As a Winter Park rental property investor, you may be searching for other methods to expand your business and diversify your income streams. The self-storage facility has become a common choice in recent years. But would it be advisable for you to begin a storage rental business? To choose if the industry is an excellent option for you, it’s critical to learn all you need to get started owning a self-storage business.
Over the last decade, storage rental facilities have blossomed around the United States. At this moment, self-storage facilities number somewhere around 50,000. To put that number in context, that is also the same quantity of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in various sizes but are focused on a single service: exchanging a monthly rental payment for space to store the renter’s stuff. From storing art and appliances to boats and RVs, individuals and businesses alike depend on self-storage units to store things they need or aren’t prepared to abandon.
By all accounts, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for those who have the funds that want to get into the business, it may be a good choice. But there are a handful of other things to consider in addition to finances. For illustration, you’ll need to determine the total cost of starting a self-storage business; decide whether you should build your own facility or buy an existing structure; what kind of operating expenses there will be; and how you will market and staff your business. By doing some of these key considerations, you can effectively discover if going into the storage rental business is ideal for your specific circumstances.
If you have existing land or own a building you could convert into storage space, you might be in a good place to establish a storage rental business. All things considered, one of the major issues of the self-storage businesses is the cost of the facility itself. It is imperative to do some research and find out how much it will cost to secure a location, building and perform the necessary construction.
Although you might assume that constructing an entirely new facility is the most expensive method, you might not be right about that. Sometimes, converting an existing building can be just as costly, depending on location, acquisition costs, and contractors’ availability to do the work. On the other hand, you may consider buying an existing storage facility really enticing. But remember that even existing or turn-key facilities may require updates, renovations, or repairs, in addition to basic operational costs.
This is why no matter which course you pick, you’ll need proper funding to start a storage rental business. Probably the significant questions you should be inquiring is: where will the money for your new business come from?
Of course, if you are a rental property investor, the aim is to diversify, not place the entirety of your investment eggs into one basket. If selling off your other assets isn’t the answer, could you qualify for a loan (either to purchase or to build a facility)? You may also think about going into business with one or more partners or finding an investor willing to help you finance an acquisition or development deal.
Irrespective of how you plan to gain the funds for your storage rental business, the important thing is you include operational costs in your calculations. You’ll need to have at least six months of operational expenses covered, which implies you’ll need to know what those costs will be and how you’ll manage your storage facility. From doing it yourself to hiring a third-party management company, there are many different approaches. No matter what, it is important to determine if you can afford not only the hefty upfront market price but also the time and effort it will demand to keep your storage rental business functioning.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Vanguard a call. We work with investors like you to improve rental property margins, increase profitability, and connect you with great off-market deals. Contact us online or call 407-681-7802 to speak with a Winter Park property manager today.
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