Where To Start When Renting Your First Storage Unit
Self-storage investing is on the rise. The self-storage industry peaked in many cities across the country following the COVID-19 pandemic, but it’s still a quickly growing industry attracting first-time investors and experienced buyers in all fifty states.
If you’re one of those interested investors, here are five things you should know before renting out your first storage unit.
#1 How Sizing and Pricing Works
One thing you’ll need to learn about the self-storage industry is how to appropriately price storage units based on their size. Storage units are traditionally measured and priced according to their square footage, with length and width dimensions typically listed on advertisements. Height is usually not listed since most items are stored on the floor rather than stacked or hung. However, some tenants may have taller items to store, in which case the height of your units may be important to include.
As mentioned, the cost of self storage units largely depends on their size. The most popular sizes for self-storage units are 10×10 ft., 10×15 ft., and 10×20 ft. However, other common sizes include 5×10, 10×25, and 10×30. In the U.S., storage units rent at approximately one dollar per square foot per month, so an average sized unit at 10×10 would rent for approximately $100 per month, depending on your facility’s location and the local market there.
#2 What Storage Unit Insurance Covers
Another important thing to understand about renting storage units is the insurance component. Your renters might store valuable items in their units, so it’s important to know that these belongings are financially and legally protected. Liability insurance is the best way to ensure this protection.
While you are certain to have your own self-storage facility insurance, you should also require your renters to have some level of insurance coverage. Just as tenants living in a residential property are usually required to purchase renter’s insurance, so should your customers have storage unit insurance.
Some renter’s and homeowner’s insurance policies include personal belonging liability coverage. If customers can verify that their existing policy already covers the limits you require, you might waive their insurance requirement. However, for renters without existing coverage, it’s best to require an individual self-storage unit insurance policy. These policies typically include coverage for fire or lightening damage, vandalism, theft, and other severe weather conditions.
#3 What to Include in Storage Unit Leases
Even though storage units aren’t traditional commercial properties, you still need to write effective leases for them. Before renting out your units, you need to know what to include in your leases to ensure smooth tenancies without legal issues.
A typical lease for a self-storage unit includes:
- The rental period and payment schedule
- Individual unit details (including the unit number or designation, dimensions and square footage, amenities, and the key code or physical key policy)
- Security deposit procedures
- Late fee policies
- Whether or not you require renters to purchase insurance
- The liability limit (the maximum value limit you allow to be stored in your units)
- A release of liability (stating you aren’t responsible for damages to tenant belongings due to severe weather or theft)
- Lease termination procedures
- The lien/auction process for abandoned belongings
- Restrictions on the use of hazardous substances
- General facility rules for behavior, subleasing, open hours, etc.
#4 Whether It’s Legal to Live in a Storage Unit
This is a critical point you should know before starting a storage business: Living in a self-storage unit is strictly illegal.
You might reason that since a customer is paying you to rent the space, they should be able to use the unit in any way they see fit. However, this is not the case—because storage facilities are zoned differently than residential properties, it can actually be quite dangerous to live in one. Storage units don’t have running water, heating, ventilation, windows, or power, meaning that a live-in renter’s health, sanitation, and general wellbeing could all be severely compromised.
Storage units also typically lock from the outside, meaning that it’s possible for a customer to be trapped in their unit. This man in Topeka was even trapped and injured while living inside his storage unit after his lit candles caught the facility on fire.
For these reasons and others, it’s crucial that you take action to remove any tenant whom you suspect may be living in their storage unit. While eviction is usually the best option, you can always connect the individual with resources or charities to help them find other temporary housing.
#5 How to Use Self-Storage Management Software
If you’re going to be renting out storage units, you need a method for managing them. Storage unit software (or general property management software like Innago) is one of your best options for effective, affordable management.
Whether you’re looking for automated management, don’t have the funds to pay for a management company, or one of your self-storage locations isn’t near your home, software can help you manage your properties remotely. Property management software performs many business functions, including managing customer data, collecting rent online, maximizing revenue, improving your marketing and leasing pipelines, signing leases, and so much more. And managing your storage units with Innago is free, a benefit you won’t find offered by other software companies.
Conclusion
Investing in self-storage is a profitable, but major, decision. Hopefully these five points have given you a basic idea of what you need to know before renting out your first units.
