Have you ever thought to start a storage unit rental business? Many people have a dream of starting a business. After all, being your own boss, providing for your family, and helping develop your community are all worthwhile goals.
With a storage unit rental business, you open up, people rent your space, and the money rolls in… right? Not so fast. While there’s money to be made operating a storage facility, it is a business not to be taken lightly. There’s a lot of preparation and operational work that goes into opening and managing such a facility.
These days, a storage unit is more than just a place to keep your spare furniture. They can be used for almost anything from storing heavy equipment to a place to store your memorabilia.
Maybe you’ve been considering opening a storage unit rental business — well, I’m here to give you the ultimate guide! You’ll learn everything from how to find a location to the different kinds of units available.
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FAQ on starting a storage unit rental business
What are storage units?
To start, let’s go over what a storage unit actually is. You may have heard them called “self-storage” or “mini-warehouses,” but the truth is they are just units inside of a larger building. The concept of this unit is that you rent the unit and own nothing else except the contents in it.
The self-storage facility owns the building and land.
Why start a storage unit business?
There are many reasons you would want to get into the storage unit business yourself. One of the biggest reasons is that you get to take advantage of a booming industry. In fact, self-storage facilities are seeing record sales these days. This is because people need extra space to store things, and there are fewer rental options at more affordable prices.
Is there money in storage unit rental businesses?
According to industry reports, in 2019, the self-storage industry recorded nearly $40 billion in revenue. The average unit rented for $89 per month. In fact, approximately 10% of households rent a unit.
In the past few years, storage facilities have trended toward more affluent areas. No longer is a facility necessarily hidden from view on a backlot.
Instead, storage facilities have been moving up in class and you can find them in more visible, convenient locations. So, yes, a well-placed, well-run storage facility can be a money-making cash cow, if done right.
How much money can I make running a self-storage facility?
Like any service, it’s all about supply and demand. If there are a ton of other rental unit businesses around and not enough customers, you won’t earn much.
I know you’re looking for some numbers, so here they are.
On average, storage units tend to range in size from 5×5 feet up to 10×20 feet. Typical rent for non-climate controlled units ranges from $60 to $180 per month. Similar climate-controlled units rent for $75 to $225 per month.
For example, if you owned a non-climate controlled facility with twenty 5×5 foot units and ten 10×20 foot units, at full capacity, you could potentially earn $3,000 per month. Of course, that isn’t profit, that’s just gross revenue.
Is my local area a good place to open a storage facility?
When thinking of a location for your business, look to see if any facilities already exist nearby. If so, are they full or do they struggle to find customers? If the units are empty, there may not be a market in that area.
Is there a large middle or upper-middle-class community in the area? How about a large transient community, like a military base, in the area? These are just two examples of groups that tend to use storage facilities.
Next, is there another service that current places don’t provide that you could?
For example, today, facilities are climate-controlled, secured, and offer a variety of unit sizes. So, if these features are lacking in your area, this may be an opportunity for success.
What skills do I need to run a self-storage business?
As with any business, smart and successful don’t always go together. Well-educated people fail at business every day. But, there are some basic skills that can help a new business owner succeed.
First, organizational skills and attention and to detail are key. Financing, tax laws, and rental agreements are just a few of the details an owner must regularly monitor if they hope to succeed.
Second, basic technology skills are essential. Banking, security, and communication are all technology-based these days. Therefore, a small business owner should have at least rudimentary computing skills.
Finally, customer service is a must. After all, you’ll be dealing with people every day. In some cases, these folks will be stressed out for some reason. Being calm and understanding will be a great benefit to you and your customers.
How do I get started?
The first step, as in any business, is to write a business plan. Unless you have a lot of cash on hand or a ready source of financing, you’re going to need investors or a bank to help you pay for your venture.
This requires a formal business plan.
The business plan will spell out what you intend to build, how you intend to pay for it, and your return on investment. You’ll also have to come up with a catchy name for your new business. Finding a name sounds simple. It should click with potential customers. More importantly, it must be available.
Do I need any permits?
Of course! You know the government needs to be involved. There are no special licenses for self-storage facilities. However, there are local zoning permits that must be obtained.
Also, starting a new business requires that you form a business entity, such as a Limited Liability Company (LLC). Various business types have pros and cons, such as liability exposure, tax requirements, costs, and administrative requirements. Plus, there may be other local guidelines you need to follow, such as getting permits.
