Over the last decade, storage rental facilities have blossomed throughout the United States. These days, self-storage facilities number somewhere around 50,000. To put that number in context, that is almost comparable to the quantity of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in various sizes but are focused on a specific service: exchanging a monthly rental payment for space to store the renter’s necessary stuff. From storing art and appliances to boats and RVs, individuals and businesses alike depend on self-storage units to hold things they need or aren’t prepared to abandon.
Actually, storage rental is a lucrative business, with profit margins averaging around 11 percent. And it could be a perfect option for anyone who can afford to get into the business. Yet, there are a few different things to consider in addition to finances. For instance, you’ll need to figure out the total cost of starting a self-storage business; decide whether you should build your own facility or purchase an existing structure; what sort of operating expenses there will be; and how you will market and staff your business. After working through some of these important considerations, you can more quickly realize if going into the storage rental business fits your specific situation.
If you currently have land or own a building you could convert into storage space, you may be in a great position to begin a storage rental business. After all, one of the most primary challenges of self-storage businesses is the cost of the facility itself. It’s advisable to do some research and determine how much it will cost to secure a location, building and complete the necessary construction.
While you may expect that structuring a brand-new facility is the most expensive approach, you may be totally wrong about that. Mostly, renovating an existing building can be just as expensive, contingent upon the location, procurement costs, and laborers’ accessibility to finish the project. Or, you may find the idea of buying a current storage facility more appealing. But keep in mind that even existing or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.
This is why irrespective of which way you pick, you’ll need proper funding to begin a storage rental business. Probably the fundamental questions you should inquire about is: where will the money for your new business come from?
Undoubtedly, if you are a rental property investor, the objective is to diversify, not put the entirety of your investment eggs into one basket. If selling off your other assets isn’t the solution, could you qualify for a loan (either to purchase or to build a facility)? You may also consider going into business with one or more partners or finding an investor willing to help you finance an acquisition or development deal.
No matter how you plan to acquire the funds for your storage rental business, don’t forget to include operational costs in your calculations. You’ll need to have at least six months of operational expenses covered, which means you’ll need to know what those costs will be and how you’ll manage your storage facility. From doing it yourself to engaging a third-party management company, there are several other techniques. No matter what, you’ll need to decide whether you not only can afford the heavy upfront price tag but also the time and effort it will require to get your storage rental business up and running.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Assurance a call. We work with investors like you to improve rental property margins, increase profitability, and connect you with great off-market deals. Contact us online or call 971-270-2600 to speak with a Portland property manager today.