Things to Consider When Starting a Self-Storage Business
Self-storage is one of the best businesses to invest in today, with over 24 million units in the country and almost 10% of households having rented one. Demand continues to rise, either from our overwhelming need to acquire more stuff and store it somewhere or from economic setbacks, which cause companies and families to downsize and then look for additional storage space.
Also, self-storage has higher returns than any other form of commercial real estate; the next closest investment is apartments at 8.8% compared to the national average for self-storage at 34.5%, but you have to do your homework. Here are three important items to consider when investing in self-storage:
- One thing that people say about self-storage is that it’s a cash-cow — that once you set up, you can forget and just let it bring in money. It doesn’t work that way; it’s a business and you have to treat it that way. You need to have process-based management in place and you need systems that will help you run it, such as web-based software and kiosks.
- A lot of new investors have difficulty finding out if they’re paying too much for their units and actually knowing how much they’re worth. There are a lot of misconceptions that can be solved through the use of self-storage software that analyzes deals or a professional self-storage consultant that can do a proper appraisal of the business and assets. Moreover, you should also take a look at the market demand to determine if it will support the facility. You need to find out what the supply index is within a 5 mile radius around your self-storage facility. You also should check your competition. Can you create a better product with greater curb appeal and ease of access? Plus, what’s the overall demand in that market? Are people moving into the area? Are their new jobs being created?
- A solid marketing plan that helps you determine where you’re going to be and who you’re targeting is essential. Just advertising in the Yellow Pages isn’t enough. If you want to dominate your local competition, you need to get every potential renter from five miles around your facility to your website and to your facility.
Finally, after you’ve stabilized your business, you also need to consider expanding and adding new profit centers, such as constructing new buildings and offering additional services like truck rentals, boxes, locks and moving supplies. All of these will add income and help your asset appreciate in value.