Most Americans have more things than they know what to do. As a result, they need extra space to store their things. This basic need is backbone in the selfstorage industry. But just because demand is there does not mean making money that fills the void is simple and guaranteed. The selfstorage industry is more complicated than it looks, and there are many important issues to understand and deal with.
Correct type of facility
There have been a number of different types of selfcontained facilities built over the past four decades. But the profitable ones are among the first varieties they are called Generation One or Generation Two. The important component is that they have all rentable units on the ground floor, and in a way that a car can drive straight up to the rolling door. Why is this? Studies have found that self catering homes want to be able to drive right up to their selfstorage door, roll it up, throw in their things or pull it out, close the door and drive off. What is not demand is units located on the second floor or higher, or that you can only reach on foot. No one wants to take a lift to their unit, or go down a hall with their stuff in the trailer. There was never a demand for this kind of facilities it was more a manufacture of selfstorage developers who tried to rationalize building facilities on more expensive land, requiring a larger number of units on the footprint.
Just like multistory facilities have proved to be a flop, so have climate controlled devices. It seems that the things that most Americans store are not enough valuable to require heating and air conditioning. If you go to most facilities today you will find the bulk of the climate controlled space. At the worst end of this spectrum, the California invention is wine storage units. I was in a plant that only had only 20% occupancy in wine storage. The cheap wine cellar at Costo and other retailers has replaced this concept for most. And do not forget that climate controlled areas are extremely expensive to drive.
Correct type of location
It is extremely important in selfstorage to have excellent street construction and visibility. The most successful selfstorage facilities in the US all share this common feature. This is because many Americans rent space in facilities they drive all the time and are aware of type of purchasing decision. When you have a selfstorage facility with poor visibility and an outoftheway location, there is no way anyone will think to rent from you, or even find out if they wanted to.
Do not forget that selfstorage is extremely competitive in most markets. In view of this, it is important that your plant has the right basic gifts to compete. We enjoy all the stories of underdogs who go on to victory as a single baseball player but its much easier to win when you have no disadvantage from day one.
Correct type of market
Selfstorage requires a high density of potential customers. Not everybody needs it, and there are competitors who also ask for their business. There is a general rule that there should be a population of at least 50,000 people within a three mile radius of the facility. Even if this is just a guideline, the key idea is that you need a high population density for a facility to succeed.
As important as population density is the density of selfstorage space in the market. A overbygged market will have low rents and excessive unemployment. The general rule of thumb is that there should be no more than 6 square meters of storage space for every person in that market. For example, a 100,000 market should not have more than 600,000 square meters of own storage capacity.
Demography is also an important part of a healthy selfpreservation market. Domestic income of $ 50,000 + per year is the best. Why? Because the more money you make, the more things you buy and the more things you need to store!
Right price and terms
An important part of a selfpreservation business probably the most important of all is the price and terms of the deal. Even the best selfstorage facility will be a loser if you pay for it. You should never buy a selfstorage facility of less than a 10% rate return on the total price. In addition, you should be able to fund the deal by about 20% down, so your cash dividend is in midteens.
The best buyers in selfstorage facilities are from moms & pops individuals who own the property free and ready and do not provide much sophisticated management. You can usually buy from these moms and pops at very attractive prices, and they can sellfinance the purchase, to avoid the entire bank application and approval cycle.