{"id":2146,"date":"2020-05-26T00:00:43","date_gmt":"2020-05-26T07:00:43","guid":{"rendered":"https:\/\/www.storagecafe.com\/blog\/?p=2146"},"modified":"2023-07-27T07:46:13","modified_gmt":"2023-07-27T14:46:13","slug":"27-q-a-for-self-storage-business","status":"publish","type":"post","link":"https:\/\/www.storagecafe.com\/blog\/27-q-a-for-self-storage-business\/","title":{"rendered":"27 Most Common Self Storage Questions and Answers for Business Owners"},"content":{"rendered":"

Starting a business entails a long list of concerns you should take into account, from financing it to choosing its location, and from cost assessment to covering customer service, just to name a few. If you think you\u2019re not sure where to begin, here at StorageCafe we have created a list of the most common questions and answers to help get you on the right track with your budding self storage business.<\/p>\n

Let\u2019s take a look at what most prospective or current self storage business owners may want to know more about concerning this business sector.<\/p>\n

<\/span>1. What\u2019s the best way to enter the self storage real estate sector?<\/strong><\/span><\/h3>\n

If you are new to the business end of this industry, there are two routes you can go: You can either buy an existing facility or you can buy the land and build one yourself.<\/p>\n

<\/span>2. Is it better to build a new storage facility or to buy an existing building?<\/strong><\/span><\/h3>\n

Buying an existing facility may mean that you\u2019re taking over another self storage business or acquiring a building that\u2019s currently hosting a different kind of activity \u2013 a supermarket, for example \u2013 that can be repurposed as a storage facility.<\/p>\n

If you are buying an actual storage facility, make sure your purchase happens at a time when you aren\u2019t going to pay top dollar. The self storage industry requires long-term investment and that is something you should be aware of when you\u2019re calculating your return on investment (ROI).<\/p>\n

Depending on the condition of the building, additional construction might be necessary in order to meet the requirements for a fully operational storage facility.<\/p>\n

\u201cWhen you are purchasing an existing property you are buying an income stream. \u00a0What you are wiling to pay for that income stream will depend on a number of factors such as your cost of capital and your risk\/return expectations relative to alternative investments\u201d, says Shawn R. Hill<\/strong> of BSC Group<\/a>.<\/p>\n

\"self<\/p>\n

If you are choosing to start from scratch, the most expensive part of this endeavor is \u00a0probably the land. Most business owners apply for a mortgage in order to cover the costs of the land. Consider what you also need to budget concerning the construction of the facility. According to Hill, investors should keep in mind that \u201cthe cost of the debt and equity need to bring the project to cash flow positive.\u201d<\/p>\n

Besides financial considerations, building a storage facility comes with a whole array of challenges, as Hill points out: \u201cThere is significantly more risk in building a property than buying an existing property with cash flow because in addition to the risks associated with construction (on-time completion, cost overruns, etc.) the builder then has to lease the property up, which takes time and involves additional uncertainty means additional risk.\u201d<\/p>\n

All things considered, each business owner needs to assess whether building a storage facility or buying an existing is the better business decision for their situation. In this sense, Hill also added: \u201cThe basic analysis has to start with is a comparison of replacement cost relative to the cost of purchasing existing assets in the market. Once an investor has a good handle on those factors they then need to weigh in the risks associated with both to determine which is more profitable from a risk\/reward spectrum, and this may differ from market to market and also across the spectrum of time as market fundamentals and variables change.\u201d<\/p>\n

<\/span>3. Which market should you address? <\/strong><\/span><\/h3>\n

Before you commit to a specific location, make sure to check demand in the area. Urban areas with high population densities usually have the highest demand for storage and also bring in the most profit. If possible, investigate whether there are other self storage facilities within a 3-5 mile radius.<\/p>\n

Think about how much car traffic<\/a> the area attracts. This is also a good predictor of business success, as it means you are more likely to gain new customers who are attracted by the convenient location.<\/p>\n

Consider your largest customer base, such as military personnel or college students. If possible, try to take population growth into account and assess how this can help you increase your customer base.<\/p>\n

To get a better grasp of how some of the largest cities fare in terms of square footage per capita, we put together a table showing the top 20 cities in this category.<\/p>\n

<\/div>\n