Getting Started in the Self-Storage Industry
The storage industry, as with any business, was born from a need. Humans have always had “stuff” and along with that stuff comes a need for space to store the stuff. Some historical evidence points to public storage facilities being available in Ancient China. Since that time people’s need for secure storage has multiplied exponentially. The modern storage facility that is prevalent today came about in the late 1950’s in Florida. The popularity of self-storage units has grown each year since. The storage demand peaked in the 1990’s when it outpaced supply leading to a rush to build new facilities across the US. In 2009 The New York Times reported (“The Self-Storage Self “)that from the years 2000 to 2005 over three thousand new storage facilities were built annually. Storage continues to be in huge demand. The Self Storage Association (SSA) reported that the total square footage offered by self storage businesses in the US is 2.3 billion. The total square footage is well over three times the size of Manhattan! One in ten US households currently rent storage space.
Reading all of those statistics may lead you to be interested in getting your self a piece of the self storage pie. So, what does it take and what are the rewards?
To get started in the storage industry you need to research and find a well suited site. Location is key to a self storage business’ success. While looking for the perfect location it is important to consider cost, property taxes, and zoning regulations. If you decide on buying an existing storage facility make sure you do your due diligence on the property. Many self-storage facilities have been built in the last decade were bought by entrepreneurs or land owners with access to large parcels of land. These facilities may not be the best investment because they are often out of highly populated areas of a city restricting the number of potential clients. Building a proper facility in an easily accessible location will help appeal to the marketplace and give you a better return on investment. You can expect a 6.75 return on investment in the first year.
Starting a self storage business does take a considerable amount of initial investment. Financing is available from some national lenders. Many in the business suggest contacting Wells Fargo’s Self-Storage Division. Wells Fargo offers programs for self-storage businesses. One program is called the mini-perm which offers two years of interest-only as you’re getting started with the project and then three years of amortization that progresses as you meet certain debt coverage goals. Really this is one of the best loans available. Using a mini-perm loan is advisable because it may take you less than a year to finish construction on your project, but it could take several years to fill the units and finding a loan after your construction period would become extremely challenging.
Once your storage facility in planned, financed and filling units you can think about adding on a complimentary business to help increase traffic to the site and revenue. Car washes are wonderful businesses to share a location with because they bring in a steady supply of clientele to your door. Another complimentary business is a pack and ship. Some people use storage units for items they are hoping to sell and if there is a business onsite that can pack and ship their items for them, all the better. Taking that idea to the next level, you may want to look into partnering with an auctioning house or E-bay professional that can help your clients in selling their items or the items that are abandoned at your facility. The options are almost endless. Use your imagination and an idea is sure to come.
The self-storage industry is strong and still growing. Although there is a considerable amount of competition within the industry it is possible to get your foot in the door and make a healthy return on your investments.