Presently, self-storage facilities are gaining popularity as a solution for storing various items. Both businesses and individuals use these facilities to store items ranging from household valuables to company products.
Self-storage helps provide them with an affordable means of storing both large and small items. If you seek a low-risk investment with a high profit, consider investing in self-storage.
If you desire to invest in self-storage, now is the perfect time to do so. Self-storage facilities are highly recession-resistant, with adequate profit at even 60 percent occupancy.
And the best part?
You can easily manage a self-storage business from your home or office.
While contemplating whether to venture into this type of commercial real estate, take your time to conduct some research on it.
What are the self-storage facility costs? How is the self-storage business affected by the operating expenses? What do you consider when calculating your self-storage facility’s development cost?
Suppose you’re thinking of putting a value on the facility, then calculate its gross potential and self-storage operating expenses to determine its market value.
Everything from the location to the building material affects self-storage space costs.
The following are ways to calculate a self-storage facility’s gross potential and operating expenses. By applying this information, you can discover the calculated self storage construction costs per square foot.
Site Selection
Whether you’re buying a facility or building your self-storage units from scratch, you’ve got to determine the location cost.
Self-storage spaces in cities near busy, residential streets will be more expensive to start up but will bring a better ROI.
The facility’s features and size also create wide price variability. For instance, a 10 x 20 unit’s average monthly cost might be around $122.83, while a 5 x 5 unit will cost about $45.18.
Remember that any feature, like video monitoring or climate control, may boost cost by 15 to 30 percent, increasing the earnings per square foot.
As such, consider these factors when going through your self-storage site selection process. Don’t forget; you’ll need to calculate property taxes in your location, seeing as it’s often at least one percent of your facility’s value and can constitute over 25 percent of your total costs.
Negotiation, Construction, and Financing Costs
If you intend to buy a developed site, then contact the owner to negotiate. Prices may range from one to ten million dollars, so research the storage facilities in the area thoroughly and consult an advisor to determine the self-storage building cost and its cap rate.
Always check for deals on self-storage spaces. Consider browsing through the Internet, networking, or hiring a commercial property broker to help you find storage facilities.
Don’t forget to keep your ears to the ground and your eyes wide open because you might never know where or when you’ll find storage spaces to develop.
Luckily, the previous facility owner may accept seller financing, so you wouldn’t have to search for loans.
Converting or constructing buildings often minimizes costs compared to buying. However, you’ll need to be exceptionally careful about extra expenses, like designing plans and hiring an engineer.
Typically, self-storage construction costs from $25 to $75 per square foot, so ensure this detail is in your construction budget. Furthermore, the facility’s construction cost varies significantly due to land prices.
For instance, building storage spaces in Los Angeles or New York will probably cost more than starting a business in a rural area.
Nevertheless, when building your own self-storage space, consider the land cost, which significantly impacts your facility size and site plan.
These costs also affect rental rates; the bigger the storage space cost, the higher the rent. Thus, when building your storage facility, consider the building’s location.
Financing Your Self Storage Business
According to the Self-Storage Association, it can cost you about three million dollars to own a self-storage unit. You need to provide at least 15 to 35 percent of the initial cost while a credit union or bank offers you a loan for the balance.
Don’t forget that part of your self-storage financing should include the return you’re likely going to receive per square foot. This part is vital because it’ll determine whether your self-storage investment is viable or not.
Also, remember that your storage unit’s operating costs, like the occupancy rates and rental prices, are part of the self-storage financing you need to calculate.
These cost features should be included permanently in your business plan. You’ve got to constantly refer back to them when calculating the cost of building storage facilities in the area you’re considering for the investment.
Marketing and Maintenance
It’d be best if you had a marketing and maintenance plan before you buy your self-storage space. Operating costs often run between two to four dollars per square foot, with site upkeep, marketing, and utilities constituting most expenses that come with investing in self-storage facilities.
Also, remember operating costs like technology updates, insurance, and credit card fees. If you’ve got a great business plan, these variable costs might be significantly reduced.
Your self-storage space will only attract potential tenants if it offers them the best value per square foot. So consider equipping your self-storage unit with the latest mod-cons.
These could include padlocks, selling boxes, or a moving truck rental service. Nonetheless, you’ll need to add these self-storage operating expenses to the rent you intend to charge for a unit.
Simply put, marketing and maintenance constitute your self-storage business’s essential operating costs.
Besides helping you promote a competitive edge over nearby storage facilities, a good marketing strategy combined with well-maintained units will ensure people come back to your business whenever they need a storage unit.
Summary
Regardless of the self-storage space or building you invest in, you’ll need a solid business plan for an in-depth understanding of a self-storage facility’s cost.
In the end, building or buying a self-storage facility will certainly consume money, energy, and time. Nevertheless, the payoff is substantial in this continually growing industry.
Self-storage facilities need capital upkeep; although their property taxes are modest, and net acquisitions in that sector have increased.
It’d be best to calculate self-storage operating expenses to know how best to start your new investment.