Storage Units

38 Replies

I've never invested in storage units personally, but I've heard that they make great investments. An article just came out today talking about how storage is booming since the real estate market has begun to look shaky.

Housing slowdown leads to boom in mini-storage units

I hope we can find someone to answer your questions, though.

I just did a bit of searching and found a resource that should prove to be helpful. Let me know if you find your answer there. Please share with us any knowledge that you pick up!

That's a good article. With the rise of interest rates and baby boomers moving, storage units sounds like a good investment. If I find any more information, I will let you know. Thanks.

I am an owner of two storage properties in California. As with most any other real estate venture, location is key. Based on general surveys, roughly 1/3 of your tenants come in from drive-by visibility, another 1/3 come from advertising (YP and Internet), and the last 1/3 come in from referrals from existing clients and nearby competitors which are full.

Debt is readily available for these assets, and SBA financing is also available (as of 10/2010). They tend to perform best in solid B markets. Retail-type locations are best as they are typically highly visible. Converted warehouse buildings can also do quite well if located in densely populated areas. Cash on cash returns are generally in the 10-12% range.

Originally posted by Greg Lewis:
I have been keepng my eye out lately for a self storage opportunity...nothing yet though

I just stumbled on an opportunity with one, I have some experience in SFR's but i'm looking for some info on what to look for in one.

The guy I talked to is willing to do an owner finance, he is working up some numbers for me to look at.

There are other posts on here about the 550+ facility I bought nearly 2 years ago. Raised it from 55% to 87.6% occupancy. It IS a business, more so than owning sfrs/apts. It has been very good. Rich

I agree with Bobby. From what I have learned, the business is dependent on location. The most successful investors I have heard in this niche usually tend to be in smaller areas where there is less competition.

I have also heard it is much easier to obtain financing in this niche as compared to others.

The upside to the business is that you are not dealing with people (as they do not reside in your units). Instead, you are dealing with items that are stored at your facility.

There are pros and cons to everything. Hope that helps! :D

Originally posted by Rich Weese:
Raised it from 55% to 87.6% occupancy.

What was the key to turning the place around like that? Was it that badly mismanaged before or did you reinvent the place? Thanks.

Originally posted by Rachel H.:
The upside to the business is that you are not dealing with people (as they do not reside in your units). Instead, you are dealing with items that are stored at your facility.

I believe you still deal plenty with people. After all, people are the ones that pay the rent, not the items stored. :wink:

And there are still maintenance calls. Maybe not clogged toilets or leaking faucets (you'd hope), but shortly after we rented a storage unit for our business, I needed them to shave the bottom of the door because it was binding on the floor. It's ALWAYS something.

So I watch the shows on TV where they bid on the rental storage units.

So if a tenant owes 200 in storage rent and their box is auctioned off for say 400 does the storage place keep the extra 200 or after your auction fees etc. have to give the remaining money to the tenant who didn't pay??

Originally posted by Joel Owens:
So I watch the shows on TV where they bid on the rental storage units.

So if a tenant owes 200 in storage rent and their box is auctioned off for say 400 does the storage place keep the extra 200 or after your auction fees etc. have to give the remaining money to the tenant who didn't pay??


From what I can understand about that whole process, I don't believe so. I'm under the impression that if the tenant doesn't pay and doesn't remove his or her belongings, the property owner actually becomes the owner of the unit and everything inside of it.

I'm sure there is some sort of legal process for all of this, much like repo work where they sort of up-and-take cars without the owner knowing, report it successfully to the police, and then go about their business.

Hi Mitch- Lots of reasons for turnaround. I had a great list of 10 and tried to post it. It was during the time the site was being re-done. I'll try again.
1. No website
2. Began advertising on Craigs list
3. Re-painted in red, white and blue.
4. Re-did landscaping so daily traffic of 73,000 cars could actually SEE the facility.
5. Increased the inside valet, a/c area for autos, golf carts etc.
6. Updated the software.
7. Re-did all the surveillance cameras and hours of access.
8. Offered special Lottery for Cancun vacation. 1 entry just to come see the facility and more , based on size of unit rented.
9. Joined Chamber and attend breakfasts.
10. Traded space for semi-annual booth in large art show at factory outlets.

I also hired new staff, but actually kept one of the previous 3 owners as mgr and my personal asst.

I've actually found you don't deal with many people. We changed the payment method to automatic withdrawal from clients checking acct. Many pay in advance and aren't even around. Definitely less people to deal with than apt building-and VERY little maintenance. A/c units have been the worst.

Joel- We've never sold a units' inventory for more than was owed on unit.Rich

my storage units in PDX run full 97% of the time. I am down by the river and rent to floating home owners. In 8 years I have evicted 2 tenants. more likely they just abondon. A that point I hall their crap to the dump. This building has another 7k of office space I am converting that to heated storage and at that point its a real cash cow.

but it is a business its not anything like owning residental rentals.

I own 1,000 Units in 16 locations around canyon Lake
[LINK REMOVED]
Started in rural are ( and stayed there...hate city regulations)
Flipped houses for cash...bought Storage units for cash flow. Prices vary from location to type of storage offered. Climate controlled, boat storage? Mini storage? concrete foor dirt floor (boats) open storage, Security? onsite mgr?

