Increasing Your Storage Auction Profits in 3 Easy Steps

You’re no longer a newbie. You’ve gotten the taste for buying up repossessed storage lockers and you have a basic idea of how to go about turning the items inside into cash. Maybe you made it to a handful of storage auctions last month and made off with a nice score or two. Maybe you’ve been talking shop to the other auction hunters you met at sales and are beginning to get an inkling that you’re one of those people that’s going to get the bug bad. Once you’ve cut your teeth on a few successful storage auctions, it’s time to start re-examining and refining your process. Figuring out what you don’t already do that you need to do and what you already do but can do better will help you to at least double your storage auction profits over the course of your picking career.

Doubling Your Storage Auction Profits – Step #1

The first way to go about increasing your storage auction process is to streamline and strictly define your reselling process. What does this mean exactly? It means that instead of coming home with a big haul from a storage auction you just won and pulling some things out that you want and some things to give away to friends and some things to put into the back of the basement for the next time you run a yard sale, you need to have a formalized plan for each and every item before you even come home. Professional storage auction pickers know what they are going to do with their winnings before they even get them loaded into their vehicle.

If you’ve read this blog before, you know that I am a strong advocate of eBay for selling off your storage auction items. That’s because eBay is the world’s largest online auction site and the most trusted as well. Nothing will get your items in front of more buyers faster. If it were me bringing back my own storage auction winnings, I would already know that 95% of them were going to be on eBay by the end of the night. The only things that aren’t really appropriate for eBay are the over-sized items like bicycles or love seats. These need to be cleaned, polished up and set outside for yard sales. The best online avenue for large items, by the way, is craigslist.com. You can quickly put up a local listing for free that will have buyers in your immediate area calling or e-mailing you to see if they can arrange a time to check out or just outright purchase your goods.

Upping Your Storage Auction Income – Step #2

Learn how to price your items for optimal sales. If you list your items way too low, people will be more than happy to take them off your hands, leaving you with little or no profit. If you price your items too high, they will sit in the listings for months at a time, no matter how many times you re-list them. This is one of the most common mistakes I see when it comes to new users of eBay trying to re-sell their goods. The new sellers get excited because they have something to sell. Then they get attached to the item because they think about all the money it’s going to bring in. Then they just list the item at a price that everyone who passes by is snickering at, and they watch their item sit there for months on end.

Don’t do this. Just don’t do it. List it in the happy medium between dirt cheap and prohibitively expensive. If you don’t have a background in antiques or retail, and you don’t have a natural knack for turning sales around quickly, use a special eBay research tool like Terapeak to take the guess work out of pricing your items. Terapeak is a super easy tool that runs back through 90 days of actual eBay sales for your item and related items and develops real-world price points that will get your item sold for maximum profit.

Take it from my old boss Jim the eBay guru. When you get something, get rid of it. When you win something, sell it. You gotta turn that #$%^ around!

Maximizing Your Storage Auction Income – Step #3

Most beginning and intermediate storage auction buyers spend a lot of time on the phone. They spend time on the phone calling around to all the self storage properties in their area, trying to get a bead on the next auction that’s going to come along. The clever ones even call auctioneers and auctioneer companies to ask them about the dates and locations they’re booked for. Unfortunately, this method does not really work. Many self storage property managers don’t like it when random people call them to ask about their auction dates. Even the ones that don’t mind sometimes won’t even know when they’re holding an auction! That’s because there are so many variables that go into finally choosing an auction date – ranging from the important legal considerations like, “did we give this person their 48 days to pay?” down to more personal ones like when can we get enough workers here to cover the entire auction day – that the date of the actual sale will float on their calendars for a week or two until they actually pay the newspaper to advertise the set sale day.

How do professional auction buyers get around this? They subscribe to professional auction listings like the ones shown here. These premium storage auction listing services range in price from as little as $5 per month to much more, depending upon the number of auctions and storage facilities in your area, and they will include the auction day, time, facility name, phone number, and sometimes a general description of the goods found inside each unit!

