Are you planning to put up your own business? Does a storage unit business tickle your fancy?
Believe it or not, offering storage units for rent is a great choice to create passive income.
Interestingly, one in every 11 Americans pays $91 every month on self-storage units. More impressively, this translated to a $32 billion dollar industry in 2016.
With people’s need to find room to store their stuff, a storage unit rental business looks very promising. But like any other business, you need to know how to start a rental business.
Continue reading below as we tackle the basics that will help you build a rental business for storage units.
Store ‘Em Up: How to Start a Rental Business
There is massive potential in a storage unit rental business. Believe it or not, there are over three times more self-storage facilities in the US compared to McDonald’s restaurants.
So how do you start the ball rolling? Let us teach you how to start a rental business of storage units. Check out this essential guide below:
1. Know the Cost
Your first step is to weigh the costs of the business. The key lies in understanding the different factors that affect the numbers. These key factors include the location, the land costs, the acquisition costs, and the construction costs.
You should also determine where you will get the money. Do you have liquid assets? Are you going to pool the money from other investors?
You also need to decide who will run the business. Is it going to be a family affair? Or will you hire staff for day-to-day operations?
The bottom line is you need to prepare to spend millions if you are going to build your own facility. You should also realize the reality of real estate taxes. A 2018 report showed that 28% of operating expenses of self-storage businesses go to real estate taxes.
In addition, 38% goes to your on-site and off-site managing expenses.
2. The Feasibility Study
After getting an idea about the expenses, you can proceed with your feasibility study. This involves extensive research and data. This study will determine if putting up a business of storage units is feasible under your current circumstances.
Through the study, you can determine if you can generate enough earnings to cover your operating expenses and debt service while making a profit.
Use this study to identify the demographics of your target market. For your market research, use a radius of three to five miles within the location of the facility. You also need to find out your market’s median income.
The same thing goes for their median age. Generally, people who rent storage units belong to the middle to upper-middle income brackets. These people also below in the 20 to 50-year-old brackets.
Furthermore, there are other key aspects you need to look into. You need to consider the current population in your area.
A rural setting is anything between 20,000 and 100,000. Beyond that already falls under an urban setting.
You also need to consider the projected population growth. Another is the daily vehicle traffic. A great number of storage facilities rely on drive-by traffic.
You also need to get a feel for the competition in your area. How many competitors are currently in operation in your area? Are there facilities that are currently underway?
In addition, you need to consider the long-term projections for property value, income, and rental rates.
3. Your Business Plan
If your feasibility study says it’s a “go,” you can proceed with your business plan. Understand that you should pattern your business plan to your needs and requirements. However, there are key elements that remain constant.
Your plan must have mission and vision statements. It should also come with an ownership structure as well as a business structure.
Moreover, your plan should clearly indicate the roles and responsibilities of your staff. It should also feature a strengths, weaknesses, opportunities, and threats (SWOT) analysis.
You should also include a market analysis as well as a competitive analysis.
You should also include your marketing and sales strategies. These strategies depend on the findings of your feasibility study.
Another key element is your pricing strategy. You should determine a rental price that is applicable to your target market.
To keep you from diverting sideways, you should also come up with a menu of your services. The menu must specify the exact dimensions of the storage units you are offering.
In addition, your plan must show your revenue streams. It should come with a projection of your revenue and expenses over the next five years at the very least.
With consumers’ dependence on the internet, you need to consider internet marketing. This includes promoting your business through different social media platforms.
4. Buy or Build?
Next, you need to decide if you are buying an existing facility or building a new one. Keep in mind that the price of these facilities depends on their location. A facility in Los Angeles or New York City is far more expensive compared to that from Iowa.
If you are looking to buy an existing facility, it best to consult with a self-storage broker. He should know the ins and outs of the market. He can also help you haggle for a better price.
But if you’re going to build your own, prepare to spend $25 to $75 for every square foot. As for the actual storage units, you should consider custom turnkey options. This will allow you to expand your service offerings to your target market.
5. Manage Your Expectations
Lastly, you should learn how to manage your expectations. The storage unit rental business is not a quick-rich scheme. You don’t get back your investment overnight.
The general occupancy rates of these facilities can easily hit 70% to 95%. But it will take you at least a year and a half before your occupancy stabilizes.
This is a long-term business that requires a lot of patience.
Get Your Storage Units Right!
Learning how to start a rental business for storage units require careful planning. It also entails the right knowledge and enough capital.
When it comes to the units, you need to go for performance, durability, and flexibility. If you are searching for the best storage units, we invite you to check our extensive selection.
Send us a message and let us know what you need. Let’s discuss your options and let’s get your business rolling, today!