Should You Invest in Self-Storage Units?

When you think of the title “landlord,” you probably envision the traditional property owner who rents out units to residential tenants. However, there is more than one way to be a landlord, and renting out self-storage units is one of them. 

Self-storage unit facilities are an increasingly lucrative way to invest, especially for those looking to reap the benefits of investing without the large-scale responsibilities of buying and renting residential properties. In fact, the self-storage industry makes some of the highest profits out of all small businesses in the country. 

If renting out your own self-storage units is starting to sound appealing, read on to learn about the storage industry and the benefits of becoming a self-storage investor.  

What Are Self-Storage Units and Facilities? 

Everyone has closet contents and clutter in their home that they wish were elsewhere. Renting one or more self-storage units is one way to solve this problem. Anything from furniture, art, files, or even vehicles can be stashed away in a self-storage unit for a monthly fee. Here are a few of the most common items stored in storage units: 

• Furniture or large appliances to be stored during a move or home renovation 
• Seasonal decorations (e.g., lights, inflatables, etc.) 
• Lawn equipment like tractors or mowers  
• Apartment/dorm furniture for out-of-state or international students during the summer 
• Personal belongings of people who travel frequently for work  
• Large sporting equipment (e.g., bikes, snowboards, skis, weight benches, golf clubs, equestrian gear, etc.) 

Renting a storage unit for any of these purposes is a safe and affordable way to store belongings at a low cost, namely because customers are responsible for packing and delivering their own items and keeping inventory of them.  

How is Renting Storage Space Different from Traditional Leasing? 

Self-storage customers are similar to residential tenants in that they must sign a lease to rent the space and abide by the laws and rules of the agreement. Rental rates, security deposits, grace periods, and late fees work in much the same way as they do for typical tenancies. However, the major difference is that these spaces are strictly for storage and therefore don’t require as much day-to-day management and supervision as a traditional rental.  

Subsequently, a self-storage unit lease is much simpler than a typical residential lease. There’s no need for an extensive guest or pet policy, few common areas to worry about, and no utility billing to set up. You also won’t have community amenities to manage, nor do you have to worry about adhering to as many federal and state housing codes for residential buildings. All in all, renting storage space is substantially less complex than renting space for residential or other business purposes. And because storage units are smaller than residential units and typically less complex to manage, the average self-storage facility contains between 400 and 600 units (according to Inside Self-Storage). This means you can generate consisted income from hundreds of customers at once, all from one centralized facility. 

5 Reasons to Invest in Self-Storage Units 

If you aren’t convinced already, here are five more reasons why self-storage units or facilities can be an auspicious addition to your real estate portfolio. 

#1 High Revenue and Profit Margins 

The self-storage industry is a highly profitable one that you may not have considered before. According to SpareFoot, one of the largest self-storage unit online marketplaces, the annual industry revenue for the industry was $29 billion with over 50,000 facilities and 2 billion square feet of rentable storage space across the U.S. Following a surge in demand during the COVID-19 pandemic, self-storage units have remained popular ways to declutter and are likely to remain highly profitable in future years. By investing in self-storage units, you’re setting yourself up for a steady stream of passive income. 

If you live in a state where self-storage units are in especially high demand, you have the opportunity to make anywhere from $80 to $200 per month per unit. According to SpareFoot data, a few cities particularly lucrative for self-storage investing include Los Angeles, San Diego, Miami, and Austin. 

#2 Little Maintenance Required 

Unlike a house or a multi-unit apartment complex, storage units require very little maintenance and upkeep over the years. You won’t have to worry about plumbing, heating, or major electricity problems. Since most of these units sit untouched during the months they are rented, serious damage is rare, and only minor cleaning is required for vacant units during turnover periods. The few maintenance responsibilities you will have (such as washing interior walls, removing pests, and testing security devices) will take up little of your time and leave you free to pursue other work or personal affairs. 

#3 Easy to Manage and Automate 

Self-storage facilities are also much easier to manage than other commercial properties. Self-storage units are a relatively unique asset class in this way. While many self-storage investors hire on-site management (either their own employees or a third-party manager) to manage their units, automation has even made it possible to manage a self-storage facility entirely remotely. With tools like storage unit software, self-service kiosks, and electronic entry, your customers can come and go from their storage units at their convenience, all while you monitor from a remote location.   

#4 Low Construction Costs 

If you’re building your own self-storage facility, you’ll have to determine and manage the construction budget. As you might imagine, the cost to build a self-storage facility is exceedingly low compared to other types of property. Construction of a self-storage facility can cost as little as $25 – $40 per square foot. For a facility with a total of around 60,000 net square feet, this adds up to around $1.5 – $2.4 million. By contrast, a multifamily apartment complex with around 100 units of average square footage can cost upwards of $37 million to build. Improvements like parking lots and climate-control capabilities will obviously increase the cost to build your storage facility, but overall, construction costs in this industry are more manageable than other types of investing. 

#5 Simple and Straightforward 

Renting self-storage units is, for the most part, a simple and predictable endeavor. You most likely won’t have to worry about bothersome tenants, illegal activity on the premises, drama between renters, or any other concerns you would typically have with residential properties. If you’re looking for a simple and hands-off investing experience, self-storage units might be for you. 

Conclusion 

There’s a reason why so many investors in 2023 are interested in building or acquiring self-storage facilities. Self-storage is a promising industry for the coming years, and its benefits as outlined in this article make renting out storage units an attractive and practical enterprise for investors of all experience levels.