As a Kuna rental property investor, you may be seeking innovative ways to expand your business and diversify your income streams. One of the most popular options in recent years is the self-storage facility. But is it good for you to start a storage rental business? To know if the industry is suitable for you, you must 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. At this moment, self-storage facilities number somewhere around 50,000. To put that number in context, that is about similar to the amount of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in all different sizes but are focused on one single service: exchanging a monthly rental payment for space to store the renter’s important things. From storing art and appliances to boats and RVs, individuals and businesses alike rely on self-storage units to store necessary things or aren’t ready to give up.
By all accounts, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for others who can afford to get into the business, it may be a wise option. But there are a few other things to consider in addition to finances. For instance, you’ll need to verify the total cost of starting a self-storage business; decide whether you should 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. By taking some of these major considerations, you can more easily discover if going into the storage rental business is desirable for your particular situation.
If you already have land or own a building you could convert into storage space, you may be in the right place to start a storage rental business. After all, one of the major barriers of self-storage businesses is the cost of the facility itself. It is important to do some research to know how much it will cost to secure a location, building and complete the necessary construction.
While you may think that building an entirely new facility is the most expensive method, you may be mistaken about that. In most cases, refurbishing an existing structure can be just as costly, depending on the spot, acquisition expenses, and contractors’ availability to do the work. Otherwise, you may find the idea of procuring an existing storage facility more appealing. But don’t forget that even current or turn-key facilities may demand updates, renovations, or repairs, in addition to basic operational costs.
This is the reason you need proper funding to start a storage rental business, regardless of which path you choose. One of the major questions you should be asking is: where will the money for your new business come from?
Naturally, if you are a rental property investor, the plan 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.
Regardless of how you propose to acquire the funds for your storage rental business, don’t forget to add operational costs in your calculations. You’ll need to cover at least six months of operational expenses, meaning that you need to know what those costs will be and how you’ll operate your storage facility. From managing it personally to hiring a third-party management company, there are many different methods. No matter what, you have to know whether you can afford not only the heavy upfront price tag but also the time and effort it will need to get your storage rental business operational.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Boise 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 208-494-1800 to speak with a Kuna property manager today.
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