As a Pasco rental property investor, you might be looking for potential opportunities to expand your business and diversify your income streams. One option that gained attention recently is the self-storage facility. But should you begin a storage rental business? To decide if the industry is the best for you, it’s useful to know more about what it requires to get started managing a self-storage business.
Over the last decade, storage rental facilities have blossomed around the United States. At this time, self-storage facilities number somewhere around 50,000. To put that number in context, that’s approximately similar to the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in many different shapes but are concentrated on a single service: switching a monthly rental payment for space to store the renter’s household items. From storing art and appliances to boats and RVs, individuals and businesses alike depend on self-storage units to keep stuff they need or aren’t ready to abandon.
Seemingly, a storage rental is a lucrative business, with profit margins averaging around 11 percent. And for people who can afford to enter into the business, it may be a viable choice. However, there are many different factors you need to consider together with finances. For example, you’ll need to know the total cost of starting a self-storage business; choose whether you should build your own facility or get an existing structure; what type of operating expenses there will be; and how you will market and staff your business. After coping with any of these major considerations, you can more quickly decide if it’s a smart idea to go into the storage rental business.
If you currently have land or own a building you could convert into storage space, you may be in the right place to start a storage rental business. After all, one of the major challenges of the self-storage businesses is the cost of the facility itself. It’s imperative to do some research and calculate how much it will cost to secure a location, building and achieve the necessary construction.
While you may believe that establishing an entirely new facility is the most expensive option, you might be mistaken. Sometimes, renovating an existing building can be just as costly due to the venue, purchasing expenses, and selection of contractors to perform the job. Or, you may consider purchasing an existing storage facility that’s ready to be operational. But remember that even old or turn-key facilities may need updates, renovations, or repairs, in addition to basic operational costs.
That’s why whatever direction you take, you’ll need proper funding to begin a storage rental business. One of the major questions you should be asking is: where will the money for your new business come from?
Unquestionably, if you are a rental property investor, the objective is to diversify, not put all of your investment eggs into one basket. If selling off your other assets isn’t the key, 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 eager to support you finance an acquisition or development deal.
Irrespective of how you plan to obtain the funds for your storage rental business, remember to incorporate operational costs in your calculations. You’ll need to have at least six months of operational expenses covered, which indicates you’ll need to know what those costs will be and how you’ll manage your storage facility. From doing it yourself to recruiting a third-party management company, there are several different ways. In any case, you’ll need to decide whether you not only can afford the hefty upfront market value but also the time and effort it will need to get your storage rental business up and running.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management Tri-Cities 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 509-572-5440 to speak with a Pasco property manager today.
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