If you are in-the-know about current real estate trends, you have probably heard about self-storage investing. This type of real estate investment is popular for being low maintenance, but what does it really take to start your own self-storage unit business? Below are a few things you’ll need to do to create a successful facility and storage business.
Your first step is to conduct research on the area you are thinking of investing in. Information on the local market is important to determine whether your self-storage business will be profitable in the location you’re interested in.
First, see what kind of demand you can expect from the locals. Is your facility next to a university? Will you have a lot of drive-by traffic that will generate interest? Investing in self storage facilities always comes with a little risk, as does starting any business, but placing your facility in a visible area will attract more customers, especially people experiencing transitory periods (college students, retirees, empty nesters, etc.). This kind of market research is a good way to see whether you’ll have enough interest to cover your monthly expenses.
Also, take a look at the average rent for other self-storage businesses in the area to estimate the amount you can expect to charge. Are these other businesses doing well and filling units? If not, it’s likely that you will have empty units as well. Use these metrics and other financial data to figure out what your predicted cash flow will be. Self storage investment returns can be lucrative, but doing market research up front makes big returns much more likely.
A Thorough Business Plan
A self-storage business plan is a way for small business owners to reach their goals in a streamlined, reasonable way, using the market research points above.
In your business plan, you should include the important insights you learned from your research, organized in a way that makes it easy for future lenders or partners to read and understand it. Explain your strategy for keeping your business profitable and create an attractive proposal that lays out the steps you plan on taking to start a successful business.
Now it’s time to implement your business plan. First, you’ll need some level of financing. Luckily, there are a variety of loans that can benefit self-storage investors. Some of the most common loans for self-storage are SBA (Small Business Administration) 504 loans, SBA 7(A) loans, or conventional loans. Also, keep in mind that if you’re constructing a new self-storage facility, you’ll need to put at least 25% down for a construction loan.
Do further research into what loan is best for you, and remember that having a sound and well thought-out business plan is the best way to secure a low interest rate.
Once you’ve secured funding and built/bought your storage facility, it’s time to market to potential tenants and start filling your units.
Targeted marketing is when you cater your advertisements towards people you’ve identified as primary customers. Your listings, website content, referral programs, and other marketing techniques should be tailored for the demographic you want. Getting quality tenants through quality marketing methods is the best way to ensure that your business remains profitable.
Detailed Rental Agreements
Now that you’ve garnered some interest in your facility, you need to create a self-storage rental agreement template.
Your self-storage lease should include, at a minimum, contact information for both parties, the rental rate and due date, lease start/end dates, security deposit details, grace period and late fee details, leasee/lessor responsibilities, and any other pertinent rules regarding what tenants can and cannot store in their storage units.
If you have any special amenities or features like climate control, you should explain the terms of that amenity in your lease, as well as any extra fees that may come with it.
Although the information above may seem like a lot, remember that property management software like Innago is a great way to streamline self-storage management and make recurring responsibilities a breeze. Tasks like online rent collection, tenant management, and financial documentation are available at the click of your mouse, so be sure to investigate which platform works best for you and your new business.