Answers To Self-Storage Owners’ Questions
Here at Innago, we’re always looking to stay informed about the newest trends in real estate. In recent years, self-storage investing has boomed as one of the most lucrative investment options in many U.S. markets. We’re tracking this trend and are eager to serve self-storage owners taking advantage of it. In this article, we answer the top questions you might have about storage units for those interested in getting started in this profitable asset class.
#1 Why Should I Invest in Storage Units?
Potential storage investors often want to know what makes storage units worth investing in. Why have they become so popular? What makes them a uniquely profitable asset class?
For one, self-storage facilities have low start-up and construction costs, making them accessible to newer investors or those without a large bank of capital to draw on up front. Costs that their owners do incur are quickly made back due to the high demand for storage units, which reached record highs during the COVID-19 pandemic and continues to thrive today. In fact, the global self-storage market is forecasted to be worth almost $65 billion dollars by 2026, suggesting that this surge in demand is long-term. There will always be customers in any town who need storage units during moves, divorces, downsizing, and other life changes, and this demand is unlikely to vary during economic downturns as much as other sectors since self-storage is largely recession resistant.
Another benefit of self-storage units is their high return on investment (ROI). Coupled with the high demand and occupancy rates, the current market rates for self-storage units can lead to unusually high profit margins. Relatively low monthly expenses, high occupancy rates, and high rental rates are a recipe for compounded wealth and wild success for self-storage owners in many cities.
#2 What Makes Storage Facilities Different from Other Asset Classes?
Self-storage facilities are a type of commercial property, but they are a different asset class than traditional commercial or residential properties. There are a few factors that set them apart.
For one, self-storage facilities are zoned differently than other properties. The zoning ordinances passed by a city determine how a property can be developed and used. A property you intend to use for self-storage must be zoned as such before you can commence operations. This usually means applying and getting approved for conditionally permitted land use, which allows local jurisdiction to weigh in on your construction plans, architecture, business operations, and general design of your facility.
Self-storage tenancies are also typically stable, low-maintenance tenancies compared to other types. Renters shouldn’t spend time in their units except to load and unload belongings, meaning that storage facility owners have relatively low contact with their tenants over the months. Property damage, squabbles between tenants, and maintenance problems are rarely a concern. However, self-storage owners do have more responsibilities in terms of security and liability. Self-storage facilities typically provide on-site security in the form of security personnel, restricted gate access, and/or camera surveillance. Stored property is usually also subject to a liability limit included in the lease, which prohibits tenants from storing property above a certain value in total.
#3 How Much Does a Storage Unit Cost to Build?
This is another common question about self-storage: How much are construction costs?
According to industry experts, a self-storage facility costs around $25-$70 per square foot. For an average 10×10 storage unit, this makes the average storage unit cost to build about $2,500-$7,000. The total cost of construction will depend on the number of units in your facility, as well as factors like the price and availability of materials in your region.
However, these numbers prove self-storage investing to be surprisingly affordable compared to other commercial or residential properties. Storage units are advertised for their empty space and storage capacity – no need for cabinetry, plumbing, running water, or even electricity. They can be climate-controlled, but owners can charge a premium for this amenity. They also do not succumb to wear and tear as easily as properties that are regularly lived or worked in.
#4 How Much Does a Self Storage Unit Cost to Rent?
Now that you know how much a storage unit costs to build, how much can you rent one for?
Naturally, rent rates depend on location, local demand, market saturation, the size of the unit, and other factors. However, Storeganise reported average monthly rates around $105 per month in 2021 and $110 per month in 2022. These rates are likely to decrease slightly in 2023 after the surge in demand during the pandemic, but storage investors are still likely to achieve rents anywhere from $80 per month for a standard unit all the way up to $200 per month for larger units or those in particularly lucrative cities (such as Los Angeles, San Diego, Miami, and Austin).
#5 Can I Manage My Self-Storage Facility for Free?
Cutting costs and maintaining a low-expense-high-return business is a priority for many self-storage investors. Thus, many are interested to know whether there are any low-cost or even free ways to manage their facilities.
If you’re in this boat, you’ll be glad to learn that yes, there are ways to manage your self-storage facility for free. In fact, we at Innago think our storage unit software is one of the best, if not one of the only, free management solutions for self-storage investors. Our general property management software is free of cost for all landlords. Additionally, while other self storage management software free versions often won’t include all the necessary features you need to truly self-manage your business, ours offers all the features you need to manage the daily operations of your facility: Rent collection, tenant screening, maintenance management, tenant communication, financial reporting, and more.
The bottom line: If you don’t want to throw away your hard-earned revenue on a property management company each month, you don’t have to. And even if you do, using software can greatly ease the daily responsibilities of you, your managers, your tenants, and everyone else involved.
Conclusion
Investing in self-storage is easily one of the most rewarding ways to begin any real estate investing journey. If you’re interested in this productive industry, don’t wait any longer to get started.
