As a Wentzville rental property investor, you may be searching for new opportunities to expand your business and diversify your income streams. One alternative that has become prominent in the past years is the self-storage facility. But should you start a storage rental business? To decide if the industry is a good fit for you, it’s important 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. At present, self-storage facilities number somewhere around 50,000. To put that number in context, that’s about the same as 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.
In every way, storage rental is a lucrative business, with profit margins averaging around 11 percent. It can be a great way for those who can afford to get into the business. But there are some other things to remember in addition to finances. For reference, you’ll need to know the total cost of starting a self-storage business; think about if you should build your own facility or acquire an existing structure; what kind of operating expenses there will be; and how you will market and staff your business. By carrying on some of these essential considerations, you can more easily recognize if going into the storage rental business is appropriate for your certain situation.
If you already have land or own a building you could convert into storage space, you may be in the best spot to start a storage rental business. Ultimately, one of the significant obstacles of self-storage businesses is the cost of the facility itself. Don’t forget to do some research to determine how much it will cost to secure a location, building and complete 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, modifying an existing structure can be just as costly, depending on the place, acquisition expenses, and the availability of workers to do the project. Or, you may find the idea of acquiring an existing storage facility more attractive. But please remember that even current or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.
This is the reason you need proper funding to establish a storage rental business, irrespective of which path you want. One of the major questions you should be inquiring is: where will the money for your new business come from?
Naturally, if you are a rental property investor, the plan is to diversify, not set all of your investment eggs into one basket. If selling off your other assets isn’t the solution, could you qualify for a loan (either to purchase or to build a facility)? You may also consider going into business with one or more partners or finding an investor willing to help you finance an acquisition or development deal.
Regardless of how you intend to acquire the funds for your storage rental business, bear in mind to add operational costs in your calculations. You’ll need to have at least six months of operational expenses covered, meaning that you need to know what those costs will be and how you’ll operate your storage facility. From self-reliant to employing a third-party management company, there are numerous different methods. No matter what, you have to know whether you can afford not only the heavy upfront price tag but also the time and effort it will require to get your storage rental business working.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Three Bridges 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 636-542-8852 to speak with a Wentzville property manager today.
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