As a Pineville rental property investor, you may be in quest of further approaches to expand your business and diversify your income streams. One alternative getting recognition in recent years is the self-storage facility. But should you start a storage rental business? To decide if the industry is a good fit for you, it’s crucial to find out more about what it takes to get started maintaining a self-storage business.
Over the last decade, storage rental facilities have blossomed across the United States. Presently, self-storage facilities number somewhere around 50,000. To put that number in context, that’s roughly as good as the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in all different sizes but are focused on one single service: exchanging a monthly rental payment for space to store the renter’s personal belongings. From storing art and appliances to boats and RVs, individuals and businesses, in the same way, depend on self-storage units to store things they need or aren’t ready to abandon.
In all respects, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for those who can have enough money to get into the business, it may be a good decision. But there are a few other factors to consider along with finances. For example, you’ll need to determine the total cost of starting a self-storage business; decide whether you should build your own facility or buy an existing structure; what kind of operating expenses there will be; and how you will market and staff your business. By working beyond some of these major considerations, you can more easily understand if going into the storage rental business is right for your particular situation.
If you already own land or own a building you could convert into storage space, you may be in a good spot to start a storage rental business. In the end, one of the biggest hurdles of the self-storage businesses is the cost of the facility itself. It’s important to some research and figure out how much it will cost to secure a location, building and execute the essential construction.
While you might think that building a completely new facility is the most expensive alternative, you could be wrong about that. Sometimes, transforming an existing building can be just as expensive, dependent on location, acquisition costs, and contractors’ availability to do the work. Or, you may find the idea of acquiring an existing storage facility more appealing. But take into account that even existing or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.
Therefore, no matter which route you choose; you’ll need proper funding to start a storage rental business. One of the biggest questions you should be asking is: where will the money for your new business come from?
Of course, if you are a rental property investor, the concept is to diversify, not put all of your investment eggs into one basket. If selling off your other assets isn’t the answer, could you qualify for a loan (either to purchase or to build a facility)? You may also think about going into business with one or more partners or finding an investor willing to help you finance an acquisition or development deal.
No matter how you plan to purchase the funds for your storage rental business, don’t forget to include operational costs in your calculations. You’ll need to have at least six months of operational expenses covered, which means you’ll need to know what those costs will be and how you’ll manage your storage facility. From doing it yourself to hiring a third-party management company, there are many distinct approaches. No matter what, you’ll need to decide whether you not only can afford the hefty upfront price tag but also the time and effort it will require to get your storage rental business up and running.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Charlotte Metro a call. We work with investors like you to improve rental property margins, increase profitability, and connect you with great off-market deals. Contact us online or call 704-919-1344 to speak with a Pineville property manager today.
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