17 Pros And Cons Of Owning Storage Units
A friend of mine owns a local specialty pharmacy distribution company but also owns commercial real estate on the side. It seems like the more successful people I talk to, the more I find out that they also dabble in different forms of real estate. This is one of the many reasons I began educating myself about it several years ago.
Even the ultra-wealthy such as Warren Buffett and Dave Ramsey that have day jobs, are also real estate investors too. This seemed a bit odd to me at the time as I thought the best way to become a millionaire was to invest in the stock market and wait 40+ years for it to grow because everyone’s doing it right?
Recently I was riding by my friend’s 24-hour access self storage units and noticed he was taking up his current parking spaces.
I snapped this picture and sent it to him wanting to know if he was expanding or was shifting from concrete to a dirt parking lot. You have to remember we’re in Louisiana so anything goes…
Anyway, he informed me the good news as units were doing so well that he was planning on doubling the size of the facilities.
Which got me thinking….look at our world today.
What are we doing more of today than we used to do?
Buying, consuming and accumulating stuff, right? But where do we put all of that stuff?
Well, some folks hoard it. Others may sell it at garage sales but the majority have to find space for it either at their own homes or a self-storage facility.
I’ve always been taught that if you want to be successful in any area of life, find a PROBLEM and SOLVE it. Basically, become a problem solver.
Obviously there’s a problem, we have too much stuff. And a viable solution is providing an off-site space for it.
If any of this has piqued your interest, let’s first take a look at the pros and cons of owning storage units.Join the Passive Investors Circle
Pros of Owning Storage Units
1) Multiple business opportunities
If you think the only business model to make money owning a storage unit is renting it out, think again. There could be another business opportunity (or two) that could be added.
I’ve personally seen other self-storage facilities that also have other businesses attached to them as well. One of the more popular are ones are also U-Haul affiliates.
Think about it. If you’re having to rent a truck to move items from your home, then you may just pick up more cash flow and business by having them store some of those items in your units too.
Another local business owner polled his storage unit facility customers and discovered there was a need for RV owners to store their recreational vehicle. This led to further expansion thus increased the rented space available.
Related article: Should You a RV Park Investment?
2) Flexible hours
The great thing about owning a self storage business is that you can set your own hours.
Heck, if you want to avoid hard work and NOT set foot on the property, you can hire someone to do it for you.
You can be as hands-on or hands-off as you want to be.
3) Demand is high
As we discussed earlier, consumers these days are buying MORE stuff and I don’t see them slowing down anytime soon. Why?
Companies with great customer service such as Amazon and Zappo’s are making it easier to purchase items. Sometimes it looks like my front door is one of their distribution centers! 🙁
They’re also finding ways to get items shipped out to us quicker and quicker.
What used to take 7-10 business days to ship out now usually arrives FREE the next day.
4) Provides convenience
As construction costs keep increasing, being able to give consumers a place to store their belongings is a great service to be able to provide. It’s getting too expensive to add on to homes in order to increase storage space.
A great way self-storage owners can offer more convenience is to be there when their customers need this temporary storage. This way they can come and go to access their belongings as they please.
5) Increases your network
Whether you realize it or not, being in the self-storage industry can help you grow your personal network. There’s a good chance some of your customers are also going to be business owners in your area.
By storing their belongings, you’re getting to know them better which helps to get your name out in the community.
6) Affordable pricing
Another value-add that you can provide is affordable pricing. Most of the time, the monthly rental fee is usually very affordable for most households.
On the plus side, you could offer optional services which can make your business more profitable such as a full-service facility and/or climate control units.
Consumers using a self-storage unit want piece of mind that their belongings are going to be safe. Especially their expensive items.
Many times these people have belongings that are special to them. So being able to provide space for their important items makes what you do that much better.
Because of this, owners will hire security guards and install surveillance cameras providing customers with a safer environment.
8) Help out local businesses
There are many businesses that don’t have room to store items such as documents, files, old tax returns, etc. Off site storage units can help them resolve this problem.
Also, many of these businesses may use a storage building for equipment that may not be needed all year long.
