Whether you're just curious about running a self storage business, or you're getting ready to take the leap, the path to success can be fraught with unforeseen obstacles and complicated questions.
There's a lot to know about the self storage business, and it can easily become overwhelming - but that's why we're here!
We've created a nifty guide to break down the ins and outs of self storage, delivering the knowledge you need to decide whether self storage is really for you. After you've read all about investing, you can take the next pivotal steps by learning about daily operations.
From breaking ground to deciding what kind of storage units to rent, this guide will lead you through the first steps you have to take to start your own self storage business.
When you're thinking about opening your own self storage business, your first step is to figure out where you're going to start this business.
Location plays a significant role in the success of your business. You want to plant your facility in a desirable location that is easily accessible to residents and businesses in the area. Think about main roads, highways, and interstates that go through your town - that's where customers will be. If you choose a more rural location, make sure that there are still enough people nearby to fill up those units.
Your location isn't just about the physical address - it's about the consumer demographics. You should do research on the area's demographics to help you determine if there is a need for storage, and if there is, what kind of storage would satisfy their needs?
Some questions you should ask yourself about the local demographics include:
While your physical location can give you clues as to what kind of storage you should offer - like boat storage if you live near a popular lake - that's just the start.
First and foremost, you should look at the local population and determine if there are even enough customers to serve. If you choose to build or buy a storage facility in a town of less than 5,000 people, you might have a more difficult time filling up units than you would in a town of 20,000 people. You need to make sure that there is a consumer population to begin with.
The average age of the local consumers is important. According to the 2023 SSA Demand Study, the majority of renters are Millennials and Gen X. While Gen Z is getting older and will take over the market in the future, this generation is still quite young and most likely won't be your target audience yet.
You should also take note of the average income level. The SSA Demand Study revealed that the majority of renters had an income of about $84k a year. Depending on the state you intend to operate in, this number could be way above the median household income, so you should consider whether or not the local demographic has enough disposable income to rent a storage unit.
Plus, disposable income points to what kind of storage unit you should offer.
Depending on the location, people with disposable income in that community might want to spend more on boats, RVs, campers, and other recreational vehicles - giving you the opportunity to offer boat and RV storage. Or they might want to invest in more protective storage, like climate-controlled storage. Whatever need they may have, you should be ready for it.
Last but not least, we have homeownership status. According to that same study, the majority of renters are homeowners, so if you live in an area with a high rate of homeownership, you could have more renters.
Of course, no single factor can determine the success of your business, and there are still many other elements to look at.
Even if your consumer demographic seems ideal for your business, you still have to look at the existing competition. If you're planning to build or buy in an already oversaturated storage market, then you may want to look elsewhere. Your business could still be successful there, but you would have to fight harder then you would in a location with less competition.
Once you've done your research on your desired area and feel confident that it's the spot to start your business, it's time to build or to buy.
There are pros and cons to buying and building a self storage facility. At the end of the day, your decision is going to depend on your budget, your needs, and your time.
If you're on a strict deadline because of a 1031 Exchange or some other time restraint, then buying an existing property is probably your best option. Buying an existing property can take as little as 60-90 days assuming it is a straightforward transaction with few hiccups.
On the other hand, building a self storage facility from the ground up could take anywhere from 6 months to over a year, once again assuming there are no issues or delays.
Not only does building require more time, but it requires a lot more work. You have to purchase a buildable property, ensure the current zoning laws permit a self storage facility (or you can petition to change the zoning), design the layout, hire contractors, and keep tabs on the construction progress for a year or more. Once the building is up and running, you'll then have to pour a ton of energy into marketing your brand new facility.
While buying an existing building is often cheaper and less time-consuming, it doesn't mean that it's easy. Some buildings may require renovations or conversations depending on the structure's condition and whether it meets your needs or not.
When shopping for a self storage facility, you may notice a class rating on the listing. There are three different classes that might impact how much work you will have to put into the building:
Choosing which class of facility you purchase might have more to do with availability. The number of commercial properties for sale is often significantly less than the number of residential properties for sale. You may have to exercise patience or have multiple locations up for consideration to find a property within your timeline and budget.
Whichever route you decide to take, I highly recommend that you work with a professional broker who is experienced in the world of self storage. These brokers can help you navigate the purchasing process and point you to other helpful resources in your area.
Once you've decided to buy or build, it's time to decide what kind of units you want to offer.
The best way to decide what kinds of storage to rent is by looking at your location and consumer demographics.
For example, if you're in a town located near a popular lake or national park with a demographic of higher-income residents, then you may want to consider recreational vehicle storage.
If you're located in an area that experiences hot and humid weather and has a high percentage of homeowners, then you may want to consider climate-controlled storage.
You should also consider the size of your storage units when building or buying a facility. According to the 2023 SSA Demand Study, the most popular storage unit sizes are 10x10s followed by 5x10s. However, if you're in an area with lots of local businesses that may need more space, then you should consider adding larger units like 10x15s or 10x30s.
Even if the facility you bought does not offer these kinds of storage, there is potential to build or convert existing units. If you aren't certain what kind of storage your consumer demographic needs based on statistics, you can even take a look at your competitors and see what they're offering.
Perhaps your competitor is nearly sold out of climate-controlled storage units, or maybe they don't have boat and RV storage despite the large boating and RVing community. You can use their business model to gather clues and shape your own.
Before you get excited and invest too much money into your new business endeavor, you should seek help from a professional consultant and conduct a feasibility study.
These studies help you determine the financial viability of your business plan by looking at competitor analysis, market demographics, rate-rental analysis, and much more.
While these studies take time and come with a fee, it still costs you way less time and money than a failing business. This way, you can verify your business plan and get started on the right foot in the right direction.
With all that said, there's still more to learn about running a self storage business! In Part 1 of this blog, we've identified the major steps you need to take to get started on your path to self storage ownership.
So far we've covered:
Now that you have your stepping stones in place, it's time to cover the daily operations of your storage facility. Our Daily Operations blog discusses how to streamline operations with insurance plans, rental management, and much more. Continue reading to learn more!