If you have already turned a profit by grabbing up repossessed storage lockers, you may want to consider stepping up your game with professional storage auction listings. The major advantage to having professional auction listings is more time. Having this critical data served up to you on a silver platter gets you off the phone and back into your life. You can spend the extra time reclaiming your basement from all the storage winnings you’ve piled up there.

Storage Auctions – Everything You Ever Wanted to Know

By now, many people have seen the wildly popular television shows that follow savvy auction buyers as they travel to self storage properties in search of repossessed storage units, hidden jewels and glory. These chronicles of modern day treasure hunts have been so captivating that even folks who normally would have no reason at all to visit a mini storage facility have been attending local auctions just to see what all the fuss is about. Obviously, this trend has had a profound effect on the self storage industry as well, with managers all over the country noticing a dramatic upswing in auction attendance, the number of inquiries regarding upcoming sales, and the amount of revenue actually paid out by eager bidders for delinquent storage lockers.

While these are certainly positive changes from a management perspective, many people are surprised to learn that the new storage auction craze has also brought a number of complications to self storage company owners and managers that were once content to view these sales as an unpleasant but necessary part of the business – storage auctions are in fact the company’s last resort when every other avenue of mediation between them and their tenants has broken down. Storage auctions are now garnering more public attention than ever before. Many in the industry view them as an unpleasant last resort that should not necessarily be publicized. The new influx of excited auction hunters view them as bargain bonanzas. As a self storage property manager, one of the questions I get most often is, “Hey, are these storage auctions real, or what?”

Storage Auctions From the Company’s Perspective

In order to understand how the perception of local storage auctions has changed, it’s necessary to first understand how and why storage auctions occur in the first place. When a customer rents a storage locker or vehicle parking space from a mini storage company, they are usually set up on a monthly payment schedule. Every month, the rent payment is due. There are exceptions to this rule, such as when a tenant will opt to prepay an entire year because they are certain they will need it, or when someone sets up a monthly autopay account that simply draws their rent off a credit card each month. However, for the most part the storage customer will be reponsible for making their rental payment each month.

Aside from the obvious need to turn a profit, the storage company also relies on the regularity of these monthly payments for covering necessary expenses such as costly repairs to gate or access systems, general maintenance, mortgage payments on the property, marketing materials, utilities and payroll, to name a few. When a handful of tenants fail to make their regular monthly payments, the company can quickly experience financial losses and damages from a lack of cash flow. For this reason, self storage companies find it necessary to put certain practices in place that will encourage timely payment of all outstanding rent.

Why Late Fees Exist
The first tool the company has is the implementation of late fees. If a customer fails to make their rent payment on time, they will incur a late fee which will be added to their total amount due. Oftentimes, this simple mental goad is enough to encourage most tenants to stay on top of their monthly rent payments. Chronically late tenants, for example, could end up paying hundreds of dollars extra per year in late fees alone.

The Consequences of Extended Delinquency
Sometimes a small late fee just isn’t enough to get your delinquent tenants to come in and write a check. The threat of compounding additional late fees works for some late paying customers, but even two or three late fees per month can sometimes fail to keep rent payments coming in on time. In order to further protect itself, the self storage company must therefore put in place more serious consequences for extended delinquency on their rented storage lockers. This is where the state’s lien law comes into play.

Liens
A lien is a legal repossession of some property belonging to a customer that has failed to make their due payments to the company doing the repossessing. A common example is a car mechanic who takes on a customer’s vehicle in good faith, and invests a few thousand dollars of man-power and parts into repairing what is wrong with the vehicle. Once the work is finished, the mechanic naturally wants to receive payment for their services. However, should their customer fail to come up with the total amount due, the mechanic may choose to enforce their legal right to place a lien on the vehicle until they are paid in full.

The same principle is at work with self storage companies feeling the financial pinch due to non-paying tenants. In order to further encourage that their delinquent tenants satisfy their financial obligations, the company can place a lien on the unpaid storage unit, including the entirety of its contents! This is usually enforced by way of denying access to the delinquent tenant at the front gate. Many modern self storage systems will automatically restrict access to tenants that have failed to make their monthly rental payment for a certain number of days.

