Across the country, entrepreneurs are talking about self-storage. The buzz is investing in this business can be very profitable. What's more, seasoned investors aren’t the only ones with their eye on the prize. With lower building and management costs than other real estate investments and a failure rate of less than 10 percent, the storage industry is drawing first-time business owners like a dazzling flame draws moths.
The advantages are obvious: easy startup, minimal maintenance, low risk … but what’s the catch? Can it really be that simple? There actually is no catch, but self-storage does require work. An investment in this business has a lot of potential, but no matter how you slice it, you need to be prepared to devote time, energy and, of course, money to the enterprise. If you’re ready to commit to the industry, here are some things to consider before you invest.
If You Build It, Will They Come?
Before you spend even a nickel on land or buildings, you’ll need to do some research into the self-storage market. You should strongly consider hiring an experienced consultant to do a feasibility study in your area. Even if you have experience in real estate or the storage industry itself, an unbiased opinion is invaluable when starting a new venture.
Location, location, location—these three words are everything in the real estate world. The same is true for your storage facility. You might be tempted to use a bit of land you already own or buy the lowest-priced land you can find, but you should never sacrifice location for price.
Choosing a site is one of the most difficult decisions you’ll make. An ideal location is one on a major travel corridor that is highly visible. Still, there are more factors to consider. Will you be needed in your service area? How much competition are you facing? Is the market already saturated? If there’s a lot more storage than customers, you’re likely to have empty units, which leads to an empty bank account.
Measure Twice, Cut Once
Once you’ve considered where to build, you’ll need to consider how. Since your storage buildings are your business, a lot of thought should go into planning construction. The unit mix and amenities of your site can be greatly advantageous or, conversely, a huge drain on profits.
The right building plan will improve your occupancy rate and help you avoid costly renovations. There are many construction details unique to self-storage, such as the width of drive aisles, size and placement of unit doors, lighting and security. Choose a builder with experience in the industry who can advise you in such matters.
Another important aspect of storage building is financing. Construction loans are dramatically different and more complex than other forms of permanent financing. Moreover, loans for self-storage are different than those for traditional real estate. Before scheduling an appointment with your lender, find out about the size and scope of loans available and if the company offers unique loans for storage businesses.
Holding Down the Fort
Many first-time business owners fail to plan beyond grand-opening day. After deciding where and how to build, you’ll need to think about advertising, staffing and the day-to-day maintenance of your new site.
Marketing is crucial. You’ll need more than a listing in the Yellow Pages and a big sign out front to keep your storage units full. Decide on a marketing strategy before you build, and expect to be analyzing and changing that strategy throughout the life of your project. Advertising is a necessity, not an option.
Customer service and salesmanship will also be vital to your business. Be prepared to find experienced staff and train them. Be cautious about hiring friends and family—it’s hard to treat loved ones like employees, and hard for them to treat you like the boss. Also, don’t assume you can do it all yourself. If you want your storage business to be a success, you’ll probably need to be open a lot more hours than you’ll want to be standing behind the counter.
As with any venture, the risks and decisions involved in starting a storage business can be daunting. However, with proper planning and preparation, an investment in the industry can be a dream come true for any aspiring owner.
Dean Brown is the president of American Steel Buildings, which has designed and distributed pre-engineered steel buildings since the 1980s. The company’s award-winning customer service and spotless reputation through the Better Business Bureau have helped it set steel-moving records in its region. For more information and to sign up for a free self-storage newsletter, visit www.gosteelgo.com.