Entrepreneurs look for projects which tick several boxes, giving good return on investment, financial security, flexibility, and some enjoyment as well. The self storage sector can provide all of this, particularly right now when other sectors may not be so suitable. And if that wasn’t enough good news, it’s also an industry which is not so difficult to start out in.
After you have appreciated the reasons for investing in self storage, you will need to make a business plan that anticipates the expenses that will be incurred, the timescale involved, and the changes that might occur along the way. A suitable location will need to be found for your self storage operation, and this will be tied up with decisions about what sort of facility it should be. Marketing will be key to making the business profitable and may also give the possibility of being creative. We explain why self storage is a great choice for entrepreneurs right now.
Why invest in self storage?
Providing storage space has become increasingly popular in recent years, with facilities appearing in retail parks and city centers in addition to the traditional out-of-town lock-up garages, so if you start a self storage business you won’t be alone. Many investors have realized the benefits of investing in self storage, and there are funds which specialize in this. But even with possible oversaturation in some regions, confidence in the sector remains positive, with the latest Yardi Matrix data confirming that street rate performance continued to improve in September.
Self storage is reckoned to be a relatively recession-proof industry, having survived previous downturns better than other real estate sectors. The present time is no different, as many people who move or downsize need a place to store belongings, and self storage can be a great solution to life’s necessities. The sector is also considered to be less problematic than residential housing, for example, as the human factor is less conspicuous: a facility manager sometimes has to deal with renters, for example if they can’t keep up payments, but most of the time their paths don’t cross. That being said, it’s not a hands-off business, and in some respects should be considered more like retail than real estate.
Make a realistic business plan
As with any business, setting up in self storage requires a plan, with market research needed in order to determine the feasibility of starting out in any given place at a certain time. In addition, the competition needs to be assessed, and this can change quite rapidly if more facilities are built in an area. These factors will help determine the ideal size of a self storage facility, and this in turn will determine, for example, how many members of staff will be required. Flexibility is a key feature of the industry — you shouldn’t be shy about regularly installing updated security measures and offering discounts and cutting rates to maintain occupancy — so your business plan should account for such possibilities.
Initial funding for your new venture can be sought at local banks and credit unions — who often feel positive about self storage projects — and they may require between 10% and 25% of the money down. It’s a sector that is quite suitable for investors who are not yet millionaires, as even a small amount of renovation, plus an energetic marketing approach, can do wonders for a well-chosen, existing storage facility. However, it should be born in mind that it can still take a couple of years or so to stabilize such an operation and make it profitable.
Decide on the location and the type of facility you want
Location is vitally important, especially as self storage is considered to be primarily a local business, finding most of its customers within a radius of just a few miles. Not only will the demographics of the local population determine their self storage requirements, but any potential future changes to an area, including possible gentrification and zoning alterations, influences a location’s suitability. Siting your facility where there are good transport connections is always recommended. Utilities and adequate drainage will have to be considered when accessing a site for building a brand-new facility.
Deciding on the sort of facility you want also tends to be linked to its location. First, a new facility, custom-built from scratch, is expensive but a good idea for inner-city locations where rates and customer requirements may be higher. Second, repurposing an existing building, for example a former big-box store, can be a lot cheaper, and these can often be found in suburban strip malls. Third, existing self storage facilities that need renovation can be purchased — they are often older, ‘mom-and-pop’ operations — and these may well be situated away from the center of town.
Develop an energetic and adaptive marketing strategy
After you’ve found out about the folk living near your new business, you have to tell them why they need your storage units. An online presence is vitally important, especially when people are staying at home more than they used to. And while billboards in well-trafficked locations used to be the preferred way of getting attention, the online approach to doing business has gained ground fast with generations across the spectrum now comfortable using it. Videos are a great marketing strategy as people these days often look for online presentations telling them what they need to know — offer useful advice about storage and promote your business in the process.
Marketing should not only be designed to be noticeable but also to be appropriate, projecting a business’s special features. There is no one-size-fits-all solution, and any marketing strategy should also be flexible and adaptive — increased competition is often a trigger for this. As your business grows, try to get feedback from customers regarding what they like about your service and what originally brought it to their attention, and then you can adjust your marketing strategy accordingly.
Make your self storage business a pleasure to run
If you’re thinking that operating self storage could be boring, consider some ways to stamp your personality on your new venture. Creating a brand image for the new business can be very enjoyable. You might unleash a creative streak you didn’t know you had, thinking up snappy tag lines or appearing in promotional videos —some operators have realized that this business is ripe for humor. And the image of the self storage industry has been improving of late, with facilities increasingly seen as assets to a community, so you might even get interviewed by the local media.
If that wasn’t enough, there are other side benefits you might not have anticipated. If you’ve invested in a large amount of space that requires staff, you may be in the happy position of being able to employ family or friends. Then there is the wilder side of self storage which, while it won’t ruin your operation, might give you some great tales to tell — some of the weirder things found in units have apparently included taxidermized animals, film star memorabilia, and even an electric chair! But you needn’t have nightmares, as there are rules governing what can and can’t be put into storage units and what must be done if you need to open them and dispose of the contents.
Self storage is an attractive prospect for an investor, as it is a stable and proven sector of the real estate industry and reckoned to be easier to run than some others. It may also be a particularly attractive proposition at the current moment in time — the sector is resilient, and as storage space is much cheaper per square foot than residential housing many people are finding the flexibility it provides very valuable.
In addition, it is possible to start in the industry with comparatively little money, by buying and renovating an existing facility, as long as sound decisions and good marketing strategies are employed. A suitable location is essential, and a realistic plan should be made that accounts for the business’s development and any possible changes in demographics and competition. Setting up a self storage business can be both exciting and profitable. If you are thinking of getting started in this sector, we wish you all the best.