I visited my friend John in Louisiana and realized he had constructed a self-storage unit in his parking lot. I didn’t know what the building was until I inquired what it was.
And he said something that got my attention. He said human behavior is a window of opportunity, but only if entrepreneurs look hard.
You can agree that we buy and accumulate many things, from clothes, books, toys, and appliances. And when these possessions clutter our homes, we want to dispose of them, but where? – Enter the storage unit business.
Gone are the days when we thought that being a millionaire solely required investment in bonds and stock markets.
Real estate investments are the new frontier, and the self-storage unit is one of the most profitable businesses you can pursue.
If you are looking for business ideas, I encourage you to read this article: 15 Best Online Business Ideas for Beginners (And how to get started!)
Is Owning a Storage Unit Business Profitable?
Owning a storage unit business is profitable as it is much easier to operate, with a 92% success rate. Owning and operating a self-storage facility is relatively straightforward and doesn’t require a lot of previous experience.
You might wonder how much revenue does a storage unit generate? On average, a self-storage facility can earn between $350,000 and 800,000 annually, depending on several factors, including the size and location of the facility and other operating costs.
In addition, self-storage facilities’ operating expenses tend to be about 50% less than other commercial property types like multifamily and office.
Here’s everything you need to know before starting your self-storage business.
See also: 8 Ways to Get Out of Debt and Build Wealth (entrepreneurs’ guide)
Why Is a Storage Unit a Perfect Business Idea For New Business Owners?
The Bureau of Labor Statistics (BLS) shows that at least 20% of small businesses will not make it past their first year. However, storage unit businesses have higher survival chances.
This business is easier to start and has a high chance of being profitable. Studies show that self-storage unit business has a 92% success rate, higher than most start-up businesses.
1- No Previous Experience Is Required
Other small businesses struggle to survive because entrepreneurs need the experience to know how to handle various growth stages. However, owning and operating a self-storage facility does not need previous experience.
Once you have built and promoted it in your area, work will keep coming, with households wanting to declutter. Since self-storage business addresses target customers’ immediate pain points, it is a profitable venture.
You agree that people have many things they need with limited space to hold this stuff.
Data from the Self-Storage Association (SSA) shows that approximately 85 million people in the United States rent storage facilities to store their things.
And since no one wants to be branded Hoarders, they turn to self-storage units to keep their belongings safe.
As an entrepreneur, you want to examine and study your demographics to know your potential customers. Whom can you target?
Your customers could include:
- College students
- Military families
- Families that are downsizing
- Families moving to a new home
Although the pandemic slowed down households moving to new locations, we will likely return to higher movements post-pandemic.
Most of these households have an overflow of things they will not want to carry; this is where self-storage unit businesses make money.
Interestingly, your customer demographic cuts across all generations.
You can target Baby boomers, who comprise 21.19% of the population in the United States. They often downsize and move to smaller houses.
Your storage unit facility can handle their excesses at a reasonable fee.
Then, you have Gen Z, crazy college students, making up 20.46% of the country’s population. Although some new storage owners disregard them as potential tenants, they can provide good business for your store. Their dorms are often small, so they will likely need an extra storage room.
With high demand for storage units by people of all ages, you can be certain you will always get business.
3- Easy Access To Loans
Unlike other real estate ventures, you do not need huge initial capital to start a storage facility. You can also access loans easily because the business has a high success rate.
While banks and lenders must evaluate the market, the value of the real estate, and the owner’s credit profiles when making a loan decision, you are likely to be considered for credit.
Most lenders view storage unit business loans to be low risk.
Typically, building a small to mid-sized storage facility costs between $200,000 and $500,000. This range of investments offers you various financing options to build a new storage unit facility.
Some suitable financing options include SBA 7a, SBA 504, and conventional bank loans.
And since 2010, small-business loans (SBA) have made their loan services available for new store owners. However, these SBA loans need a 10% down payment which many entrepreneurs find cheaper than what conventional banks offer.
