In an earlier article, I mentioned the value of self-storage units as valuable real estate gems, even if they aren’t in the commercial real estate mainstream. I’d like to explore some basic considerations for this type of investment, as it is something I get asked about with some frequency.
First, you need to consider the overall demand for the units you may have in mind. I’ve heard many an investor talk about some location near them that would be “perfect for storage units”. Perfect perhaps for them, but not necessarily a good investment. It all comes down to the number of available units in your area and how “full” they are to make a truly good investment decision.
For example, if there are three competing facilities in your immediate area, and each is 75% occupied, is there really a need for a fourth one? Probably not, and you don’t want your business bottom line to rely upon your new facility somehow being more marketable than what is already there. Full occupancy in other facilities, or simply a lack of them, are more what you should be looking for here.
Another thing to consider is where the facility will be located. Is it near a heavy residential area? Ideally, is it near several local apartment complexes? Answers to these questions will help you determine first the ideal location for a facility, and also what demand you might expect.
As a rule of thumb, no matter how inexpensive the land may be, never presume that clients will want to go the extra mile to use a storage facility. Consumer love convenience and if your facility is either off the beaten path or has any sort of limited access, these seemingly minor items can have a huge impact on your occupancy.
Last, there is the issue of the type of units you want to offer. Will there be variable sizes? Is there onsite security and, if so, what type? Is there an onsite manager? Will you offer air-conditioned units? These types of questions will naturally affect your construction costs and must be answered before any effort in this type of investment is undertaken.
When you assemble all the pertinent information you need, it is time to put your ideas into a solid business plan, as this will be essential to attracting any private capital or getting a bank loan to fund your venture.
Overall, storage units can be a very steady and profitable form of commercial investing but do your homework, treat it like a business should be treated, and your success will reflect your efforts.