So you’re thinking of buying a self-storage facility now that you’ve seen a couple of episodes of Storage Wars and Auction Hunters. You figure you’ll jump onto this cash cow, have an easy life in the stored junk industry, and retire at the age of 32.
Though it’s true that self-storage facilities come with a smaller initial investment—as little as one-third to one-half the costs of other kinds of commercial properties—they also come with operating costs that, while typically low, your get-rich-quick plan probably hasn’t accounted for.
Before you put all your Fabergé eggs into one basket, review this list of things you ought to think about so that you don’t go broke and are then forced to make an appearance on Storage Wars to watch people bid $182 for your entire life.
If you live in a small town and think you’ll just buy a self-storage facility and count your mountains of cash each quarter, you should think about quitting whatever it is you’re smoking. If you buy a facility in a town with a population of 10,000, just who do you think is going to rent a storage unit from you? The population density of the market in which you wish to buy has a direct correlation of the facility’s success—and this goes for just about any business. For example, San Francisco is a great self-storage market, but Modesto will never be able to rent out all those units.
Location, Location, Location
Most people who rent a self-storage unit find these places by driving by, not because they were seduced by an Oscar-worthy commercial that inspired them to travel across town to see this fabulous place. To be successful, a storage facility needs to be on a major street that enjoys plenty of regular traffic, have easy access, a large parking lot, and a clean exterior. That is pretty much the only criteria people look for when deciding to rent a storage unit. That and free Jolly Ranchers in the lobby.
Think about it. Who rents space in a warehouse to stash furniture, sports equipment, extra vehicles, or their prom dress? Those who can afford to own all that extra stuff without actually getting any use out of them. People with regular incomes who own cars, drive them. People with high incomes purchase extra cars and store them. Plus, the cost of renting a unit is anywhere from $100-800 per month, so once again, purchasing a self-storage facility in a low-income area will probably guarantee that you’ll have a lot of vacancies.
Costs of Operating a Self-Storage Facility
There are several fixed costs when operating a self-storage facility, and none of them involve all that pizza and beer you’ll consume as you put your feet up and watch the crowds of people rush in to store all their extra belongings. The biggest cost is probably the facility manager’s salary (which is an average of $45,000). And yes, you’ll need help running this business. Other costs of operating a storage facility are grounds maintenance (no one wants to stash their valuables in a dilapidated building with a healthy rat population), appliances, plumbing, electricity, etc. Again, these costs are typically lower than other commercial properties, but they’re not free.
Additional Good-To-Know Statistics
- the average annual household income of a self-storage facility owner is $80,000-100,000—because you have to be able to spend money to make money
- it typically takes 8-18 months to reach 90% occupancy
- most facility owners won’t see a profit until the fourth year—patience is a virtue!
- standard operating costs are usually between $2.75 and $3.25 per square foot of the facility
So there you have it. If you’re not scared off by all this grown-up information, facts, and advice, then when it comes to self storage facilities for sale, you may have what it takes to succeed. And if you don’t, you can always sell your house and live in one of the units illegally.
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