In addition, it is sometimes necessary to place a manager’s overlock on the delinquent storage unit. This prevents the late paying customer from getting onto the property by tailgating someone else through the gate and then visiting their unit. A manager’s overlock is usually a sturdy tamper-proof lock that goes over the tenants storage locker door handle. Even if the late customer were to arrive at their unit and remove their own lock, they would be unable to gain access to their belongings.

The Manager’s Role
Contrary to popular belief, most self storage property managers are not only compassionate toward their delinquent tenants, they are actively trying to help them remedy their situation at every turn. From making courtesy calls to remind them of due dates, to setting up personal payment plans that accommodate their tenants’ payroll schedules, most managers do everything in their power to prevent their customers’ units from going to auction.

Why Self Storage Companies Kept Storage Auctions Somewhat Quiet

Not only is selling off someone else’s belongings not pleasant, but it’s not lucrative for the company either. By law, the self storage company can only recoup the amount of money they were owed for unpaid rent and applicable late fees and auction surcharges. Any money raised by an auction in excess of these charges must be returned to the previous owner of the unit via a check!

As a matter of fact, there is a great deal of extra labor that the company must invest in the auction process, in order to prevent any legal action for a wrongful sale being brought against them. The manager must keep meticulous notes of every interaction with the delinquent tenant, send off all legal pre-lien, lien, 45 day late and notice of auction letters, all of which must be double printed, time stamped and kept on file. In addition, the company must pay to advertise the repossessed storage locker auction in a newspaper of general circulation, in a final attempt to gain the awareness of the tenant whose belongings will be sold off.

Finally there is the matter of paying the professional auctioneer. Many self storage properties with multiple delinquent tenants will opt to lump all of their storage auctions into one auction day. This allows them to hire a professional auctioneer who can come to the property and conduct the sale. There are a few advantages to hiring a professional auctioneer, including the fact that it provides an additional layer of due diligence between the company and the sale of the unit. Unfortunately, this comes at the cost of the auctioneer’s fees! In the past, it was not uncommon for a self storage company to lose a good deal of money on storage lockers that fell into severe delinquency. Not only is the company not receiving its normal rent payments, but it must pay a number of fees out of pocket, plus lose work hours when their managers focus on the sale as opposed to marketing, just to legally process the delinquent lockers for sale.

Storage Auctions and Public Perception
None of this is to mention the simple fact that auctioning off the very belongings that customers once entrusted to the company to keep safe can be bad for business! Self storage companies used to be quite reluctant to introduce their delinquent locker sales with any fanfare because they feared people would get the wrong idea about their services and come to think that self storage was some trap that preyed on tenants who were down on their luck. Keeping this in mind, it’s not difficult to understand why some mini storage owners and managers have viewed the recent storage auction craze with a certain degree of skepticism.

Self Storage Auctions from the Bargain Hunter’s Perspective

Suffice it to say, the recent spate of storage auction reality shows has had a pretty profound impact on the public’s view of delinquent locker sales. As you can see, many self storage managers and owners have good reason to keep these sales from becoming large spectacles. Out of respect to their customers and the hard times that delinquent tenants have fallen upon, most owners and managers are perfectly content to let those in the know stay in the know, and those out of the know to stay that way, too. The small ring of low-key professional auction buyers have known since the beginning of self storage how to keep tabs on upcoming local sales and how to make a profit from bidding on repossessed storage lockers.

The Effect of Storage Wars and Auction Hunters

Now, enter the perspective-changing reality shows like Auction Hunters and Storage Wars. These shows have followed a colorful band of professional auction buyers as they traverse the country in search of big scores, hidden jewelry and abandoned rolex watches. Antique coca-cola vending machines, custom built vehicles, and collections of immense value have all been discovered in these exciting and sensationalized chronicles of modern treasure hunters.

These shows are built on the reality-show model that has been proven effective in grabbing and holding viewer’s attention. There are unnatural edits, tricky juxtapositions and an extreme filtering of extraordinary discoveries. The ultimate impression one gets from watching these shows is that you can expect to find something spectacular in each and every repossessed storage locker you bid on. While these shows and their producers are, in truth, guilty of only rather mild manipulations of reality, they do also deliver a reasonably accurate portrayal of the overall process of buying a storage unit.

