Storage Auctions...Easy Money, or Money for Nothing?

Good news clip a buddy sent me this morning. Storage Auctions...Easy Money, or Money for Nothing?
 
What's up with these storage auctions?
Making money buying defaulted storage units seems to be all the craze these days. With television shows hyping the "riches" that can be found in these units, or lockers, it seems easy to find your way to wealth. The truth is, probably 98% of the time you will lose money instead of making it.

Before this became a fad there was some money to be made if you were smart and knowledgeable. Now it's generally a waste of time and money.

It used to be that 10 to 15 people who knew about this business would show up for these storage auctions. The bidding was kept low because of the number of people, and there were a lot of units to bid on. Now it's not unusual to to see a hundred or more people at an auction who think they know what they're doing, but end up paying way too much. Have you ever attended an auction where the bidding frenzy begins and people bid way over even retail value? Well, so it goes with storage auctions these days. A unit that may have sold for $200-$300 a couple of years ago now sells for well over $1000. There is no profit to be made when a unit is so overpriced.

There also are not nearly as many units being auctioned now. With the economy as bad as it's been, it appears most people who were going to lose their units have already lost them. Just look at the vacancy rate at storage facilities. It is reported that vacancy rates are about 30%, but there is evidence to suggest that they're much higher.

 
Source: jarrodlombardoA few words of warning
If you still think this may be the business for you, here are a few more things to consider:

Self storage is kind of a weird product. It's a need based product if you need more storage space and you have some extra cash to pay someone to store your stuff. But if you don't have extra cash, some would consider it a luxury they can do without. They may just continue to pile stuff up at their house, or sell, or trash their stuff themselves.

Most people who actually have valuable items in a self storage unit will take the valuables out and sell them themselves before they default, or while the default process is going on. They do get notification that their unit is going to auction in plenty of time to get the good stuff out and just leave the junk and trash. The best bet to avoid this is if someone has moved and the facility can't get in touch with them, or if someone has died and their family doesn't know about the unit. You would never know this in advance, of course, but if either of these is the case, you may hit a home run.

Most people who default on storage units are just normal people, not rich. They're storing holiday decorations, used baby clothes, knick knacks, paperwork or other items which are difficult to sell, and definitely don't have high profit potential. Most state laws do not allow you to go into a unit and look around, you have to look from the door. Those piled up boxes? Well, they're piled up boxes.

Keep in mind people are not paying as much for things as they used to. Take furniture for example. Say you get a unit full of furniture that is in really good condition. You think you've hit the jackpot. Everyone needs furniture, right? Right. And a lot of people don't want to pay retail anymore. The problem is two fold. First, used furniture is everywhere now, and it's cheap. And second, you're going to advertise it on the internet.  People are going to call you to look at it. If in fact they show up, which is a big if, they are going to beat you up on the price.

The auctioneer wants their piece of the pie. Most of the time there is a buyer's premium paid to them in addition to what you pay for the unit, so make sure you have 10-20% more cash available to pay their cut.

The storage facility will charge you a deposit in addition to the price you paid for the unit. They want to make sure the unit is cleared out and left clean when you are done. The deposit ranges from about $50-$100. Yes, you will get it back if you make sure the unit is nice and clean when you leave, but it's just one more thing to keep in mind when you buy a unit. You need that additional cash with you. Usually the storage facility will give you 24-48 hours to clear out the unit. If you can't do it in that time, you're going to have to rent it until you can.

You need a good way to get rid of trash because you will have lots and lots of it. You cannot leave it at the storage facility. Maybe you can talk your regular trash collectors into taking it by giving them a little "lunch" money, or you're going to have to take it to a dump yourself. You need a vehicle big enough to haul it, and dump fees have also gone up and can eat into your profits.

Remember, people will always tell you about their big payoffs, but never their losses. Yes, maybe they once bought a unit that they made a couple of thousand dollars on. What they don't tell you about is the thousands of dollars they spent, and lost, to find that one gem.

Is this business really for you?
There are certain people that find this business appealing. Check out the list below to see if it's a business for you.

If you like opening boxes just because you don't know what's in them, this might be the business for you. There are definitely interesting and sometimes scary items to be found in storage units.

If you like having garage sales or going to flea markets every weekend to sell used, and mostly worthless stuff, this might be the business for you.

If you like getting beat up constantly to lower your price when you're only asking a quarter in the first place, this might be the business for you.

If you can detach yourself from the idea that what you find in a storage unit may have little to no monetary value, but has high sentimental value to someone, this might be the business for you.

If you are willing to spend a bunch of money to find that one jewel, this might be the business for you.

If you believe everything you see on TV, this might be the business for you.

 

In conclusion
To be fair, there are some people who are in this business who are successful. Much of it is heavily dependent on geographical area and local economy. For those of you who are in this business and are making a living, good for you. I wish you continued success.

For those of you who are thinking about getting into this business, read and study everything you can that's available from people who have had success.

Nice analyst.

Easy Money, or Money for Nothing.