Should I use a franchise or start my own rental unit business?
There are currently over 60,000 storage facilities in the US. Six large companies own or franchise 18% of these facilities. Small operators own the other 73%.
There are many benefits to going the franchise route. For example, the visibility and name recognition of their brand gives you instant credibility.
Some franchise companies even offer standardized building layout and financial assistance. Of course, these services come at a cost. Franchise fees, minimum facility standards, and adherence to company guidelines may take away some of the freedom a new owner was hoping for. But, on the other hand, it can get you a head start.
How much money do I need to start a storage unit rental business?
There are a million variables that will impact this question. For example, the price of land, the price of building material, the cost of construction, property tax all vary by the market you’re looking at.
In general, site development costs can range from $5 to $8 per square foot, depending on the topography. Additionally, drainage, facilities, utilities, etc., have to be considered.
The average cost of construction of a facility can range from $23 to $28 per square foot. The overall development of a facility can approach $50 per square foot. This includes the site preparation, construction, and financing costs.
How do I find financing?
Being a good business person is great, but you need to secure financing before becoming that person. Most self-storage facilities are financed with small business loans. The Small Business Administration is a government agency that helps small businesses get loans by giving lenders access to funds specifically intended for business. There are several SBA-backed loan programs for various types of businesses and financial needs. In addition, most major financial institutions work with the SBA.
Do I need special insurance?
A self-storage facility requires several kinds of insurance. Let me go through them.
First, as with any property owner, general liability insurance is a must. This insurance covers the owner from any injuries suffered by anyone on the property. This insurance typically covers medical bills and any legal fees or fines.
Second, customer Property liability covers any damage to customer property in the event of fire or storm damage.
Then, you have Crime Loss insurance, which covers losses due to theft.
You’ll need to have Worker’s Compensation insurance, in case employees get hurt on the job.
The types and costs of the various types of insurance vary based on the location and size of the facility. Like any insurance, shop around. Every insurance company has different rates. Some may provide package rates if you purchase multiple types of coverage from them.
What other services can I offer?
Since this is your business, there’s no end to the services you can offer. Like I said earlier, new self-storage facilities offer more than just a place to store stuff.
Think about other services you might offer that would expand your customer base.
Since many families store items temporarily when they’re moving, consider offering moving materials like boxes, tape, bubble wrap, etc. Even a truck rental service could be incorporated into your facility.
In urban areas, why not offer parking for boats, RVs, even spare cars may be an option.
Even offering PO boxes may draw customers.
People that are on the move often need a permanent mailing address for mail and package receipts. You could provide that service.
Of course, every service you offer brings its own demands. For example, the liability involved in storing vehicles is much different than storing household goods.
And, while PO Box and mail services sound simple, there are many legalities and liability factors involved in handling mail.
Will I need to hire employees?
How many people you need to run your facility will depend on many factors. These include facility size, location, and services offered, just to name a few.
In many rural areas, basic self-storage facilities are unmanned. To give your customers access, use code key security systems to give customers access. And, of course, each unit has a locked door.
In more urban areas, you’re going to need more help. That’s because you’re offering more services, you have more clients, and you’ll need beefed-up security.
How to start a storage unit rental business
The first step to starting a storage unit business is finding the right location and determining your business model.
1. Location, Location, Location
There are many things to consider when picking a location. The most important thing is to make sure the location is zoned for a storage business. Cities can be very strict with zoning, so it’s best to check with your local government before spending money on a location.
Once you have that in order, then consider the location itself. Make sure it has good visibility and is appropriate for your target demographic. That may mean finding a place near a major highway or high-traffic areas. It also may mean not placing your business right in the middle of a residential area.
When deciding, think about where you would like to be if you were using a storage unit business. For example, do you want to be out by a busy highway or a residential area? Is that the best place for you? That’s where you’ll need to consider your target demographic– whether it’s families or individuals, or businesses.
It’s also a good idea to look into construction costs for your site. While you’re at it, look into zoning regulations, permits, and other requirements. This will help you make an informed decision about the location.
2. Learn about the building types
Once you’ve picked the right spot, you’ll need to figure out a few things about your business building. Will it be a free-standing building or part of a larger facility? It may depend on zoning requirements or the size of your property. If your property is large enough, building a free-standing building is the best option.
The type of building you choose will depend on how much you want to invest in your business. You don’t have to go all out with a free-standing building, and you’ll save money on the land purchase or construction costs.
