Thinking of starting a real estate venture, but unsure of what type? Consider one of the safest and most profitable industries. Consider Self-storage!
Keep reading while we cover what exactly makes self-storage a great industry and why you should seriously think about investing in a facility.
1. 9.4% of Households Rent Storage
According to Selfstorage.org, 9.4% of households in the U.S. currently rent storage. That means that around 12 million households are utilizing self-storage. This data becomes more intriguing when you break down the numbers of who is renting.
- 14% of Millennials
- 11% of Gen X
- 7% of Baby Boomers
- 5% of the Silent Generation
A lack of home ownership is likely the number one factor causing young people to need extra space. However, the numbers also disclose that the need for storage isn’t going out of style. As the current population grows, expect more people to need storage, particularly in urban areas where space is more and more limited.
The type of units younger populations are interested in is also surprising. Smaller units are becoming increasingly popular with young people. About 22% of self-storage users now want 5×10’s, putting them on par with 10×10’s, which were historically the most popular size.
2. They’re a Safe Investment
Roughly 92% of self-storage businesses succeed! This number is significantly larger than the number of overall businesses that succeed, which is a low 50%. This is because self-storage offers a relatively straightforward business model. You don’t need to be a self-storage expert to start one and you can get up-to-speed on what you need to know in a short period of time. Furthermore, most facilities can start making a profit somewhere between 60-70% capacity! Obviously, this is dependent upon your prices, which will be dictated by your market.
Independent owners make up 75% of the self-storage industry, so the industry isn’t dominated by huge companies. Furthermore, the industry offers plenty of space for mom-and-pop operators.
3. They’re Less Expensive to Build
Self-storage facilities tend to cost between $4.5 to $8 per square foot. Therefore, a 60,000 square foot facility at $8/sq. ft. would cost around $480,000. However, this cost will vary depending upon the type of units you’re building, as climate-controlled units are more expensive to construct.
Let’s contrast this with an apartment building. Construction for apartments normally ranges from $85 to $200 per square foot, and the average cost of an apartment building, according to Fixr.com, is $10.5 million! Take one look at those figures and there is hardly a comparison. It is clear self-storage is far more affordable.
4. They’re Easy to Get Funding For
Couple the affordability of a self-storage facility with the fact that they’re a safe investment and it’s easy to see why it’s not hard to get funding for them. Lenders will still need to see the potential value and market potential, as well as credit profiles, but at the end of the day, most consider self-storage to be a low-risk investment.
SBA loans, conventional bank loans, and private financing are all viable options for funding a self-storage venture.
Keep in mind that your intended market will play a considerable factor in your financing options. If your market has low-demand and high-saturation, expect financing to be limited or less favorable. Consider surrounding areas where markets may be underserved. Demand may be lower, but the lack of options may still make these areas suitable for your business.
Conclusion
Are you convinced yet? Self-storage is still a hot market, and the industry is trending positively to remain easily profitable for years to come. Not only is self-storage a great opportunity for first-time business owners, but it is also one of the best real-estate ventures you can be involved with in 2021 and beyond.
What are you waiting for, the market is hot, get started with your own self-storage investment today!