How Much It Cost To Invest In Storage Units

How Much It Cost To Invest In Storage Units

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If you’re looking to make an investment, look no further than investing in your own storage unit facility. Because this industry continues to grow with no signs of slowing down, it’s a great way to make sure you don’t lose too much money in the process. But how much does it cost to invest in a storage unit, and how much can you expect to pay for your own storage unit business?

Building your own self-storage facility ranges from $25 to $40 per square foot for a single-story self-storage facility to $42 and $70 per square foot for a multi-story facility. According to LoopNet, purchasing an existing facility can range between $40,000 and $30 million. Investing in another storage unit business means you can spend as much—or as little—as you want. 

There’s more than just looking into purchasing your own storage unit. Read on to find out more about how much it costs to build your own and what the industry looks like now and in the future. You can also learn about the benefits of running your own business.  

Crunching the Numbers

How Much It Cost To Invest In Storage Units

Investment costs vary depending on what you’re doing with your business and whether you’re investing in a new place or buying an existing one. 

What profit margin can you expect from a self-storage business? The average in the United States lands around 11 percent. When a restaurant’s margins are three to five percent and a clothing shop is around four to 11 percent—this is a fantastic profit margin for a fairly simple business model. 

According to Forbes, self-storage is considered recession-resistant and has a compound annual growth rate of 134.79 percent in the next several years. From 2009 to 2018, storage facilities also averaged an annual return on investment of 16.9 percent, making it the highest return on any real estate properties during that time period. 

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Building Your New Facility vs. Buying an Existing One

On average, creating your own facility is going to cost about $25 to $70 per square foot. That may not seem like a lot to start out with, but when your facilities range from 10,000 to 100,000 square feet—things can start to get pricey.

One of the main items that you’re going to need to start your own facility is a plot of land. Construction costs will be the majority of your budget, as most facilities are going to be between 10,000 and 100,000 square feet—bringing your costs to create your own fairly high. Most storage businesses are single story businesses, so make sure you have enough room to build enough space for your storage units. If you’re looking to create a multistory facility, it may increase to $42 to $70 per square foot. 

Additionally, you will need security measures such as a fence, cameras, and even a guard house. Administrative offices are helpful for you and your employees. You should also consider whether it will be climate controlled or not—this could be a feature your customers are looking for, but it can add additional costs. 

You should also consider how easy the building would be to maintain. While it has less maintenance needed compared to other real estate investments, it still needs day-to-day upkeep. 

One thing to remember is that your land needs to be in the right zoning and the right size. Make sure you’re looking for something that fits into both of those categories before you consider purchasing. You should also consider whether you have land enough to expand, and whether you’re building or not, whether you can expand upon your existing buildings. 

But that’s not the only option. You can also consider buying an existing one, but those costs are going to vary depending on your location, the size of the building, and the state it’s already in, along with any outstanding costs the business has incurred. You should also consider the amount of population within the facility—making sure that you have about 50,000 people within a drivable range to the facility is key, along with being in a high traffic area. Buildings with more than 400 units are going to give you the most profit, and median household incomes should be about $50,000 to encourage using the facility. 

If you’re looking into this, make sure you research any potential properties in your area before considering your budget. One way to start your research is by looking on LoopNet, where they have listed all types of self-storage facilities for sale within the United States—some with self-storage businesses around $100,000, all the way to large scale storage businesses topping $30 million. 

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Why is a storage unit business a great investment?

Running your own business can be incredibly rewarding, but there are even more benefits to running your own storage business. Storage is something that everyone needs sooner or later, and whether that means moving into a larger home or getting a storage unit, you’re going to be there to help. Marketing will need to be focused on brand awareness rather than convincing someone they need your services, so your work is done there—if they need you, they’ll find you, so make sure yours is the name they think of. 

Because the industry continues to grow, the public is aware of the service. As mentioned previously, that means you must be on the forefront of the public’s minds when they think about self-storage units. 

Considering that the industry generates about $39 billion annually, according to IbisWorld, it’s not a surprise that investing in your own storage unit is a great idea. Statista also predicts that the global self-storage market will increase almost 6 percent over the next five years to about $64 billion. With numbers like these and no decrease in sight, there’s not many negatives to getting into the self-storage industry. But, like any business, there are always challenges—so what are some of the pitfalls? 

You will face your typical business challenges, such as budgeting and problematic customers. You also have to face competitors that may try to undercut your business. You also have to consider safety and anti-theft measures, but all of these can be combated by proper planning. 

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Other Investment Options

How Much It Cost To Invest In Storage Units

In a business like a self-storage business, there are also other options for investing. If you want to get into the business without having to buy or build your own storage facility, you can invest in another business—whether it’s in your area or not. Websites such as Self Storage Investing, Passive Storage Investing, SpareFoot, and Neighbor are all ways you can invest in the self-storage business without owning your own building. In these cases, you don’t have a limit on how much you want to invest—it just depends on how much you want to spend and how much you want back in your investment. 

Because of the growing industry, there are many existing businesses who are looking for investments to make capital improvements to their self-storage units or even expanding their businesses to make room for additional units. This gives you a unique opportunity to make that investment—and once you do, you’ll have a stake in that business and a piece of those profits once the improvements are complete. 

The best way for you to decide to spend your potential investment in self-storage units is by researching. If you want to build new, consider looking for property and start planning your budget. If you want to buy an existing one, it may be harder, but you can search for those properties as well. Investing in an existing business also requires research, but you can find assistance through any of the websites mentioned. Regardless of whether you’re spending $100,000 or $7 million, you can find a way to get your part of the self-storage industry and make your return on investment. 

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Frequently Asked Questions

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If I own a storage unit, do I want to have all my units filled?

No, you do not want to have all your units filled—that’s actually a sign that your storage unit prices are too low. It is best to have costs high enough to actually have empty units, as it makes your business more competitive and you can bring in additional income at a fair price. 

What kind of insurance do I need to start a self-storage business?

Much like any business, you are going to need certain types of insurance to manage your business. Commercial property insurance will cover your facility, while general liability insurance and sale and disposal legal liability insurance, along with customer goods legal liability insurance, can help cover any possible damages to your customers’ items. Flood insurance and worker’s compensation insurance can protect you as well in times of flooding and if an employee suffers a work related injury. 

How can I make income from a self-storage unit?

It’s important to remember that your income doesn’t just come from the rental fees of the units. Your income can come from retail sales, administrative fees, late fees, and even truck rentals for moving items. You can also sell packing products such as tape, insurance, and even better locks. 

To learn more on how to plan your own storage business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.