Are you pondering the possibility of diving into the storage industry? Whether you’re an aspiring business owner eyeing a profitable self-storage investment or just someone who is looking for a way to make some extra money with your existing space, the storage sector offers a substantial range of opportunities.
The industry is a bustling marketplace of traditional self-storage units and self-storage facilities themselves, large storage units, and even peer-to-peer self-storage marketplaces like Neighbor.
We’re going to cover everything you need to know about buying storage units, from the business model to what to look for when making a purchase.
Understanding the Self-Storage Market
You will need to spend money to make money in most cases. However, before you jump in and start signing checks and spending money, it’s crucial to understand the lay of the land in the storage facility industry.
Knowledge is power, and the more stuff you know, the better equipped you’ll be to make informed decisions.
The Self-Storage Industry
Renters are looking for spaces of all shapes and sizes to store their excess stuff. Profitable locations range from traditional self-storage facilities with rows of garage-style doors to modern solutions like residential spaces listed on peer-to-peer storage platforms like Neighbor.
Whether it’s a large-scale facility with hundreds of units per large storage unit or a small business owner renting out extra garage space, understanding the nuances of the self-storage industry is your first step to success.
Business Model and Cash Flow
At its core, the self-storage facility business model is remarkably straightforward. It’s all about cash flow. It’s not based on the “luck of the draw”, like acquiring storage units at auction. You bring in revenue by renting out storage space (after covering necessary expenditures like property maintenance, utilities, and staff salaries).
This ongoing cash flow allows your business to grow, making a self-storage facility a generally stable and often lucrative investment. It’s simple, but not easy; making money requires effective management and a good marketing strategy to attract and retain customers.
What to Look For When Buying Storage Units
Once you have a grasp of the storage unit market and understand the business model, you’re ready to take the plunge. But before you do, there are several essential factors to consider. Here’s what to look for when purchasing storage units.
Property and Location
When it comes to real estate, location is everything, and the storage business is no exception. A facility’s location will directly affect your cash flow and profitability. Look for a site with good visibility, easy access, and relatively close proximity to populated areas. Research the competition in the area, and keep an eye out for future developments that could impact your business.
Existing Self-Storage Facility vs. New
Deciding between purchasing an existing self-storage facility and starting from scratch is another crucial point to ponder.
Each option has its pros and cons.
Buying an established facility can provide immediate cash flow but may come with higher upfront costs.
On the other hand, building a new facility from the ground up allows you to customize the space to fit market needs, although it typically takes longer to see a return on investment.
Due Diligence and Research
Diligently conducting market research is critical for anyone considering buying an existing storage facility. Before a potential property can be seriously considered, the buyer should look into things like the facility’s financials, tax invoices, tax returns, rental and payment history, deeds, business bank statements, occupancy reports, insurance riders, and more.
On top of all of that, a buyer should conduct a thorough building and property inspection before purchasing.
Costs and Pricing
Running a self-storage business isn’t just about offering storage units; it’s also about smart financial planning. Here’s a quick breakdown of costs and pricing strategies to consider. Knowing your operating costs is essential for setting realistic prices for your units.
Common expenditures include maintenance, security, utilities, and employee wages. Don’t forget about property taxes and insurance costs. Factor these into your overall pricing structure to ensure a profitable business model.
To stay competitive, keep an eye on local market trends. Price your storage units neither too high to deter potential customers nor too low to run at a loss. Offering discounts for long-term rent commitments can incentivize renters and secure a more stable cash flow.
Self-Storage Amenities
In an increasingly competitive self-storage industry, making your mark can be challenging. You can’t afford to be just another storage unit provider, so do what you can to offer the premium amenities that your renters are going to want.
Climate Controlled Units
Climate-controlled units are a must-have for many renters. These units maintain a stable temperature and humidity level, ideal for storing sensitive items like antiques, documents, clothes, furniture, or electronics. Offering climate-controlled storage can be an example of a unique selling point that attracts a specific customer base.
Security and Convenience
The modern renter values security and convenience. Installing high-definition security cameras, providing 24/7 access through secure, automated gates, and offering easy online payment options are just some ways to meet these needs. Additionally, consider implementing a customer service chatbot on your facility or property’s website for immediate support.
How to Help Your Unit Stand Out in the Market
The self-storage industry isn’t over-saturated, but it’s still vital to establish your presence in the storage scene.
Here are a few ways to make your presence known: a) traditional marketing, b) digital marketing, and c) peer-to-peer storage platforms.
Marketing Your Property
Effective marketing is critical to attracting potential buyers and renters.
Optimize your online presence, leveraging platforms like Google My Business, to appear in local searches. Pair this with traditional advertising, such as billboards and local publications, to cover all your bases.
Special promotions and partnerships with local businesses can also bring in new customers. The key is to remain active and creative in your marketing efforts.
Peer-to-Peer Storage Marketplaces like Neighbor
Embracing the digital transformation, consider listing your available storage units on a peer-to-peer storage platform. Post vacant units on these marketplaces and watch the renters flock in.
A peer-to-peer marketplace like Neighbor doesn’t just broaden your reach; it also appeals to a younger, tech-savvy demographic who might not otherwise consider traditional storage facilities.
Such platforms can serve as an additional channel for securing rentals, making your units available to an audience you might not have tapped into.
Additionally, these peer-to-peer platforms can even offer additional layers of security which can be a selling point for prospective renters.
Common Mistakes to Avoid
Embarking on a self-storage venture is exciting but can be fraught with pitfalls. Here are some common mistakes that new self-storage owners should steer clear of:
Poor Location Choice
The saying “location, location, location” is a longstanding cliche in this industry, but for good reason. A poorly chosen site, far from potential customers or in an unsafe area, can dramatically reduce your business’s chances for success.
Insufficient Site Security
A lack of robust security measures, such as 24/7 surveillance cameras and keypad entry, can result in theft or vandalism. This not only results in financial loss but also severely damages your overall reputation in the market.
Ignoring Online Presence
In our highly digitized world, not having a functional, user-friendly website or neglecting your social media can make you invisible to a large chunk of potential customers. It’s an oversight that costs you valuable business.
Neglecting Due Diligence
Cutting corners in the research phase can be disastrous. Always thoroughly investigate any existing self-storage facility before purchase, including scrutinizing financial records, compliance with regulations, and customer satisfaction levels.
Overlooking Essential Maintenance
Facilities need to be kept in top shape. Ignoring the little things like cleanliness, pest control, or weather damage can add up over time, leading to unhappy customers and potentially expensive repairs in the long run.
Neighbor Makes Investing in Storage Easier Than Ever
Whether you’re eyeing an existing facility or starting from scratch, the key is diligence and smart choices.
Need to build a steady stream of clients? Becoming a host on Neighbor’s platform can help you expand your customer base tenfold.
