Self Storage Auctions – Reality Vs. Fiction
Self storage auctions are quickly increasing in popularity. The production of a number of recent reality style TV shows has greatly boosted people’s awareness of self storage auctions and the incredible opportunities that they often proffer. Along with this, the self storage business itself has seen an unprecedented boom in recent years. People seem to be acquiring more things — more things than they have space to store on their privately owned property. And, these people are turning to self storage options more than ever before. A couple of decades ago most fair sized cities and towns usually had a few self storage facilities — usually located on the outskirts of town. Today, these facilities seem to be practically everywhere.
Of course, with so many more people making use of these self storage facilities, there’s a lot more people who are also failing to pay their owed rental fees on their storage lockers — which means many more self storage auctions are taking place. And, of course, that means a lot more opportunities are presenting themselves to bidders and buyers looking to acquire desirable merchandise for pennies on the dollar at these self storage auctions.
With the widespread notoriety that self storage auctions have received due to the current crop of reality TV shows that are centered around the self storage auctions industry, however, and owing to so many people now being aware of self storage auctions, but not really having any experience with them, there’s a lot of myth and misinformation currently going around about these self storage auctions and how they work.
Hopefully this article will serve to dispel some of these myths. If you have questions regarding how self storage auctions actually work, read on. I’ve been attending self storage auctions since the 1990s, and I’m here to address some of the false information that I’ve recently seen being bandied about on the internet.
The Reality of Self Storage Auctions
I was recently wasting some time browsing around Youtube and I happened to be watching a few videos people had uploaded regarding self storage auctions. The comments sections on these videos was rife with comments from people who obviously had very little experience with actual self storage auctions. There was a lot of myth and misinformation being spread around.
A common question that I saw being posted over and over again in the comments section was something along the lines of “Can you really make money at self storage auctions like the people do on the show?” And, a common answer given was something along the lines of “No! Don’t believe what you see on TV. They fake it to increase ratings. When you go to a self storage auction, obviously, the storage facility looks through the storage unit first and takes out any valuable stuff before they put the unit up for auction!”
I couldn’t believe how common it was that people kept posting this fallacy — that storage facilities raid the storage lockers before the auction begins and take out valuables tin order to sell themselves. The fact is, this doesn’t happen. At the time of auction, when that door first opens and the self storage auctions begin, the auctioneers and the management of the storage facility know as much regarding what’s actually inside that storage unit as the people bidding do.
Oh sure, it may happen somewhere, sometime, at some fly-by-night, small-time, seedy self storage facility run by unscrupulous people. But, it’s so incredibly rare within the self storage industry that’s it’s practically non-existent. The reason being, of course, that such an action would actually constitute fraud. And, no respectable owner of a self-storage facility is going to risk their business by having fraud charges brought against them in order to gain perhaps just a few thousand dollars worth of profit here and there.
“But, why then,” I’ve seen people ask, “don’t these storage unit facilities just not hold self storage auctions, and just sell off the contents of the units themselves? I’ve seen those units on the TV shows regularly make huge profits for the successful bidders — surely the storage locker facilities could make more money if they just didn’t hold any self storage auctions and just went through the storage lockers themselves and sold off all the valuables?”
The answer, of course is, absolutely not. And, there’s a number of reasons for this. First, and perhaps foremost, is that the nature of reality TV does tend to skew the truth in this regard. The fact of the matter is, most storage lockers up for grabs at self storage auctions are either worthless, or end up containing just enough value that the successful bidder ends up just barely breaking even. On the reality TV shows, the bidders on those shows most likely bid on dozens of lockers that turn out to be completely worthless, or close to it. Of course, showing these storage locker wins wouldn’t make for very compelling television. So, those lockers are edited out of the show, and only the exciting ones end up being shown. For every “big win” you see on those self storage auctions TV shows, there’s probably a dozen entirely unexciting auction wins you don’t get to see.