This has made viewers more confident in their ability to attend a local storage auction and turn a profit from bidding on the delinquent units there. This is all well and good. The truth is that the public is welcome at these sales and it’s good for the company when more bidders turn out because it’s more likely they will obtain a higher total payment for their auction units.

From my personal experience, these shows have had a profound impact on the way our auctions run. The amount of non-tenants that call up randomly asking for auction information, how to bid, and when our next sale is occurring has increased by a factor of three. When we run an auction now on one of our smaller properties, the turn out which used to include 1-3 veteran storage auction buyers and a few curious passerby now includes about 45 people packing our parking lot.

The Downsides of Increased Interest in Storage Auctions
One complaint I keep hearing from storage managers that are experiencing this huge increase in foot traffic during auctions regards property damage. With more curious people coming in off the street, focused only on making a quick buck and finding some jewelry in a repossessed storage locker, you simply get more people being involved in fender benders and driving into keypads, kiosks, gates and the corners of buildings.
With the introduction of more and more people that have never even heard of self storage before, you also get a different demographic of buyer: people that are only seeing dollar signs when they arrive at a property hosting a storage auction. These are the folks that will win a few units, fail to clean them out entirely and drive away leaving the manager a huge mess of trash and useless items that they must drag out and get rid of.

 

A Real Storage Auction – What to Expect

With so many eager auction hunters approaching me with questions about what it’s like to go to a repossessed locker sale, I thought I would post this recording of a live auction as an example. In this video, you can see Dan “the auction guy” Dotson, of Storage Wars fame conducting a well-attended auction at a large self storage property in the Inland Empire of California. This auction had nine delinquent storage units and drew a full crowd of interested auction buyers. My hope is that by watching this real live self storage auction you can all get a better idea of what to expect when you attend your first sale. As you can see, there’s really nothing to be nervous about!

Here is a basic breakdown of the video as it occurs:

Pre-Auction

There’s not much of the pre-auction process explored in this video – we see Dan pop into the self storage manager’s office at the beginning of the sale and pretty shortly after that he is leading a full group of eager bargain hunters down the main row of storage units. Generally, this is pretty much what you can expect when you get to your first sale. You will likely have to wait around in the parking lot when you first get there – you should also be looking out for the bidder registration form to fill out. This is important – don’t get left out in the cold by not being able to bid on units you want!

The Turn Out For This Storage Auction

Was a little bit high. Yes, it’s a big facility and it’s in California, but some of these folks probably showed up just to watch Dan in action and for a chance to be caught on film!

Dan Let the Buyers “Root Around” in the Units

This is also unusual. Most of the time, the strict house rules of the storage facility will forbid anyone from even touching something inside the unit. Touching anything inside, or even crossing the threshold of the unit, can get you expelled from that storage sale and barred from attending any future sales with that company.

In this video, however, Dan Dotson explained his reasoning for allowing people to go inside and poke around. Because these units were totally abandoned by their previous owners – because the managers were not even able to get a response regarding the account – they are all assumed to be of lesser value than an average delinquent storage locker. They are junkier and unlikely to have much hidden treasure in the way of small high-value items like jewelry or gold watches. Therefore, Dan allows the buyers of these abandoned storage lockers to go inside and poke around because he doesn’t want anyone playing up the units – inflating their value with lies and implications that they are extremely valuable. Basically this is a judgement call that Dan made to keep his buyers happier and to prevent misunderstandings.

Don’t expect this to fly at your average storage auction!

The Movement

One thing this video is good at doing is highlighting the constant and quick movement that occurs at storage auctions, especially when you have a large volume of people moving about and trying to view the units for sale right before the bidding begins.

This is one of the tougher aspects for the auctioneer and the property manager – getting people in and getting people out. Everyone attending the auction wants a chance to see inside the auction units. Everyone wants to get a chance to peer inside. You see the buyers filing in and out of the hallways in this video because Dan is trying to keep people moving quickly. Otherwise selling off 9 delinquent storage lockers would take all day long.

