13 Pros And Cons Of Owning Storage Units
13 Pros And Cons Of Owning Storage Units
A friend of mine owns a local specialty pharmacy distribution company but also does quite a bit of real estate investing on the side. It seems like the more successful people I talk to, the more I find out that they also dabble in 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, also heavily invest in real estate as well. This seemed a bit odd to me at the time as I thought the only 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 self storage units and noticed he was taking up his parking lot.
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 that the 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? 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.
Pros of Owning Storage Units
1) Multiple business opportunities
If you think the only way you can make money owning a storage unit is renting it out, think again.
I’ve personally seen several storage units that also have other businesses attached to them as well. One of the more popular are ones that 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 business by having them store some of those items in your units too.
2) Flexible hours
The cool thing about owning a storage unit is that you can set your own hours. Heck, if you don’t want to 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 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 the cost to build or remodel a home continues to rise, 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.
Owning storage units are great investments as they offer convenience to people. They allow them to come and go to access their belongings as they please.
5) Increases your network
Whether you realize it or not, owning storage units can help you grow your personal network. Some of your customers are going to also 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 controlled units.
Consumers using storage facilities 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.
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 storage units 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 the traditional tenant problems that you’d have as a single family or multifamily owner.
Also, storage units have lower overall maintenance costs as well.
Cons of Owning Storage Units
1) Location, location, location
As with anything in real estate, location is one of the most important factors to consider when building/purchasing storage units.
If you find one that hasn’t 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
Just like multifamily rentals, one of the goals of storage units 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.
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!
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