Do your Sums before you sink money into Self Storage
They say a fool and his money are soon parted and that could prove a very accurate description for anyone who thinks self storage investment is easy money.
It could look deceptively simple and straightforward, given it appears you don’t have to worry about ordering and storing products, or managing a huge team of staff, or buying expensive equipment, but self storage investment has more traps than it might seem.
For starters, assuming you will have customers just because you have built a steel storage facility is wishful thinking. With other products, spending money on marketing and offering good deals might work, but that is not the way to approach self storage investment if there are no potential customers nearby who need to pay to store ‘stuff’.
Self storage investment is like any other business investment. The key is the word ‘business’ and you need to answer some fairly basic questions before this investment, like any other, looks worthwhile.
The business plan for your self storage investment will tell you how much it will cost you to build and operate the site, what you can expect to earn from rent, how much profit you need to make the investment worthwhile, and what your end goal is, whether this is a short-term or long-term strategy.
Finding the answers for your business plan will take a little bit of research, but it’s not difficult. For starters, play ‘secret shopper’ and check out the competition, not just in the area that you plan to build, but with sites in other locations that are similar in style to the self storage investment you are planning.
People tend to store their belongings, whether personal or business, at a facility as close as possible to their own location, or on a route they use to get there, so check all your rivals in those areas.
Visit those sites and assess how their self storage investment is panning out. If they’re thriving, is there enough business for two operations? If they’re not, then perhaps there is no more demand in that area and you might need to consider making your self storage investment somewhere else.
Whatever you decide in terms of what’s happening in that particular region, you still need to determine rents and that involves more research. You need to know what you are likely to earn to help pay for the self storage investment and the ongoing maintenance, as well as making a profit.
You will need a mix of unit sizes and that will depend on who your potential customers are and what their needs are. A mix is better than building units that are all the same size, but are you mainly looking at home owners/renters with household possessions to store, or commercial tenants? The better your unit mix matches your potential customers, the better your rental returns will be.
Of course, you can do all this research yourself before you make your self storage investment, or you could engage the services of a steel storage facility specialist who will have much of what you need at their fingertips.
The key, though, is always to look before you leap!