The Prices

In the post “Storage Wars” world, the same delinquent storage lockers of old are simply selling for more money. That’s just the way it goes when there is an uptick in public awareness, demand and interest. Since being popularized by reality shows like Storage Wars and Auction Hunters, repossessed storage lockers that would have gone for $125 tops even two years ago are now regularly selling for $300. This is due to increased bidder competitiveness. Since everyone attending an auction feels like this unit is their ticket to riches, they are likely to fight each other harder for it.

You see Dan Dotson confirming that one woman paid $375 for one of the larger units, either a 10×20 or a 10×30. This is a full garage’s worth of stuff, but the fact remains that not long ago the same unit might have gone for $200! This is the premium you pay when everyone wants in on the action. Keep this in the back of your mind when you are trying to make that crucial decision as to whether or not a particular unit is worth that one last bid or if it’s better off given to your competitor. Sometimes the potential value of the unit simply does not exceed what’s really driving the price up – everyone’s excitement!

Top 5 Mistakes that New Auction Hunters Make

The Excitement of Your First Few Auctions

New auction hunters are some of the most enthusiastic people you will meet. They are ready to show up to their first ever mini storage sale and start plunking down cash on big units and clearing them out. They plan to hit several different auctions in a single weekend, and they know that every unit they buy up is going to help them turn a nice healthy profit. Unfortunately, brand new auction hunters are also some of the most naive people you will meet. Their expectations can soar way beyond the reality of buying and reselling storage goods via local auctions. If you are starting out your own journey as a storage auction buyer, make sure not to repeat these common 5 mistakes.

New Auction Buyer Mistake #1 – Too Much Too Soon.

Of course, I get it. Once you start piecing together the basics of attending local storage auctions and flipping the goods you find their for profit, it seems to good to be true. Firstly, there are auctions held every week all over the states. In some places they happen every day. This means you have a huge financial resource right near you. Next, attending storage auctions allows you to work on your own terms, make your own financial decisions or even start a small family business, all thanks to the flexibility of scheduling the auctions you want to go to that fit into your regular week. They’re even exciting. Many auction hunters simply love the thrill of a good competitive bidding war as the booming voice of the auctioneer decides the fates of the goods inside.

But it’s too easy to get wrapped up in the excitement and to see only dollar signs. Yes, you can start making a profit off the very first auction unit you buy up, but it’s also possible that you won’t. Keeping in mind that slow and steady wins the race, especially with making storage auctions into a source of a healthy side income, it’s important not to get ahead of yourself when you first start buying delinquent mini storage lockers.

How come? Because it’s too easy to over-invest in your first few purchases. You put out a bunch of cash to get several different sized units, but before you even begin processing them and refurbishing the goods inside to sell, you’re off to the next delinquent storage sale where you plan to outlay even more of your hard earned cash. If you over-extend yourself this way in the beginning of your repossessed locker buying career, you can miss out on the natural motivation that comes from the first time you make a healthy profit on all the goodies you found in the storage sheds. It’s a fast way to burn-out before you even get started.

New Auction Buyer Mistakes #2 – Bagging the Bigger Units

I see this a lot, especially from the folks that got turned on to repossessed storage sheds by shows like Auction Hunters or Storage Wars. Remember, these shows are in the business of getting their episodes watched. They have to be entertaining, which means they’re necessarily exaggerated. Does this mean that you should never buy a bigger garage sized unit? Absolutely not. In fact, they have some of the best profit margins, generally speaking. However, I would recommend that newcomers to the repossessed storage shed scene start out small and grow gradually.

There’s absolutely nothing wrong with sticking to the little closet-sized 5×5 units when you’re first getting your feet wet. Smaller units are easier to buy, in general, because many of the other auction attendees will overlook them, thinking they are of less value. Meanwhile, they’re easier to load into even a small two door car and drive home. This means you can have your purchased storage shed emptied in one go, and not be stuck toiling in the hot sun at a storage facility all day long, making repeat trips to and from your home, simply to claim your winnings. In fact, it’s a great starting experience to go to an early morning auction, buy up one small unit, and return home to process and list on eBay everything you’ve found therein.

Doing an entire storage unit in one day will help you to know if buying up repossessed lockers is for you or not. It can be a great thrill to have a day off, attend an auction in the morning, and have everything from inside it listed on eBay that very night. Then all you have to do is just sit back and watch the profits roll in.

