Looking for the best passive income investment? The self-storage industry could be just the ticket.
With experts lauding the self-storage sector as a “recession-resistant” option, you may have considered building storage units and renting them out to the 38% of Americans who currently use or plan to use a storage space.
But then the question arises: “Is there a need for another storage business?”
Though you may find storage businesses planted on every corner, consider the wide range of customers in need of item and vehicle storage. Employees relocating across the country, downsizing homeowners without enough space for collectibles or belongings, and remote-first business owners who don’t need or have brick-and-mortar locations (just to name a few).
With such a large customer base to serve, as long as there are self-storage units available, people will want to rent or purchase them—especially with storage vacancies sitting at a steady 8%.
If you’re thinking about getting into the storage business, you’ll need to know how much it costs to build storage units from the ground up. Read on to discover the answer to this question and more.
Why Look Into Building Storage Units?
It might be wise to look into the self-storage industry because storage units promise great potential for profit.
Even in hard economic times, people will need self-storage solutions to keep their furniture, cars, and other personal belongings, out of sight and out of mind. But storage isn’t just a personal need. Businesses will also need storage units for excess business equipment (important files and documents, desks, printers, and so on). For instance, business that recently transitioned to a fully-remote structure need places to store the equipment and inventory they no longer use, now that their employees work from home.
If you can build storage units affordably, you can then rent them out to people who use them regularly, making a very tidy profit without a lot of maintenance requirements. Storage facilities don’t require a ton of employees, and once your facility is up and running, regular maintenance and repair fees shouldn’t eat too much into your bottom line.
Understanding the Cost of Storage Units
But how much is a storage unit? If you’re still wondering, “How much do storage units cost?” the answer may not be as simple as you originally thought.
You’ll need to account for the following costs: the cost of buying land, the cost of contracting workers, and the overhead costs of overall setting up your self-storage business. The more money it costs to get started, the more money you need to earn to turn a profit.
Building a storage unit isn’t as simple as paying a one-time fee and calling it a day. Indeed, there are a number of different costs you’ll assume responsibility for as a facility owner: labor contracts, construction costs for each self-storage unit, and much more (especially if you plan to build a facility from the ground up, rather than purchasing units from an existing storage facility).
Price of Land in the Self-Storage Business
You’ll first need to consider the price of land for your storage unit business. If you want to build storage units or a self-storage facility, you’ll need to own or lease the land on which the storage units will sit.
Of course, the ideal land for a storage facility depends on factors like:
- Location
- Zoning laws (which also affect construction cost margins)
- Accessibility to the public
- And more
Typically, you’ll need anywhere from 2.5 to 5 acres for your storage facility. Overall, your land costs will monopolize between 20% and 30% of your total development budget. So if your self-storage facility business costs $5,000,000 to get started (for simple math), your storage facility may cost anywhere between $1,000,000 and $1,500,000. Always factor land costs per square foot into your self-storage business calculations.
If the land is unusable, site improvement costs will increase prices, too. Site development costs are a core part of operating expenses that you can’t avoid, unfortunately.
Materials Cost for Self-Storage Facilities
Then there are materials. Most self-storage facilities are made of a mixture of concrete and steel, and you should expect to spend anywhere between $25-$70 per square foot to construct high-quality self-storage facilities that people want to use.
Your material costs will also fluctuate depending on the layout of your building. For example, costs for materials for a single-story self-storage facility can be anywhere between $50 and $65 per square foot, while facilities with multiple floors require additional construction materials and inclusions. A multi-floor facility may cost anywhere between $85 per square foot and up to $110 per square foot.
Price of Labor
Someone has to build your self-storage facility. Therefore, you’ll need to hire contractors, construction experts, maintenance staff, inspectors, etc. These fees will consume hundreds of thousands of dollars of your budget alone, as building a self-storage facility can take anywhere from six months to up to a year or more, depending on the complexity of the project, zoning rights, and how soon you’re allowed to start building, etc.
It’s best not to skimp on the price of labor. “Half the cost, ten times the misery.“ The last thing you want to do is construct a less-than-stellar self-storage facility that is riddled with plumbing or wiring issues. If an inspection surfaces problems (hiding beneath the drywall), you’ll spend more on fixes and fees than you would’ve to do it right the first time.
Labor costs extend into long-term operating costs. In the self-storage industry, you’ll need employees, even for a single-story storage facility. Multi-story storage facility businesses require even more workers, of course.
Marketing Fees for a Self-Storage Facility
After you set up your storage units/build your facility, you still have to market your business to potential customers. If you don’t spend the time and resources marketing to your target audience, your storage facility will remain off the map, leaving you with many vacancies to fill.
Marketing fees can be highly variable – depending on whether you plan to use traditional OOH/out-of-home marketing methods, like billboards, online ads, TV ads, for example.
You should expect to pay several thousand dollars at least for a reasonable marketing campaign, especially in the early days of your storage unit business’s lifespan.
Ancillary Costs
When totaling the cost to build storage units, don’t forget the ancillary costs. For example, do you want to add a parking lot to the facility for customer ease of access? Will you want to keep up on routine landscaping to boost your facility’s curb appeal? What about branded signage? These are all are ancillary costs to account for.
Climate-controlled storage is another popular “extra” that many self-storage facility owners choose to offer. Climate-controlled storage units are a necessity for items and vehicles (think a classic car) that are negatively impacted by dramatic temperature fluctuations.
If you, as the storage facility owner, choose to introduce climate-controlled storage to your menu of services, you can charge more for climate-controlled facility access in a self-storage building to offset the higher costs associated with installing climate-controlled storage units in the first place. With climatized storage units available, you’ll also be able to expand your customer base.
When all is said and done, these extra inclusions may cost a pretty penny—but they could earn you a pretty penny, too. Once again, the more amenities your storage facility has to offer, the more appealing it will be to store with you (over the other 50,523 storage facilities in the U.S.)
So, How Much Do Storage Units Cost?
Add all those numbers up, you’ll probably spend anywhere between $2 million and $5 million or more to build up a fully equipped, ready-to-go self-storage facility.
You can, of course, reduce this cost in a variety of ways.
For example, instead of building a facility with 546 individual storage units, you might start off with a mini storage facility that only has a half-dozen or so storage units for your customers. With fewer units to construct, your build will have fewer soft costs, along with lower operating, marketing, and maintenance costs.
To save money on the total build, you might forgo a traditional parking lot in favor of street parking, or you might use an existing facility for your self-storage businesses.
Or you can lower storage building costs by building a single-story facility with a low construction budget (rather than a big-ticket, multi-floor facility). However, keep in mind that a smaller facility will decrease your bottom line and tighten your profit margins. Plus, fewer units means fewer customers, which equates to fewer monthly rent payments. .
When Will You Make Money?
People always need self-storage units, but you shouldn’t expect to make back the money you spent right off the bat. Usually, it takes anywhere between 18 months and 24 months for self-storage facilities to realize their full income potential—rather than just paying down debts with the majority of their revenue.
Keep this in mind – using an existing storage unit business or warehouse storage facilities might be ideal if you’re looking for faster profits.
There’s a More Affordable Way to Jumpstart a Storage Business
As you can see, there’s a lot to think about when evaluating the cost of building storage units. Starting a storage business can be quite challenging, especially since you have to get the word out to your potential customers.
But with a peer-to-peer storage marketplace like Neighbor, you can post your available storage units and attract new clients in no time. If buying a commercial lot isn’t in the budget, you can even rent out your own driveway or spare bedroom as a storage space. Check out Neighbor’s Become a Host page to learn more!
