Most new entrepreneurs desire to venture into real estate; however, high investment costs scare many people. Does it mean that you can’t have a taste of real estate markets?
Owning and managing a storage unit is an ideal entryway that new investors can use to have a share in real estate investments.
I recommend a self-storage facility because it is safer, easier, and more profitable than many traditional start-up businesses.
Owning storage units has a 92% success rate and does not need previous experience to operate. Additional evidence for success is that storage units are 75% owned by independent operators.
So, does it mean that everything is all rosy for storage unit businesses? Let’s consider this venture’s pros and cons to help you make good investment decisions.
If you wonder whether owning a storage unit business is good business, I encourage you to read this article: Is Owning a Storage Unit Business Profitable? (Everything you must know!)
Pros Of Owning Storage Units
Investing in storage units has piqued the interest of many entry-level investors for various reasons. Let’s consider some reasons.
1- High-Revenue Stream
We all agree that people own more things than they need. Although others sell them at their garage sales, most folks hoard them.
These items collect dust in self-storage facilities and garages. This means the demand for storage units is ever-increasing as your neighbors continue buying more stuff.
From baby boomers to households downsizing in your area, you have potential customers for your facility. Storage unit business can offer you a steady income stream from tenancy without much hustle.
Storage units offer you several business opportunities
How do you imagine storage units will earn you money? Many people would say rent without thinking twice, but you can add one or two business opportunities to your unit. For example, you can attach other businesses like U-Haul affiliates and pop-up shops to your storage facilities.
And since you have a storage unit, you can hire your truck to help move items from a household’s house to your store. The truck may well earn you a couple of bucks.
One local business owner with a storage unit found that his RV owners needed a place to keep their recreational vehicles. What did he do?
He saw it as a business opportunity and expanded his storage unit to increase the rented place available. He could not have seen this business opportunity without operating a storage unit.
2- Flexible Hours
Operating a storage unit business allows you to set your working hours. It is your business, meaning you have the liberty to dictate when you close shop and let your customers know so they are not inconvenienced.
Furthermore, owning a storage unit business can serve as a side hustle, earning you passive income if you can hire someone to operate it.
You do not need to set foot on the property if you are busy with other businesses or employment.
3- Owning a Storage Unit Business Is Convenient
Have you noticed that construction costs are constantly increasing? It is challenging for potential customers to build extra rooms to store their stuff, so they find storage units a convenient option.
Amazon and other online stores seem to have moved their distribution centers to our doorsteps. Storage units are the best deals in town as people pile stuff and construction costs rise.
You can ensure your customers enjoy the convenience of your store by being there when they need you.
If you are not at the facility, you can hire a manager or storeman to enable customers to access their belongings when they want to.
3- Starting a Storage Unit Business Increases Your Network
If you own a self-storage facility, you can tremendously grow your network. What are the odds that your customers and friends will become business owners in your neighborhood?
I bet the chances are high. As you store their belongings, they will know you better, and you will know them too. And who do you think they will go for when they need storage space for their business?
4- Storage Units Are Affordable
Most storage units are relatively cheap for many households. Although many factors, such as location and add-ons, influence storage pricing, the cost of renting a storage unit is generally low.
Full-service facilities could cost around $50, while self-service go as low as $12 a month in some places. While low rent benefits the community, it also benefits the business owner because it means more business.
5- Owning a Storage Unit Business Reduces Personal Risks And Accidents
If items are not properly kept, they could cause accidents at a business or home. Cluttered items can result in tripping hazards.
Valuable items kept at home also increase theft risks, while delicate items can easily break due to excess clutter around the house.
However, a self-storage unit reduces or eliminates the risks linked to frequent movements of your valuables. The community can have peace of mind knowing that their items are well kept away from danger.
Cons of Owning a Storage Unit
Like a coin with two sides, owning a storage unit business has challenges.
6- Owning a Storage Unit Business Can Be Challenging To Get The Right Staff
Like most businesses, finding an excellent management team to direct the storage unit’s performance can be challenging.
Even though storage units may not need a large team, it still needs quality staff to handle customers’ properties. The hiring process can be tedious; occasionally, you may not get the right people with warehouse know-how to manage the business.
If you do not have passionate employees, you could lose business. Nobody wants to leave their valuables in the hands of careless people.
So, exercise patience when hiring employees and if you find the right person, compensate and treat them right. Dedicated employees can be the differentiator between high and low-performing businesses.
7- High Competition And No Guarantee Of Occupancy
Many entrepreneurs have realized the value of investing in storage units, hence high competition. Seasoned storage unit owners recon that having a 100% occupancy is challenging.
The goal is to have a 90% occupancy to help you make a profit. You cannot be certain if people will utilize the facility.
Sometimes the investment can tie capital without immediate returns.
Furthermore, increased competition affects the occupancy rate, forcing storage owners to revise their prices.
You can stand out from other businesses by adopting technological advancements and market changes. Using technology to enhance security and tracking can give you the needed competitive edge.
8- Tenant Issues And Problems
You will undoubtedly meet with unruly customers. Like most businesses, you should expect the unexpected when dealing with customers.
Some tenant problems you can encounter include working out a suitable payment plan, refusing to pay, holding auctions, etc.
Don’t think you will not encounter tenant issues because you have an excellent rapport with the community.
Most storage unit owners agree that some common problems, such as being delinquent, filing damage claims due to rodents infestation, and living in the storage units, are difficult to avoid completely.
9- The Extra Expense In Security
Since you keep your customers’ valuables, you must invest in string security protocols and equipment. Households have entrusted you with their belonging because they know you will keep them safe.
If a crime happens at your store and properties get lost, your tenants’ trust may grow thin, and you don’t want that. The reputation of your storage facility can be soiled, and you may lose future business.
So, the storage unit business needs extra investment in security systems, which could chew into your profit.
What are some security measures you can implement?
- Access controls that allow only authorized individuals to enter the gates
- Security cameras to identify who accessed where and at what time.
- Updated security apparatus.
And since technology continues to advance and change, you will need to invest in new technologies. You don’t want criminals with updated techniques to bypass your security systems.
Some of these systems are costly but important for the safety of your tenants’ properties and the reputation of your business.
10- The Initial Cost Can Be High
If you own the land, you want to build a single self-storage unit; the cost could be between $25 to $40 per square foot without including improvements. The cost will likely go up as high as $70 when building a multi-story facility.
If you rent or buy the land to build your storage, prices can be as high as $ 1 million, depending on the location. I bet most beginner entrepreneurs don’t have that turn of money.
A storage unit business is undoubtedly profitable and benefits both the owner and the community. Certainly, there is high global demand for storage unit facilities, and you can meet this demand at a reasonable fee.
The business is flexible for you and convenient for your customers; however, it has its own challenges. For instance, you may constantly worry about the safety of things stored on your premise.
Besides burglars, you will also battle the risk of fire and floods that may damage your customers’ valuables. Generally, the storage unit business is a good venture you can invest in with tangible returns.