As an Evansville rental property investor, you might be looking for further ways in which you can expand your business and diversify your income streams. One possibility of gaining popularity in the past few years is the self-storage facility. But must you start a storage rental business? To determine if the industry is a good fit for you, it’s important to learn more about what it takes to get started owning a self-storage business.
Over the last decade, storage rental facilities have blossomed across the United States. Presently, self-storage facilities number somewhere around 50,000. To put that number in context, that’s nearly equivalent to the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in all various sizes but are concentrated on one single service: swapping a monthly rental payment for space to store the renter’s personal belongings. From storing art and appliances to boats and RVs, individuals and businesses equally rely on self-storage units to store things they need or aren’t ready to leave behind.
Apparently, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for those who can afford to get into the business, it may be a great option. Nevertheless, there are a few other problems to consider along with finances. For instance, you’ll need to define the total cost of starting a self-storage business; decide whether you have to build your own facility or buy an existing structure; what kind of operating expenses there will be; and how you will market and staff your business. Through the work of some of these major considerations, you can more easily figure out if going into the storage rental business is right for your particular situation.
If you already possess land or own a building you could convert into storage space, you may be in a good position to start a storage rental business. In the end, one of the greatest obstacles of self-storage businesses is the cost of the facility itself. It’s important to some research and understands how much it will cost to secure a location, building and perform the necessary construction.
While you might think that building a completely new facility is the most expensive alternative, you may be wrong about that. Occasionally, transforming an existing building can be just as costly, depending on location, acquisition costs, and contractors’ availability to do the work. Or, you may find the idea of purchasing an existing 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 the reason why no matter which route you select, you’ll need proper funding to start a storage rental business. One of the biggest questions you should be asking is: where will the money for your new business come from?
Of course, if you are a rental property investor, the idea is to diversify, not put all of your investment eggs into one basket. If selling off your other assets isn’t the answer, could you qualify for a loan (either to purchase or to build a facility)? You may also think about 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 much you plan to obtain 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 hiring a third-party management company, there are several different tactics. In any case, you’ll need to determine whether you not only can afford the hefty 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 Results 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 812-461-1676 to speak with an Evansville property manager today.
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