do a better job. Most managers genuinely want to do a good job; they just aren’t always trained in how.

Basic Auditing

How do you conduct an audit? I like to regularly check for “the big wins” and look at the smaller details in between. The biggest win in auditing a self-storage property is to compare the reality of the site with the information logged in your facility-management system.

Here are some simple steps you can follow: First, print a unit map and a secondary report, such as a walk-through or rent-roll report. Then walk through the property and confirm the status of each physical unit matches what’s on the report.

If the system shows the unit as rented, it should have a tenant lock on the door. If there isn’t a lock, you need to find out what happened. Did the tenant just move in or out? Did he forget the lock? Did he get robbed?

If the report shows a unit as vacant, the space should be empty. Open it and check. Some operators put a green lock or tag on vacant units. If the space isn’t empty, whose items are in there? How long have they been there? Who are they paying?

If the unit is noted as delinquent, it should have an overlock on the door next to the tenant lock. Locking the tenant out of the gate isn’t enough. If your manager isn’t overlocking the unit, it could be a sign that he’s pocketing the monthly rent and doesn’t want to alert the tenant.

If the unit is marked as being in auction status, again, it should have an overlock next to the tenant lock. If the tenant lock has already been cut, add a seal or wire tag to prove no one entered the unit after it was removed.

If the unit is marked as unrentable, there should be a plan to get it back in operation. I’ve seen managers make units unrentable only to rent them off the books and pocket the payment. Be especially careful with parking spots if your numbers aren’t clearly marked.

Marking the map as you examine each unit will also verify that all spaces are represented in the software system. Once all units are checked, review your reports to screen for any other possible issues.

Using Reports

There are several management reports you should use in your audit. The daily payment-summary report, for example, can be used to track money from the property to your bank account. If you start your accounting by entering bank deposits, you likely have sales tax mixed in with your income and are paying more in taxes than necessary. You must use the payment-summary report to enter your revenue into your accounting system, and then check to ensure the money was deposited each day. Having your manager make a separate deposit slip each day will make this job much easier.

Next, review the credits-issued report to see who’s receiving credits and from which staff member. Late fees seem to quickly get out of hand if your manager waives too many. My company has a policy that we waive one late fee per customer. If someone wants a second fee waived, he must sign up for autopay. Also, review the discounts report and check that each tenant with a student or military discount has a valid ID on file.

Watch for units that have been backdated out of the system. When staff works on Jan. 2 and you were closed on Jan. 1, they’ll need to backdate some tenants who moved out before the first. However, no one should be backdated in the middle of the month if your staff is doing regular walk-throughs.

The exceptions report is a gold mine of information when it comes to audits. I review each deleted charge and payment, unit change or edit, and anything else that catches my attention. It’s worth your time to learn how to read the exceptions report.

Finally, look at your price list and verify that all units of the same size and type are the same price. There shouldn’t be any reason that all 10-by-10s are $100 but one is $30. If the tenant is paying $30, let his rate reflect that variance. If your staff is editing unit rates to reflect tenant rates, your economic occupancy and gross potential numbers are incorrect. Plus, the rent roll won’t reflect the variance. It’s vital to have units properly priced.

Other Areas

Once you feel comfortable with the information in your reports, review other areas of the business, such as:

Payroll. Is your staff on site when they’re clocking in and out? This data can be verified with gate-code login and cameras. Also, looking at the log-on history in your software will show when employees are logging in and which computer they’re using.

Inventory. This area is at huge risk for theft. Counting inventory on a regular basis is crucial to controlling expenses and closing opportunity. Check to ensure your retail product inventory matches what’s in the management system.

Truck rentals. Most truck-rental companies have a close-day report that shows the amount of cash accepted by your staff. Your accountant should receive this report at the end of the month and reconcile the total to the books to ensure all the cash reported was deposited.

Prepaid cards. If you offer prepaid gas or gift cards in exchange for referrals, there should be controls in place. I did an audit for a company that offered prepaid gas cards. The cards’ serial numbers were logged into the system, but the staff worked around these controls by using only part of the card value. The cards were worth $50, and they used $30 for gas for their personal vehicles. The business didn’t find out until a customer called and complained.

Staff credit cards. Any staff member with a company credit card should submit the receipts to the accountant at the end of the month for reconciliation. Some businesses have the policy that any expense without a receipt comes out of the employee’s paycheck. Check your state laws to ensure you’re allowed to deduct this type of expense.

Auction deposits. Here’s another area ripe with opportunities for theft. If you’re holding live auctions, you need controls around the winning bid amount, the total the customer paid, and the amount that was deposited. Also, make sure no one entered the unit between the time the lock was cut and the auction was complete. Online auctions have helped eliminate to eliminate some of this risk. If you haven’t made the switch yet, you may want to consider it.

Whether you conduct your self-storage audits yourself or hire someone to do them for you, it’s critical that they be done regularly. In addition to uncovering possible employee theft, you might find other aspects of your business that require attention.

Magen Smith is a former self-storage manager turned certified public accountant (CPA). Her company, Magen Smith CPA LLC, helps storage operators understand the financial side of their business. Services include monthly financial management, bill-pay functions, revenue management and strategy. She also offers a curb-appeal checklist available for download and has created an online revenue-management course complete with checklists, cheat sheets and guides. For more information, e-mail [email protected]; visit www.selfstoragecpa.com.