10 Reasons Why Investing In A Self Storage Business Is A Great Idea

August 30, 2022 Reading Time: 3 minutes
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Many people are attracted to the prospect of owning real estate due to this sector’s consistent returns on investment. Real estate investments can be categorized into different types, from rental properties and self storage businesses to commercial buildings and raw land.

Over the years, self storage facilities have gained popularity among investors, thanks to their ease of management, low investment and operating costs, to mention a few advantages. We have rounded up ten reasons you should invest in a self storage business.

1. Lower initial investment

A self storage unit is generally cheaper to set up and run than the other types of rental investments. Once you have built your storage facility — or repurposed a building constructed for another reason — and equipped it with all the necessary amenities, from security elements and proper lighting to climate control features, you are ready to welcome your first tenants. With rental apartments and business properties, on the other hand, you would need to invest in expensive furnishings, landscaping and amenities to make the place look attractive and competitive.

2. The lease period automatically renews after 30 days

Since self storage lease periods are generally shorter than for other types of rental real estate, you can quickly evict undesirable tenants by issuing them a 30-day notice. The other benefit is that raising or lowering rates is easier, depending on the current supply and demand. This level of flexibility gives you a distinct advantage, allowing you to save time and money in the long run.

3. The turnaround time for the next customer is a matter of minutes

Once a self storage unit is vacated, it takes only a few minutes to clean the space and prepare it for the next client. This is quite convenient compared to business premises that need deep cleaning, painting and maybe repairs as well. The cost of getting a self storage unit ready for a new tenant is also comparatively low.

4. The high depreciation cost can help reduce taxable net income

A self storage unit has a high depreciation cost since the interior partitions can easily be removed or modified to get different size units. Luckily, you can use this depreciation as a non-cash deduction to reduce your taxable net income. This makes this business very practical and ideal for people with multiple investments.

5. You have the option to lock out tenants within 5-6 days

Unlike other real estate investments with complicated laws and regulations, self storage operations give you more control over how you can run your business. If the tenants fail to pay within a week, you have the legal right to lock them out — although many operators prefer to work with delinquent customers, so they are not forced to leave right away. With other real estate investments like business apartments, office spaces and rentals, it can take months to legally evict non-compliant tenants.

6. You can recoup losses after 57 days

If the tenant fails to make payments even after serving them with the required notice and instructions, most state statutes allow the self storage business owner to sell the tenant’s goods. Once 57 days have elapsed from the notice date, you can sell the items without legal assistance. Ideally, this is one of the legal ways you can recoup losses and create storage space for other clients.

7. Fewer personnel are required to run the facility

Besides the security personnel who have to be around the premises 24/7, you may need one or two more employees to manage and oversee the entire facility. This is relatively cheap compared to running rental apartments or a business property. You can further minimize the operating cost by investing in low-maintenance structures such as paved driveways or automating the on-loading and off-loading operations.

8. Income flow is much more predictable

As an investor, you always want a predictable income source that can help you cover your operating costs and service debts, and can even pay your bills. With self storage facilities, the large number of units means you have many tenants. This eliminates a common problem whereby just a few tenants moving out can impact your cash flow.

9. It is easier to increase rental prices

A 10% increase in an apartment’s rental fee could easily be more than $100, which can force some tenants to move out. However, a similar rate hike would be pretty insignificant with a self storage unit, probably between $3 and $10. You’ll have accomplished the goal of catching up with the market, but as you are charging several people and not a few individuals, the cost per head is less.

10. Self storage rental services are always in demand

Businesses and individuals need self storage rental services all year-round, regardless of the economic situation. Many individuals are downsizing their homes, and businesses are often looking for extra storage space for their inventory. This makes a self storage business a great investment option for many people. And like any other business, self storage units have peak periods with high demand. An example is the winter season when many people want to store their outdoor equipment in a safe and secure place.

With the benefits listed above, it is apparent that a self storage business is an ideal investment option for many. However, you should first research and evaluate all your investment needs before making a business move.

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