Now, keep in mind that if a self storage unit facility were to forgo self storage auctions altogether and just root through every locker themselves and sell the valuables themselves, they’d incur an expense in doing so. They’d have to pay staff to sort through the units, research the value of the items found, and to actually sell the items. They’d also incur expenses associated with dumping the tons of worthless junk that a lot of people keep in their storage lockers. Because most lockers are mostly worthless, these expenses just aren’t worth it to the self storage unit facility.
The storage facility is in the storage business. They’re not in the flipping of used merchandise business. They’ve incurred a loss at the hands of someone who has failed to pay their rental fees and is tying up one of their lockers that could be rented out to someone who would be paying them a monthly fee. The storage facility merely wants to recoup as much as what is owed to them as possible and to get that locker cleared out to make way for the next customer. They don’t want to be dallying around having employees sifting through all of the junk looking for treasure, making arrangements to have the worthless junk disposed of, researching the valuation of the interesting items found and then going through all the rigmarole of trying to find buyers and moving the items. That’s not their business — that’s not what they’re set up to do.
So, they’re much happier letting someone else — a bidder at one of their self storage auctions — deal with of that stuff. It’s the individual self storage auction bidder that then has to worry about sorting through the junk, valuing items, disposing of the trash, finding buyers, etc., etc.,
Now, you might be saying something like: “Well, due to how much worthless junk there is compared to how many valuable items there are, if it’s so not worthwhile to the self storage locker facilities, wouldn’t it also be not worth it to me?”
The answer is, again, no. The last self storage auction I was at had ten lockers up for auction — ten individual self storage units. If the facility would have forgone a self storage auction and simply searched through the ten unites themselves, that’s ten units all containing some amount of worthless trash they’d need to sift through. Ten units of garbage they’d need to pay to dump. They’d have to pay employee wages to do it. It would be a big risk to them — they likely wouldn’t make enough money to cover the associated expenses they incurred.
But, if you spread that risk out across multiple bidders, the risk becomes much less and the acceptance of that risk becomes well worth it for the individual bidder. If you’re at a self storage auction and you successfully procure a locker with a bid of, say, $200.00. First of all, it’s just one locker — you can sort through it yourself. You don’t need to incur the expense of paying anyone. And, dumping the refuse is equally much less of a problem for just one locker. Now, maybe you’ve lost the gamble and the locker does turn out to be worthless — you’ve lost $200.00. It’s not the end of the world. You might make $600.00 in profit on your next locker. Or, maybe this $200.00 locker produces $5,000.00. The risk of the gamble is well worth it to the individual bidder buying lockers here and there. It’s not worth to the storage facility who forgoes self storage auctions. They’d be getting all of the valuables, yes. But, they’d also be getting all of the junk. When you put all of the lockers together, the amount of junk almost always makes the amount of valuables not worth your while. If you gamble here and there on individual lockers, and you do it wisely, there is risk involved, but the potential for reward makes it well worth it.
If you were the owner of the storage facility, however, and you chose not to hold a self storage auction and just go through all the stuff yourself looking for valuables, out of, say, 10 lockers you had up for grabs, you pay employees to sift through everything. The ten lockers might yield, say, a total of $20.000.00 worth of salable goods. But, you’ve paid employees hours worth of wages to sort through everything, you’ve incurred expenses for disposal of TONS of worthless junk, you’ve had to incur a bunch of time and expense research the interesting items you’ve found, you’ve had store the valuables until you were able to sell them… etc., etc., In doing things this way, every so often you might come out a little bit ahead and end up making more money than you would have if you held self storage auctions for the delinquent units. But, you’re much more likely not to even break even on each individual go round. So, over time, you’d actually make less money than you would had you sold the units by holding self storage auctions — you’d probably even lose money.
Much better to hold self storage auctions, not be bothered with the hassle, and focus on your main business of renting storage units to people. Leave the buy-low-sell-high flipping of pre-owned merchandise to people who are in that business.