As a Durham rental property investor, you may be searching for different strategies to expand your business and diversify your income streams. One recommendation that has gained popularity in recent years is the self-storage facility. But would it be beneficial for you to begin a storage rental business? To determine if the industry is good enough for you, it’s critical to learn all you need 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 different sizes but are focused on one single service: exchanging 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 alike rely on self-storage units to store things they need or aren’t ready to leave behind.
It seems like storage rental is a lucrative business, with profit margins averaging around 11 percent. And for individuals who have resources and want to get into the business, it might be an excellent choice. However, there are some other things that you need to give importance to 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 type of operating expenses there will be; and how you will market and staff your business. By thinking of any of these key considerations, you can effectively determine if going into the storage rental business is ideal for your specific circumstance.
If you have existing land or own a building you could convert into storage space, you might be in a decent spot to establish a storage rental business. All things considered, one of the significant problems of the self-storage businesses is the cost of the facility itself. You need to do some research to determine how much it will cost to secure a location, building and perform the necessary construction.
While you may think that building an entirely new facility is the most expensive option, you may be wrong about that. Sometimes, 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 you still need proper funding to start a storage rental business, regardless of which route you choose. Probably the significant question 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 aim 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 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 ways. No matter what, you’ll need to decide whether you not only can afford the hefty upfront price tag but also the time and effort it will need to make your storage rental business up and functioning.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Impact 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 919-439-8989 to speak with a Durham property manager today.
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