As a Worcester rental property investor, you might be looking for additional methods to expand your business and diversify your income streams. One option that is gaining popularity in recent years is the self-storage facility. However, should you start a storage rental business? To decide if the industry is a good choice for you, it’s crucial 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. Currently, self-storage facilities number somewhere around 50,000. To put that number in context, that’s roughly equal to the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in all the different sizes but are focused 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, in the same way, rely on self-storage units to store things they need or aren’t ready to leave behind.
According to what is being said, 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 good option. But there are a few other things to consider in addition to finances. For example, you’ll need to determine 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 operating through some of these major considerations, you can more easily figure out if going into the storage rental business is right for your particular situation.
Unless you already have land or own a building you could convert into storage space, you may be in a good place to start a storage rental business. After all, one of the biggest obstacles of the self-storage businesses is the cost of the facility itself. It’s important to some research and figure out how much it will cost to secure a location, building and perform the necessary construction.
Although you may think that building an utterly new facility is the most expensive option, you may be wrong about that. Sometimes, converting 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. Although keep in mind that even current or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.
It is for this reason that it does not matter which path you prefer; you will 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?
Naturally, if you are a rental property investor, the idea is to diversify, not put all 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 likewise 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 you plan to acquire 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 many different approaches. Come what may, you’ll need to make a decision whether you not only can afford the substantial upfront price tag but also the time and effort it will need to get your storage rental business up and running.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management MetroWest-Worcester 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 508-329-6000 to speak with a Worcester property manager today.
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