None of this is easy, and if you count your labour, time, gas, wear and tear on your vehicle for free then you get money for nothing. 


Our current area is flooded with yard sales, 25 - 50 a weekend. makes that part hard.

Disagree with the "hard to sell" used baby clothes. Baby and kids clothes are my #1 seller. Also have good luck with women's clothes. Don't have any trouble with Christmas stuff either. When I see a unit rented by a woman with a lot of clothes and toys, I get very interested. You have to know your market.

You have to know your market.

That's very true, but at the same time markets differ in different parts of the country. What sells in one area can be unsellable garbage in another.

That's very true, but at the same time markets differ in different parts of the country. What sells in one area can be unsellable garbage in another.

Too bad shipping costs are so high on a lot of that stuff......we could set up an exchange on the board so the right product could get sent to the right area.......that would be awesome! 

The guy that wrote that article hit a few nails on the head but he said 6 things that made me think he has no idea what he is talking about.

He said "The truth is, probably 98% of the time you will lose money instead of making it."

Total BS. Let's just make up statistics and percentages. If you only bid on what you can see and you wait for the right unit to come along at the right price, you can still make money in this business.  

He said "There also are not nearly as many units being auctioned now. With the economy as bad as it's been, it appears most people who were going to lose their units have already lost them. Just look at the vacancy rate at storage facilities. It is reported that vacancy rates are about 30%, but there is evidence to suggest that they're much higher."

Again, total BS. The number of auctions & the number of units at the auctions has not fluctuated, if anything, there are more auctions occurring because the storage facility owners and managers are trying to capitalize on the increased interest in storage auctions. Vacancy rates have always averaged around 30%, except for urban facilities with dense populations.

He Said "Most people who actually have valuable items in a self storage unit will take the valuables out and sell them themselves before they default, or while the default process is going on. They do get notification that their unit is going to auction in plenty of time to get the good stuff out and just leave the junk and trash."

No, they don't have plenty of time to get their valuables out. If their rent is due on the 1st, most facilities attempt to contact the tenant on the 3rd and if payment has not been received, they over lock the unit by the 5th at the latest. The tenant cannot cut the facility's lock, otherwise it is considered burglary of a building.

He said "Most people who default on storage units are just normal people, not rich. They're storing holiday decorations, used baby clothes, knick knacks, paperwork or other items which are difficult to sell, and definitely don't have high profit potential."

Perhaps the reason the writer of this article is so bitter is because he was only in the storage auction business for the big scores. The reason he can't buy units anymore is because everyone else is looking for those big scores as well. The smart people in the storage auction business realize that the common household items, clothing, electronics, furniture, tools, lawn equipment, baby items, knick knacks, sporting goods, etc., are the bread and butter in this business. If I see an average unit containing common items and I think I can double my money, I'll buy it. If all you're doing is chasing the units everyone else wants, don't be surprised when you have to overpay to get a unit.

He said "Keep in mind people are not paying as much for things as they used to."

What an idiot! Yes, people are being more cautious with their money, which means they are buying quality second hand merchandise instead of buying new products. If anything, this demand for second hand merchandise is raising prices higher than they were when the economy was good.

He said "The auctioneer wants their piece of the pie. Most of the time there is a buyer's premium paid to them in addition to what you pay for the unit, so make sure you have 10-20% more cash available to pay their cut."

This isn't not true, most auctioneers do not charge a buyers premium. Sure some do, but a majority of the auctioneers get their cut from the storage facility.

The guy that wrote that article hit a few nails on the head but he said 6 things that made me think he has no idea what he is talking about.

He said "The truth is, probably 98% of the time you will lose money instead of making it."

Total BS. Let's just make up statistics and percentages. If you only bid on what you can see and you wait for the right unit to come along at the right price, you can still make money in this business.  

He said "There also are not nearly as many units being auctioned now. With the economy as bad as it's been, it appears most people who were going to lose their units have already lost them. Just look at the vacancy rate at storage facilities. It is reported that vacancy rates are about 30%, but there is evidence to suggest that they're much higher."

Again, total BS. The number of auctions & the number of units at the auctions has not fluctuated, if anything, there are more auctions occurring because the storage facility owners and managers are trying to capitalize on the increased interest in storage auctions. Vacancy rates have always averaged around 30%, except for urban facilities with dense populations.

He Said "Most people who actually have valuable items in a self storage unit will take the valuables out and sell them themselves before they default, or while the default process is going on. They do get notification that their unit is going to auction in plenty of time to get the good stuff out and just leave the junk and trash."

No, they don't have plenty of time to get their valuables out. If their rent is due on the 1st, most facilities attempt to contact the tenant on the 3rd and if payment has not been received, they over lock the unit by the 5th at the latest. The tenant cannot cut the facility's lock, otherwise it is considered burglary of a building.

He said "Most people who default on storage units are just normal people, not rich. They're storing holiday decorations, used baby clothes, knick knacks, paperwork or other items which are difficult to sell, and definitely don't have high profit potential."

