Thinking About Purchasing Storage Buildings
Anyone have experience with owning multi-unit storage facilities? I am wondering how lucritive it is and what kind of work is involved if someone doesn't pay and leaves their stuff behind. I'm considering this as perhaps a fairly hands off kind of investment. I don't have anything targeted specifically although I've seen an 18 unit on the market. How much is the average monthly rent on one of these units and what are the usual expenses. Thanks for your input.
They can be tremendously lucrative -- or not. The key is the market, including the specific location in the market. It's best to be the only facility in a 3 mile radius of dense population, but if the population is large enough, many facilities can be supported. Think about 5 square feet of storgage required per person, or thereabouts. Then take the number of people, multiply by 5, and that will give you the total requirements (in square feet) for the market. Then figure out how much space is already available from existing storage facilities, and that will give you a ROUGH idea of whether there's room for a new competitor or not.
It can be a great business in the right location, but a lot of people have figured that out, and some markets are getting overbuilt, mostly in the West.
Check out www.selfstorageguide.com for LOTS more info on this subject. Be sure to read their message board, called "Discussion Forum".
As to your specific questions, it can be a lot of work, so you usually have a full-time manager to handle everything. If someone doesn't pay, you can seize their property in storage and auction it off to get the fees you're owed. Average rent and expenses vary tremendously as a function of the market, and the type of unit. (Single story, multi-story, climate controlled or not, etc..)
Good luck,
CT
You may also want to look for specialized training on this topic. A contractor told me he was going to his 3rd such training a few months ago. It was in Las Vegas, and it lasted 2-3 days - with speakers addressing lot selection, construction issues, security, etc. I looked at the brochure (online) and thought it was fabulous. Lots of vendors also apparently show up at these things, so you can compare pricing on all sorts of needed items, like doors, ramps, elevators, sprinkler systems, and also collateral revenue streams, like rental trucks, boxes, etc.
Good luck!
I guess that right now I'd be looking only at existing storage units. I'm not ready to consider building one. There is one 18 unit for about 90K. I don't even know if that's a good price. I have no idea what a unit rents for per month. This one is in an area where there isn't a lot of competition and the units are most likely rented out mainly by tourists who visit in summer and keep their boats there over the winter.
You may want to pick up a local newspaper and scan it for storage units for sale. Getting an outside source on rental prices could be asy enough that way. If none are listed in the newspaper, you might try calling them to see if they just don't carry them, or better yet, if they would carry them, but indeed, no one else is advertsing. Now that might just be the best situation, eh?
MarleneM
To those who know...
What sort of returns would a good storage business produce? Not the best and not the worst examples. Just something that fairly represents returns if one was to invest in the sector. Assume a hands off situation as I am not interested in living there or doing any of the day to day management
I am not looking at this time. I just want to get a crude idea so if other things slow down I know where to investigate next.
John
[addsig]
Say a first-class facility in a large market costs you $6M. That's $2M for land and $4M to build. This is a 65k sq ft facility on some expensive suburban land. It could cash flow about $630K. If you put 20% down, after you make your loan payments you will have about a 13% cash-on-cash return on your $1.2M down payment.
Throw in the amortization and the increases in the value of the property, and you could be looking at IRR's in the 30-40% range. BUT (big BUT), the siting is crucial. The demand in that particular sub-market has to be there, and this also assumes no over-building by competitors.
CT
don;t forget these are generally great locations for installying cell phone towers - providing an extra $15 to $50k a year in revenue!
I used to be in that business (cell towers). What you say is true, BUT: a)your storage site has to be where the carriers need to put another tower, and b) the rent rarely reaches $50K/year any more -- it might typically run $12 to $20K, or lower in rural areas. The basic idea is correct, it's just not that easy to implement.
CT
That's interesting. I know of someone who has access to a company that utililizes other peoples land for cell towers. It might be worth looking into. Any thing that can produce passive income peaks my interest any day!
Ask to see their license agreement and compare them one to another if you can. Be mindful of renewal dates and be sure to get top dollar when renewal periods come around.
I know of two property owners who are stuck with 10 year renewal periods, and very little income (approx. $200 per year for one in downtown San Diego!!!! and another, for $350 per month). I would think billboards could pull a lot more income if contracted properly.
Marlene
If the billboards would show to a Federal Interstate they would be subject to the Highway Beautification Act (do a google search and you will find a copy). Assuming the placement meets this criteria, you would then be subject to State and Local criteria. Generally, the State regulations are governed by the DOT and local you can get by going to the City/Town Hall and asking for a copy of the Zoning Ordinance. Many municipalities have made it difficult to erect new signs. You will derive more value if you go through the permitting process yourself and sell a lease/permit package then you will if you just enter into a lease with an outdoor company. Additionally, you may want to drive the local area to see how "fresh" the ad copy is - if you see a number of "Call Here to Advertise" messages, any new site may be of limited value to an incumbent outdoor operator. Good Luck.