--Mitch Stephen--

Mitch- 1000+ units in 16 locations? At an average of 60 units per location, onsite mgmt would be out , due to cost. Many of the expenses I have (security gate maint, state of the art surveillance, software system etc) wouldn't prorate very well with only 60 units. How do you do it? What is the largest facility you own and is it fully managed? How are vacant units rented with being unmanned? Drive-by represents 70% of my ups. Most of those stop by and want to talk to someone. Different strokes for different folks. Rich

Originally posted by Rich Weese:

1. No website
2. Began advertising on Craigs list
3. Re-painted in red, white and blue.
4. Re-did landscaping so daily traffic of 73,000 cars could actually SEE the facility.
5. Increased the inside valet, a/c area for autos, golf carts etc.
6. Updated the software.
7. Re-did all the surveillance cameras and hours of access.
8. Offered special Lottery for Cancun vacation. 1 entry just to come see the facility and more , based on size of unit rented.
9. Joined Chamber and attend breakfasts.
10. Traded space for semi-annual booth in large art show at factory outlets.

I also hired new staff, but actually kept one of the previous 3 owners as mgr and my personal asst.

Thanks Rich. I know a self-storage "guru" out there who charges about $1,000 for pretty much what you just provided us free of charge! Thanks again.

Thanks Mitch. Always available and never charge for my $.02 input. Rich

Thanks for insight into the the storage bussiness Rich. I was looking into it for awhile and did some reading and even rented a unit at a successful facility to see some of the ins and outs. What I found out was that it is really an active bussiness. Also it seems that the capital required is much greater because some costs are fixed so a large facility with 400+ units just makes more sense.

Like Brian, I am also looking for answers for the same questions. I am looking into purchasing a storage unit. It seems that return on investment from purchase price won't be profitable until 10 years after buying one. Does this mean they are over priced in my area? What amount of time should one be able to profit from their investment?

They must be overpriced or you need to re-do your analysis. You haven't entered a lot of info- downpayment, size, location etc It helps if there is some upside in the project for you to benefit from. Are homes selling in your area? Storage facilities do well when homes are selling-buyers and sellers both need space. Good Luck. Rich

It's possible my analysis is wrong. It has been awhile since I took my business classes in college. I know it's smart to use down payment for leverage, but I am being offered the opportunity to find an investment which someone else is buying for me in cash. I can't argue with that. :-) I am a mom who has put her life on hold to raise 2 wonderful young men which hasn't been easy on a very meager salary. This is inheritance money and I want to be sure I use it wisely. I have done some more research and am thinking I will go talk to someone in SCORE and perhaps maybe I can get a mentor.
I live 15 miles outside of Tampa, Florida area. Home sales are slow but still selling. One of the storage businesses I found for sale is selling for $495,000 and has an annual net operating income of $42,495. It is only 54 units.... and it is old. Which doesn't sound very good from what I was reading here. I would really like to look into building one in my neck of the woods because there are some homes being built in my area. So far there are only 2 companies, in this immediate area offering storage service and they are very small. http://www.loopnet.com/Listing/17324754/1490-E-Dr-Martin-Luther-King-Jr-Blvd-Seffner-FL/

How do you go about finding out if they have many vacancies? The simple answer seems to be, call. Should I be direct and express my motivation for this information?

I'm going to be honest. I really don't know what I'm doing. I'm just a middle aged woman with a desire to make more of my life, who is looking for a way to get there. Even if it takes me awhile. Any suggestions or help is greatly appreciated.

I'll try to answer some of the questions and also give you some thoughts on the facility that you're looking at. My only experience in storage units is the one I bought several years ago near Naples Florida. It was 10 years old and 10 times the size of the one you're looking at. I have trouble believing the net income of $42,000 and would pose various questions.

Is the owner managing the building currently and would you continue doing that? If not, you'll need to add salaries for a minimum of two people to your equation. If it is old like you say it is, you're going to have maintenance problems with your doors, rollers, etc. My building was only 10 years old and I had to repaint, install a completely new modern surveillance system, add a new roof system and upgrade the software. My guess is none of those items are up to the current needs on your unit.

The vacancies really don't matter as much as you might think. If they have been planning on selling for some time, they may be renting units at very low rates in order to show higher occupancy. If these tenants are on leases, you'll have no opportunity to increase the rents to cover the expenses that you are going to have.

The other thing that many people fail to realize is that owning a storage facility is not like owning houses or apartments. A storage facility is a full time business. If you are going to manage this, how far away do you live? If someone else is going to manage, reduce your potential net income by 50% minimum.

I just don't see this as a good place to put $500,000. I know of a location where you could buy brand-new free and clear homes and generate almost the same anticipated net income as you are projecting here and have fully managed , turn key properties.

The part that scares me the most is when you said you really don't know what you're doing. I would urge you to run the other direction from an old, outdated, small, storage facility as fast as you can. I think you would be buying a huge headache for yourself with very little possibility of reselling in the future. Good luck. Rich

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