How to Get Started with the Self-Storage Industry
As with every business, the storage market was born from a necessity. Humans always have “stuff” so there is always a need to have space to store it. There are historical records that show Brilliant Storage was available in Ancient China. People have needed secure storage for a lot longer than ever before. The modern storage facility we see today was built in Florida in late 1950’s. Each year has seen a rise in self-storage units. In the 1990s storage demand reached its peak, outpacing supply. This led the US to rush to build more facilities. The New York Times in 2009 reported (“The Self Storage Self”), that more than 3000 new storage facilities were created each year between 2000-2005. Storage is in great demand. According to the Self Storage Association of America (SSA), there are 2.3 Billion square feet offered by self storage companies in the US. This total square footage is almost three times larger than Manhattan! One in ten US households rent storage.
All those statistics may inspire you to want to own a piece the self-storage industry. What does it take to make this happen and what are the rewards?
Start your storage business by researching and finding the right site. Your success with self storage is directly related to your location. The cost of the location is crucial, along with property taxes and regulations. Before you purchase an existing storage facility, do your research. Many self storage facilities that have been built over the past decade were owned by entrepreneurs or landowners who had access to large amounts of land. These facilities might not be the best investments because they are usually located outside of densely populated areas, which can limit the number potential clients. It will increase the appeal of your business and help you earn a higher return. In the first 12 months, you can expect 6.75% return on investment.
An initial investment of substantial capital is necessary to start a self-storage company. Some national lenders offer financing. Many professionals recommend Wells Fargo’s Self-Storage Division. Wells Fargo offers programs that can be used by self-storage businesses. One program is the mini-perm. It offers two years of interest only while you’re starting the project. Then, three years of amortization. These payments progress as you reach certain debt coverage levels. This loan is one of our top picks. You should consider a miniperm loan. This is because it takes less than a full year to build your project. But, it could take several more years to fill your units. Finding a loan would be very difficult after you have completed construction.