I used to own a lawn care service and found it was convenient to be able to store some of my equipment when business slowed down especially in the winter.
9) Less problems
Typically as a storage unit owner, you wouldn’t have tenant problems that you’d have as an owner of single-family homes or apartment complexes.
Also, storage units have lower overall maintenance costs as well.
10) Reliable in all Economies
Storage units are known for being one of the MOST recession-resistant asset classes available.
When the economy tanks, many people start to downsize and need a place to house their possessions during the transition into smaller homes or an apartment.
When the economy is good, storage units are still in demand. People who are moving need temporary accommodations for their furniture. People who are starting new businesses also need places to store supplies for their start-ups.
The reliability of self-storage income despite what the economy is doing makes it a highly appealing investment.
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Cons of Self-Storage Ownership
1) Location, location, location
As with anything regarding the real estate market, location is one of the most important factors to consider when building/purchasing storage units.
If you find an existing facility that’s not been fully occupied that you think can be turned around, think again. One of the main reasons why a storage unit continuously operates under a low capacity could be due to a poor location.
2) Variable occupancy rate
Similar to multifamily rentals, one of the goals of ownership of a self-storage business is to have a high occupancy rate. Typically, most aim for 90% or higher.
But you have to remember you’re dealing with human beings. Life happens. Sometimes they have to move, can’t pay the rent or other issues can arise that causes the occupancy rate to vary.
If you want to invest in something that is guaranteed, then this may not be the best choice for you.
3) Large commitment
As with anything in life, if you want success, you must be willing to work hard and make a large commitment.
Owning storage units is a business. If you’re not willing to do your part such as keeping up with maintenance and security along with other business issues, then don’t expect it to be successful.
4) Competition can be fierce
Because storage units can be cheap and easy to build, competition could be high. Especially if the demand is there too.
Now that there are several large, national companies in this space, you can bet every location is being scrutinized.
5) Must hire right
The majority of self storage owners are of the “mom and pop” variety. This is typically a husband and wife team that have decided to take things into their own hands and try to do everything themselves.
Most tend to personally manage because many times hiring the wrong person to handle management can ruin a company.
As we’ve seen in the last few years, finding “good help” is extremely difficult to find. In our practice, we’ve constantly paid above and beyond what any other office pays as long as they meet certain target goals. If you want to do the same with your self storage business, make sure you pay them what they’re worth and treat them right to be successful.
Good help is hard to find in this industry. Be patient with your hiring practices, then pay the perfect individual something that they can’t turn down.
6) Must meet storage specifics for local community
Depending on what area your storage facility is going to reside in, make sure that you meet the specifics for the area community.
Some may prefer units where tenants can drive up to their unit (outdoor facility) where others prefer only indoor storage options.
It’s important to perform market research first so you’ll know what option is preferred over the other.
7) Tenant Issues and Problems are Inevitable
As with running any business…always expected the UNEXPECTED.
Whenever you’re dealing with the public; expect to have problems such as: tenants NOT paying, offering payment plans (making sure they pay on time), handle delinquencies in a timely fashion.
Also, be wary of those that are trying to rent from you yet coming out of an eviction. If they didn’t pay their previous landlord, then there’s a good chance it could happen to you too.
A Few More Facts To Consider
Now that we’ve covered a few pros and cons of owning storage units, here’s a few more facts that you may also want to take into consideration…
The demand for self storage has been rising. Roughly half of all the 23,000 self storage facilities have been built in the last 7 years.
Something else to consider is the large number of Baby Boomers that are set to retire, travel and downsize in the not too distant future. Some will also be purchasing second homes.
What this means is that the need for self storage for this group is going to skyrocket.
Also, boomer retirees have trillions (with a “T”) in purchasing power. So coming up with money for storage shouldn’t be hard!
Want More Info About Self Storage Investing?
If you’re a busy professional like myself, being an active owner in a self storage facility may not be the best use of your time. It’s for this reason that I’ve chosen to go the passive route.
If you want to learn more about how to passively invest in self storage deals, click HERE.Join the Passive Investors Circle