As a North Richland Hills rental property investor, you may be looking for additional ways to expand your business and diversify your income streams. The self-storage facility has become a popular choice in the past few years. But can you operate a storage rental business? To verify if the industry is ideal for you, it’s necessary to study the criteria about how to start operating a self-storage business.
Over the last decade, storage rental facilities have blossomed across the United States. Currently, self-storage facilities number somewhere around 50,000. To put that number in context, that’s roughly equal to the number of McDonald’s, Subway, and Starbucks locations in the U.S. combined. Self-storage rental businesses come in all different sizes but are focused on one single service: exchanging a monthly rental payment for space to store the renter’s belongings. From storing art and appliances to boats and RVs, individuals and businesses alike rely on self-storage units to store things they need or aren’t ready to get rid of.
By all accounts, storage rental is a lucrative business, with profit margins averaging around 11 percent. And for individuals who have enough money to join the business, it may be the right approach. However, there are several other things to consider along with finances. For instance, you’ll need to compute the total cost of starting a self-storage business; analyze whether you should build your own facility or get an existing structure, what kind of operating expenses there will be; and how you will market and staff your business. By dealing with any of these primary considerations, you can more quickly decide if it’s a smart idea to go into the storage rental business.
If you already have land or own a building you could convert into storage space, you may be in a good position to start a storage rental business. After all, one of the biggest hurdles of the self-storage businesses is the cost of the facility itself. It’s important to do some research and figure out how much it will cost to secure a location, building and perform the necessary construction.
While you may say that establishing a completely new facility is the most expensive choice, you may be mistaken about that. In some instances, renovating an abandoned building can be just as expensive, based on areas, purchase prices, and the capacity of workers for service. Or, you can find it more desirable to purchase an existing storage facility. However, you need to consider that even existing or turn-key facilities may need updates, renovations, or repairs, alongside basic operational costs.
That is why whatever route you choose, you still need proper funding to begin a storage rental business. One of the greatest questions you should be asking is: where will the money for your new business come from?
Clearly, if you are a rental property investor, your target is to diversify, not put all of your investment eggs into one basket. If selling off your other assets isn’t the option, could you qualify for a loan (either to purchase or to build a facility)? It would be great if you’re going into business with one or more partners or finding an investor that is keen to help you finance an acquisition or development deal.
No matter how you plan to acquire the funds for your storage rental business, it is important to include operational costs in your calculations. You must cover at least six months of operational expenses, meaning that you’ll need to know what those costs will be and how you’ll manage your storage facility. From doing it on your own to engaging a third-party management company, there are multiple different tactics. No matter what, you’ll need to decide whether you not only can afford the hefty upfront price tag but also the time and effort it will require to get your storage rental business up and running.
Are you looking for new ways to expand your investment portfolio? Give Real Property Management 360 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 817-502-3588 to speak with a North Richland Hills property manager today.
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