New Auction Buyer Mistakes #3 – Getting Caught up in the Moment

This is a good way to lose money when you are first starting out. Letting your emotions get the better of you and start dictating your bidding behavior is a big NO-NO. It’s the best way to get taken for a ride and give all your hard earned money to the storage company and the auctioneer without any significant return on your investment. I see this happen more often with the fellas than with the ladies. Machismo and bidding do not a happy pair make. If you think that some guy in the crowd is trying to move in on “your” unit and outbid you, then you have already lost, and all you will achieve at the end of your head butting session with this stranger is a bigger bill.

That’s  why it’s important to set budgetary limits and bid ceilings for yourself, before the action starts heating up. It’s far easier to approach your limit of, say, $140 for a promising 5×5 unit, and then fall back once the leading bid exceeds $140 when you’ve already established that boundary in your mind, than it is to simply “stay reasonable” when you’re caught up in the excitement of bidding back and forth.

Another way to approach this problem, if you do know yourself to have a vulnerability to this kind of gambling behavior, is to use the buddy system. Bring your partner, spouse or best friend along with you when you attend a storage auction and discuss reasonable bid ceilings right after viewing each unit together and before the auctioneer starts making calls.

New Auction Buyer Mistakes #4 – Sitting On Your Stuff

Once you have successfully bought and paid for a repossessed storage shed, all the stuff inside is no longer their stuff, it’s your stuff. This is great. It’s the crucial step that allows you to begin profiting off your efforts. However, keep in mind how your stuff’s previous owner got into an auction situation in the first place. They did it by sitting on this very same stuff for too long. Instead of getting rid of some of it by selling it or giving it away or stuffing it into the back of a buddy’s garage, they just sat on it. Then they lost it. You, as the successful auction hunter, aren’t necessarily at risk of losing it like they did, unless you’re foolish enough to put it into another storage unit. But you are at risk of having it just pile up around you to no effect whatsoever.

Here’s a little mental exercise to help you get into the right spirit regarding all the things you find inside any repossessed storage shed you buy up: treat it all like it’s stolen and you’re the thug that needs to hustle it all away for profit. Get rid of it. Now. Clean it all up. Research reasonable market prices. Get it listed. Call up interested stores or third parties for the big items. Get it sold.

Pack rat behavior is a quick killer in this business. The tenants that lose all their things get it pretty bad – that’s a lot of the reason why they end up in a giant storage locker they can’t afford in the first place. Don’t repeat their mistakes. Get rid of the things you find in storage sheds as if they were carrying infestations that were going to spread to your home (p.s. part of the reason you refurbish your goods is to ensure this doesn’t happen!)

I learned this approach from working in a professional eBay sales warehouse. Stuff came in, we cleaned it up and tested it, and then listed it like there was no tomorrow. The boss man had been successfully selling on eBay for close to a decade, first out of his own garage and then eventually from a commercial warehouse that could hold all his inventory. Of the many things I learned from him, perhaps the most valuable was regarding turn around time. We would list something once, maybe twice if it was something we knew was a specialty item that was just being overlooked, but after that it either got scrapped for metal or sold at an absurd liquidation discount. You might think that those three items you’re sitting on in your basement, that you keep listing again and again unsuccessfully, are your key to some nice coin, but the fact of the matter is that in the time you’ve wasted not selling anything, you could have converted several smaller items or increased your inventory five-fold by attending one or two more auctions.

New Auction Buyer Mistakes #5 – Throwing in the Towel Too Soon

Remember, you’re probably not going to find your first big gold cache in the first storage locker you repossess. You could, but you probably won’t. Many new auction hunters go into this business with overblown expectations and then bounce out of it just as quickly when their first few purchases don’t produce diamond necklaces. One of the hardest things to explain to new auction buyers is that this is a long march, not a quick sprint.

You need to look at buying and flipping delinquent storage units as a long term process that, over time, produces a healthy side income. Will every unit you buy put you over the top? No. Will you sometimes get closets full of other people’s trash and dirty clothes? Yes.

If you keep up a steady and determined workflow of buying up delinquent sheds and reselling everything inside, will you make money? Yes.