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Should You Start a Storage Rental Business?

A Storage Unit Filled Completely with Boxes and FurnitureAs a Merced rental property investor, you might be looking for extra avenues to expand your business and diversify your income streams. One route gaining popularity in recent years is the self-storage facility. But then again, 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 maintaining 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 just about the same as the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses are available in all different sizes but are concentrated 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.

By all accounts, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for those that could afford to get into the business, it may be a good alternative. Then, there are a couple of other things to be taken into account in addition to finances. For instance, you’ll need to determine the total cost of starting a self-storage business; decide whether you should build your own facility or purchase an existing structure; what kind of operating expenses there will be; and how you will market and staff your business. By working 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.

If you already have land or own a building you could convert into storage space, you may be in a good position to start a storage rental business. Nevertheless, one of the greatest difficulties of the self-storage businesses is the cost of the facility itself. It’s crucial to some research and figure out how much it will cost to secure a location, building and perform the necessary construction.

Though you may think that building an entirely new facility is the most expensive alternative, you may be mistaken about that. Sometimes, renovating an existing building can be just as costly, depending on location, acquisition costs, and contractors’ accessibility to do the work. Or, you may understand the idea of acquiring an existing storage facility more appealing. However, keep in mind that even existing or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.

This is why no matter what route you choose; you’ll need proper funding to start a storage rental business. One of the major questions you ought to be asking is: where will the money for your new business come from?

Of course, if you are a rental property investor, the concept 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 intend to purchase 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, and this 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. 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 require to get your storage rental business up and running.

Are you looking for new ways to expand your investment portfolio? Give Real Property Management Valley Wide 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 209-722-7761 to speak with a Merced property manager today.

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