Small-business loans (SBA) are partially guaranteed by the U.S. Small Business Administration and administered by participating lenders, usually banks (Source: Nerdwallet)
But if the surrounding market for your storage unit business is not good, you may struggle to secure a loan.
Some lenders may be apprehensive when they think you face the overbuilding problem. However, you can overcome this hurdle through a comprehensive market study, showing the area’s current storage market and population.
You can sway the lender to approve you for a loan with a good presentation.
See also: How to Create a Business Emergency Fund for a Rainy Day? (Here’s how!)
Financial Projections Show That The Storage Unit Business Is Profitable
If the above information does not convince you, consider some financial projections. We will consider some projections for cost and profits.
Data from LovetoKnow, Storable, and MakoSteel estimates start-up costs for storage unit business as follows:
- Maximum start-up cost = $2,4 million
- Average start-up cost = $2.0 million
- Minimum start-up cost = $1.5 million
But how much can you make with this investment?
A self-storage unit sales revenue depends on several factors, including the size of the facility, the prices, the market needs, and the number of units likely to be rented at any given time.
You can determine the prices through market research. You want to remain competitive and attract more business.
Alternatively, you can use a target-based pricing method that considers your profit margin.
Generally, a storage unit business often has a 41% profit margin, meaning if you use target-based pricing, you can use this percentage to set your prices.
Assuming that your storage unit is 50,000 square feet and is 100% occupied, BizFluent, SweatyStartUp, and Truic project expected revenue as follows:
- Maximum revenue = $600,000
- Average revenue = $450,000
- Minimum revenue = $90,000
Now, if you subtract operating expenses projected by Storable, RoadLessTraveledFinance, and BizFluent, you have the following profit margin estimates:
- Maximum profit margin = 60%
- Average profit margin = 41%
- Minimum profit margin = 11%
Regardless of how you look at it, statistics show that the storage unit business is a profitable venture.
How Can You Make Money With Self-Storage Units?
After considering this business’ profitability, you could wonder how to make money with your units. Here are some practical ways.
1- Rent The Units
Renting your storage units is the primary source of revenue from this business. So, promote it and let your neighbors know you have storage units they can rent.
Conduct market research to know the pricing range. You do not want to charge discouraging prices!
2- Offer Parking And Garage Services
You can turn the open space into a parking lot or garage for motorists, especially if your storage unit facility is near a busy road.
You can advertise these spaces on various online platforms, indicating when they will be available.
3- Generate Solar Power
You can utilize the open roof space to harness solar energy.
You can then supply the energy to the grid to reduce your electricity cost. Generating solar power also allows you to take advantage of incentives and rebates, thus reducing your tax costs.
4- Partner With Movers
If you own a storage unit where people keep things, moving truck business owners want to work with you.
You give them business by linking them to your clients at a commission. You can also charge some parking fees for their trucks.
Sell boxes or storage items.
Of course, people need boxes or storage items to pack their stuff before moving them to your storage unit.
That need is a business opportunity since you can sell them boxes, tapes, locks, chains, bubble wrap, file folders, etc., at a profit.
5- Sell Related Services
You can also think creatively and sell related services to your customers. For instance, if your clients store their vehicles or boats at your storage unit, you can offer winterizing or cleaning services.
Alternatively, you can partner with other businesses offering these services to get your share of the profit.
6- Host Pop-Up Shops
If your storage unit has a large space, you can host pop-up shops like farmers’ markets, food trucks, Christmas tree sales, art shops, clothing shops, and mobile coffee shops.
You can pitch for pop-up shops if your store is in a high-traffic area. After all, every business is interested in numbers; if your store has them, you will be a hot cake.
If you were wondering which business to invest your money in that does not require lots of experience, the storage unit business is an excellent fit.
You can easily acquire a loan to help you build the facility and start making money. And if you own the piece of land, the better. Otherwise, you will have to rent to build the structure.
Storage unit business shows higher profitability chances than most start-ups, making them suitable for new entrepreneurs.
Besides rent, you can make money from storage unit facilities through other means, such as offering parking and a garage, generating electricity, selling boxes, partnering with moving trucks, etc.
What else can you do to make the storage unit business more profitable?