How to Start a Self Storage Business?

The storage business market is enormous and expanding, with revenues of close to $32.7 billion in 2016. It has projected growth of 3.5 per cent each year through 2021. Starting such a firm can be done in a variety of ways, from working with successful equity investment partners. To launch a one-man operation on a tight budget. This blog focuses on the low-budget strategy, and it stresses the importance of doing a feasibility study to find a building in a profitable location.

What Exactly Do You Need?

Start by assuming that you won’t be building the rental storage facility because doing so will raise your launch expenses by hundreds of thousands of dollars. What kind of pre-existing facility should you, therefore, be looking for? To turn a profit at the rental amount those clients are prepared to pay, you need a storage facility that is rentable to a large enough customer base.

Although it may seem blatantly obvious, the self-storage industry has seen several failures. It is because inexperienced business owners didn’t do the necessary research to find out why their plans couldn’t be implemented. Sometimes this was due to a saturated local self-storage market or the fact that their startup and operational expenditures were greater than what the local market. It would tolerate in terms of self-storage pricing. These failures frequently had both of the following effects: Owners cut their prices as the storage leasing market nears saturation.

You need to conduct the study, starting with storage facility demand, to prevent this kind of failure.

Demand and Prices for Rental Storage Business

Hiring a feasibility consultant might help you with several issues if you have the money. If you can’t afford one, conduct the feasibility study yourself. Start by analysing the demand in several busy local markets where zoning laws permit self-storage facilities. You must respond to two crucial questions. Also, you can frequently learn the answers by speaking with an employee who is already there:

  • What is the standard rate of occupancy?
  • You’re looking for a neighbourhood with a minimum occupancy rate of 90%.
  • What is the current per-square-foot price?

Can You Turn a Profit?

When you have the answers to these inquiries, you’re ready to seek reasonably priced buildings to rent. You must consider the various conversation costs associated with each construction. An illustration demonstrates this:

You’ve located a qualifying location (strong traffic, 90% occupancy or better), where the going rate for a 10-by-10-foot facility is roughly $200 per month or $2 per month per square foot. Let’s say you’ve identified a rental building with 10,000 square feet available for $6,500 per month, or $0.65 per square foot. On the surface, it would seem that you may turn a profit with this structure, but there are a few additional factors to consider as well:

You cannot rent space. In an existing multistore building, each self-storage facility reserves a specific amount of space for its administrative offices, lifts and hallways.

An office, elevator, and hallway might take up around 30% of a three-story, 10,000-square-foot building, and leaving 7,000 square feet of rentable space. In this case, $6500 divided by 7,000 is $0.93 per square foot, which is your effective cost per square foot of rentable space.

You must consider this if the self-storage occupancy rate in the vicinity of this facility is 92%. This means that just 92 per cent of the time will your facility’s 7,000 square feet of available storage generate income. Additionally, there are many other costs to consider.

What is the Net Profit from the storage business?

After all, facility costs are covered, and the remaining amount is the net profit. A conversion fee exists for each facility. You must factor in the monthly payments for the loan, assuming you would borrow the money to pay for the building. Additionally, be prepare for some industry norms, one of which is the customary practice of offering potential tenants the first one to three months free in exchange for a one-year lease.

Include the cost of advertising and promotion as well as your facility’s inevitable underperformance as it ramps up from zero to the 92 per cent occupancy rate you hope to eventually attain. This initial time, which could last up to six months, will require adequate beginning funds for you to make it through.

A Note from Marking Millions

A business licence and all necessary local licences are, of course, necessities for any business. Registering your selected name and your company entity can be done by visiting the website of your state’s secretary of state. To determine if a corporation, limited liability company or self-employed status is best for you, see an attorney. Register for a tax identification number on the IRS website. Before opening a storage business bank account or making a loan application, you need to have all of this information.

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