If you’re going to invest in a building, make sure it is zoned for a storage business so that you can get the proper permits. In addition, make sure you know the construction costs and zoning requirements before investing.
3. Choose your storage unit sizes
There is a wide range of different sizes to choose from when opening your business. You’ll need to make sure you have enough room for all of the other size units.
This will determine how much money you need to spend on construction and land or property. If you are making a significant investment in a site and building, make sure you budget time for construction. It’s not a bad idea to get estimates for how long it will take to complete construction so that you can plan accordingly.
You’ll want to check out the different sizes available, so you know which one will work for your business. For example, you may want to choose a smaller unit so you can put in more units. Or maybe you want a larger unit to be able to charge more for them.
4. Choose your unit types
Now that you have picked a site, built a building for your business, and determined the unit sizes you’d like to rent out, it’s time to choose what kind of unit you’ll be renting.
There are many different varieties of units available. You may want to specialize in a particular type or provide units that are good for many uses. Let’s look at some of the different types of units available:
Climate-Controlled Storage
This type of unit is ideal for storing items that are sensitive to temperature changes. It’s great for electronics, commercial equipment, and more.
If you plan to use these units as a business and provide maintenance, it’s crucial to check out the maintenance requirements. It may be challenging to come by someone willing to do the maintenance for you, so it’s best to plan.
There are many different types of climate units available, and they can vary significantly in cost. This is why it’s crucial to check out which ones will be best for your business.
High-Density Storage Units
High-density storage units are designed to hold a lot more than regular storage units. They are designed to handle heavy items, such as large furniture or vehicles.
These units are expensive due to the extra materials needed. You should check out whether these units are available in your area before you make a decision.
Vehicle Storage
Most storage facilities have enough room to store cars and other vehicles. It’s not common practice, but some facilities do rent out parking spaces for recreational vehicles, boats, or trailers. You can offer these if you have the space available.
It’s also a good idea to check on any zoning requirements that may apply to vehicle storage. While most people don’t want their vehicles next to their personal belongings, some people prefer it.
5. Determine how much to charge
Now that you know all of the options available for your business let’s look at how to determine how much you charge per unit.
There are several things you need to consider when calculating the price for your storage unit. Of course, the first thing to think about is the cost of renting out units. However, it’s not always easy to calculate how much this will be.
This is because management fees, insurance, and other factors play a role in determining how much money you’ll be making. One of the things you need to consider when deciding whether or not to charge for units is your competitors’ price.
You can find out prices from similar facilities in your area. However, since these are potential competitors, you may want to make sure that they are honest about what they charge before deciding your pricing.
The easiest way to determine how much to charge for a storage unit is to figure out the price per square foot. This will help you gauge whether or not your business would be successful.
You can find out how much your square footage is worth by looking at similar businesses in your area. The best thing to do is find out how much other storage facilities charge and charge a similar amount. You can always raise your prices down the line after you get plenty of customers.
6. Advertise your storage units
To make sure you get customers, it’s time to start advertising. So let’s look at some of the ways you can advertise your business to attract customers.
You have a few different ways that you can advertise your storage units. One way is to do it yourself. Put up display ads on your property that will attract as many eyeballs as possible.
You can also use flyers or print ads in local newspapers and magazines. Or you can even use advertising on local radio stations or cable television ads.
No matter how you advertise, make sure the ad is appealing to potential customers. Here are some things to keep in mind:
Make sure you include pricing and make it easy to find.
Make sure the ad is as appealing as possible. This includes using good pictures and writing a captivating description.
Try to include testimonials or quotes from happy customers that will convince people that renting from you is a good idea.
Make sure the ad is professional and appealing. This includes the layout as well as copywriting. In addition, the text should be clear and easy to understand.
Starting a storage unit rental business: The bottom line
If your dream is to be your own boss and run your own business, why not start a storage unit rental business? As a multi-billion dollar growth industry, it may be the investment in your future you’ve been looking for.
Now that you know everything you need to run a successful self-storage business, it’s time to go out there and start making money. By following the advice outlined in this article, you should get a successful self-storage business going in no time.
As with any business, your most important asset will be the customer base. By providing excellent customer service and meeting their needs, you’ll have the best possible chance of making money. Make sure you always follow the local laws and regulations when running your storage business.
Whether you decide to go via the franchise route or on your own, starting a storage unit rental business might just be the business opportunity you’ve been looking for.