Perhaps the reason the writer of this article is so bitter is because he was only in the storage auction business for the big scores. The reason he can't buy units anymore is because everyone else is looking for those big scores as well. The smart people in the storage auction business realize that the common household items, clothing, electronics, furniture, tools, lawn equipment, baby items, knick knacks, sporting goods, etc., are the bread and butter in this business. If I see an average unit containing common items and I think I can double my money, I'll buy it. If all you're doing is chasing the units everyone else wants, don't be surprised when you have to overpay to get a unit.

He said "Keep in mind people are not paying as much for things as they used to."

What an idiot! Yes, people are being more cautious with their money, which means they are buying quality second hand merchandise instead of buying new products. If anything, this demand for second hand merchandise is raising prices higher than they were when the economy was good.

He said "The auctioneer wants their piece of the pie. Most of the time there is a buyer's premium paid to them in addition to what you pay for the unit, so make sure you have 10-20% more cash available to pay their cut."

This isn't not true, most auctioneers do not charge a buyers premium. Sure some do, but a majority of the auctioneers get their cut from the storage facility.

tclane, I would rather go with a slightly pessimistic review for all the people thinking about getting into this business. We don't need anymore competition.

I do like units with lots of kitchen stuff showing (bread and butter, people!)

Glad to see an article like this. For us in the biz u can always create a non existant nitche in the sales part of it. But u still have to have sales experience and money, among other things to really be successful

The guy that wrote that article hit a few nails on the head but he said 6 things that made me think he has no idea what he is talking about.

He said "The truth is, probably 98% of the time you will lose money instead of making it."

Total BS. Let's just make up statistics and percentages. If you only bid on what you can see and you wait for the right unit to come along at the right price, you can still make money in this business.  

He said "There also are not nearly as many units being auctioned now. With the economy as bad as it's been, it appears most people who were going to lose their units have already lost them. Just look at the vacancy rate at storage facilities. It is reported that vacancy rates are about 30%, but there is evidence to suggest that they're much higher."

Again, total BS. The number of auctions & the number of units at the auctions has not fluctuated, if anything, there are more auctions occurring because the storage facility owners and managers are trying to capitalize on the increased interest in storage auctions. Vacancy rates have always averaged around 30%, except for urban facilities with dense populations.

He Said "Most people who actually have valuable items in a self storage unit will take the valuables out and sell them themselves before they default, or while the default process is going on. They do get notification that their unit is going to auction in plenty of time to get the good stuff out and just leave the junk and trash."

No, they don't have plenty of time to get their valuables out. If their rent is due on the 1st, most facilities attempt to contact the tenant on the 3rd and if payment has not been received, they over lock the unit by the 5th at the latest. The tenant cannot cut the facility's lock, otherwise it is considered burglary of a building.

He said "Most people who default on storage units are just normal people, not rich. They're storing holiday decorations, used baby clothes, knick knacks, paperwork or other items which are difficult to sell, and definitely don't have high profit potential."

Perhaps the reason the writer of this article is so bitter is because he was only in the storage auction business for the big scores. The reason he can't buy units anymore is because everyone else is looking for those big scores as well. The smart people in the storage auction business realize that the common household items, clothing, electronics, furniture, tools, lawn equipment, baby items, knick knacks, sporting goods, etc., are the bread and butter in this business. If I see an average unit containing common items and I think I can double my money, I'll buy it. If all you're doing is chasing the units everyone else wants, don't be surprised when you have to overpay to get a unit.

He said "Keep in mind people are not paying as much for things as they used to."

What an idiot! Yes, people are being more cautious with their money, which means they are buying quality second hand merchandise instead of buying new products. If anything, this demand for second hand merchandise is raising prices higher than they were when the economy was good.

He said "The auctioneer wants their piece of the pie. Most of the time there is a buyer's premium paid to them in addition to what you pay for the unit, so make sure you have 10-20% more cash available to pay their cut."

This isn't not true, most auctioneers do not charge a buyers premium. Sure some do, but a majority of the auctioneers get their cut from the storage facility.

Also depends where you live and state economy and those who can afford the luxory of rent a storage unit. My state has the best econmoy in the USA so not many auctions going on. And the 98% losing money is where the show watchers way over bid and leave no room for profit. So I can see 98% about right. People love to jack the bid up and waste there money

It doesn't matter how good the economy is, people are still losing their storage units. Even in the best economy, there is still an overabundant supply. I'm sure there are plenty of auctions going on around you but you have to do your homework to find them. What area are you in by the way?

It doesn't matter how good the economy is, people are still losing their storage units. Even in the best economy, there is still an overabundant supply. I'm sure there are plenty of auctions going on around you but you have to do your homework to find them. What area are you in by the way?

In slc. Don't get me wrong there are auction just not allot. Not really economy problem just people have the means to throw down an extra 60 to 120 a month to rent space for there belongings. Storage facility's across the country are offering huge discounts and perks to get people to rent space. Just look at all the specials going on right now. I wouldn't want to be a owner of a storage faculty right now.