How to Get the Most Out of Your Self-Storage Investment: A Beginner’s Guide

Self-Storage Investment
When people lack the extra space at home for their belongings, the first thing that comes to mind is a self-storage unit, where they can store valuable items securely for a short or long period of time. They may need one when they have to stash expensive furniture, no longer have enough garage space for their vehicles, or are looking for a temporary storage solution when they are renovating. Even businesses use these spaces to organize and keep track of their inventories. According to a recent report by GlobeSt, more and more individuals are renting self-storage units. It reveals that 1 in 11 Americans use them and pay as much as $90 per space. And since 2012, the industry has continued to grow by almost 8% every year, with an annual revenue valued at $39.5 billion. As one of the fastest-growing sectors in real estate, it won’t be a surprise why many people take an interest in self-storage investment. Now, if you are thinking about investing in a self-storage business, let this article serve as your guide.

Finding the Right Self-Storage Investment Opportunities

The first step in self-storage investing for beginners is to identify what kind of investment you want to pursue. Basically, you have two options:

Storage Real Estate Investment Trust (REIT)

This is the easiest kind of self-storage investment. REITs are companies that finance or even own income-producing real estate properties, including self-storage facilities. All you need to do is purchase shares in a self-storage REIT. This is a passive investment option and requires a minimal amount of time. As a result, you receive a return on investment (ROI) through dividend returns.

Active Self-Storage Participation

This is one of the most common self-storage investment opportunities out there. In self-storage, this can mean two things—you either build your own facility from the ground up or buy an existing facility. Either way, both options are lucrative.

Building Your Own Self-Storage Facility

While this option is considered labor-intensive, it can be highly profitable if managed properly. You have to gather all the necessary resources and knowledge to be successful in this business. Self-storage facilities that are newly developed are also recognized to be of the highest value in the storage market. When developing a self-storage facility, you should look for the best parcel of land to purchase. Choose a location that has a high demand and low supply of storage units. The ideal site should at least have three acres for construction. However, a multi-story building can also be feasible and be built on less acreage. You must follow zoning, permitting, and development procedures as well. Don’t forget that your facility should meet local building, fire, and safety codes. To ensure everything goes well with the construction, you should hire a builder that specializes in self-storage facilities.

Buying an Existing Self-Storage Facility

You can search for existing storage facilities on the internet or work with a real estate broker to expedite your search. You can also use direct mail marketing to facility owners. Existing self-storage properties are marketed and sold based on capitalization rates or cap rates, which determine how much cash flow the properties are generating. If a property has a higher cap rate, then it has a better potential to give you better returns. So, before making a final decision, it is crucial to do a cash flow analysis and calculate the value of an existing self-storage facility.

Maximizing Self-Storage Investment Returns

Self-storage units with their roll-up metal doors opened
While the industry is already bankable, you still need to work harder to have higher self-storage investment returns. Here are some steps that you can take to increase the profitability of your business:

Make your facility look more attractive.

Customers are more likely to check out your facility over other facilities if it looks better. Plus, an increased curb appeal makes your business look secure and professional. Ask the opinion of your friends and associates and see if they think if your property is eye-catching. Perhaps they may give you some suggestions. You can take certain steps like adding new lighting and signage, adding modern security features, trimming the bushes, and making the premises neat.

Cut down on expenses.

This is where cash flow analysis is extremely useful. Check your profit and loss statement. From there, identify areas where you can save money without putting your business at risk. The key is to keep your total operating expenses within 25% to 35% of your total revenue.

Implement rental increase the right way.

If you have high occupancy, there’s nothing wrong with raising your rental fees a bit. However, this would be a bad idea if you have low occupancy. Raising rental fees may drive away existing tenants, but you can still attract others who are willing to pay more. However, you should make sure they get value for their money. Regardless, you should always be transparent about rent increases. You should notify your tenants long before you implement one. You should also make the increase gradually in small amounts.

Improve your marketing strategy.

You should tweak your marketing strategy when needed to keep up with your competition. Aside from attracting new customers, this makes sure your current tenants are still satisfied with your services and stay. If you don’t have a digital marketing strategy in place, better start building one. Set up a website and take advantage of social media to make your business known. If you have already taken these steps, you may still need to look into areas that need improvement.

Boost your facility’s security measures.

People will always prefer storage units that guarantee the utmost safety of their belongings. So, install more surveillance cameras and an updated alarm system in your facility. Better yet, you can have individual cameras for each unit,  automated access with control keypads. Improved site security is also a good base point when you want to increase your rental rates.

Maintaining Your Self-Storage Facility

Self-storage facility with a mini stuffed toy in the middle
Property maintenance can either make or break your business. Without it, you may lose tenants along the way. But if you are keen on following a regular, preventive maintenance program, you can be sure that you’ll have your tenants stay with you longer – maybe even forever. To keep your self-storage investment intact, here are the things you need to include in your facility maintenance checklist:

Perimeter walls and gates

Your potential tenants should be impressed with what they see upon arriving at your facility. This is where you should pay attention to detail. Make sure to remove debris, weeds, or shrubbery found within your premises. Don’t forget to treat metal gates regularly to prevent them from rusting.

Exterior and interior lighting

Without good interior lighting, it will be difficult for your tenants to move around their units and manage and organize their belongings. This will also give the impression that your facility is unsafe. With a regular maintenance program, you can make sure that all lighting fixtures you are using are working perfectly.

Exterior and interior cleaning

Signs of garbage or debris are a major turn-off to tenants. These can also tell them that the property is not taken care of properly. So, make sure to dispose of any waste properly.

Heating and cooling systems

If you’re offering climate-controlled self-storage solutions, you must keep your HVAC units in optimal condition. Climate-controlled facilities allow tenants to store environmentally sensitive items, keeping them from harmful elements like mold and mildew. Filters and dust vents should be checked and changed regularly by professionals. For damaged units, you should replace them as soon as possible.

Signage cleaning

Clean signage is an indication of a positive brand association. Not only does it look professional, but it also attracts more customers. On the other hand, dirty or poorly illuminated signage will have a negative impression on potential customers. With that said, you should make sure your signage is neat and looks professional. Check it from time to time to see if it’s still in good condition, and make the necessary repairs if it is not. A properly maintained signage will also last longer, saving you more money that you can then use in improving other areas of your facility.

Final Thoughts

One of the best ways to earn from real estate is by investing in the self-storage market. You can purchase shares in a self-storage REIT, build a self-storage facility from the ground up, or buy an existing property. By properly marketing your business and maintaining it, you can be sure to have a high ROI. Investing in real estate may require extensive work as you need to study the details first before finalizing your decision. Learn more about this industry by reading blogs at Apzo Media. For more information, you can visit them at this page!