- What Is A Self Storage Business?
- What Is A Self Storage Franchise?
- Should You Buy An Existing Self-Storage Facility?
- Should You Consider Building A Self-storage Facility From The Ground Up?
- Self-storage Franchise Cost
- Research and Planning Before Starting A Self-storage Franchise
- Do You Need A Self-storage Feasibility Study For A Franchise?
- Financing a Self-Storage Facility
- Best Self-storage Franchises
- Using Property Management Systems For Self-Storage Franchise Management
- Key Takeaways
In the United States, the storage sector is expanding. IBISWorld reports that the industry generates $38 billion in revenue yearly.
A franchise might be a terrific method to gain the tools and know-how you need if you want to enter this expanding business sector.
Consider the following franchise options in storage for ambitious business owners. But first, let’s understand what this self-storage business is about.
What Is A Self Storage Business?
Self storage is the business of renting out storage spaces like rooms, containers, lockers, and/or outdoor spaces, often known as "storage units," to customers, typically on a temporary basis.
Self storage is also known as "device storage" (often month-to-month).
What Is A Self Storage Franchise?
In order to create a mutually advantageous relationship, self storage franchising brings together the resources and entrepreneurial spirit of a business owner with the knowledge of a franchisor.
The concept offers each stakeholder a financial opportunity based on their skill, initiative, and commitment.
A self storage franchisee often owns all of his company and operates it under a license. With this arrangement, you work for yourself rather than by yourself.
Should You Buy An Existing Self-Storage Facility?
Prices for purchasing an existing facility are as varied as the self-storage facilities themselves.
An established self-storage facility in New York City, NY, will probably sell for tens of millions of dollars, contrary to what you may assume, yet an existing facility in rural Iowa can probably be bought for less than $1 million.
According to Storable , a spot survey of storage facilities up for sale in March 2019 showed that asking prices for each facility typically ranged from $1 million to $10 million. A few of the facilities on the market were also offered as a single portfolio.
Buying an existing self storage facility (franchise) is not a bad idea. It is less stressful, costs less, and involves fewer complications.
However, the best way to purchase existing self storage facilities is by doing a lot of research and making sure you choose the right one.
It's advisable to use a seasoned self-storage broker to assist you in finding and ultimately purchasing a facility if you're not a licensed real estate professional.
A seasoned broker is familiar with the market and has price negotiating skills.
Naturally, you'll want to purchase a facility in the area where you reside if you're going to be managing it. But it doesn't necessarily matter where the facility is located if you'll be turning over management to a third party.
Just make sure you both understand the local market well.
Should You Consider Building A Self-storage Facility From The Ground Up?
It shouldn't be a surprise that location has a significant impact on how much it costs and if it will be a good idea to establish a new facility.
A 100,000-square-foot facility in a more urban area might cost $8 million, or you might be able to build a 50,000-square-foot self-storage property in a small town for $2 million or less. Remember that these are just ballpark figures.
Generally speaking, you should budget $25 to $75 per square foot for new construction. Once more, the cost of the facility will depend on its location, including the cost of the land.
If you don’t mind doing extensive research, putting in more effort, and investing more resources into your self storage business, building the facility from the ground up wouldn’t be a bad idea.
It gives you the chance to have a clear understanding of the business while going through every planning process from scratch.
When building a self-storage facility, keep the following data in mind:
- Facilities might be anywhere from 10,000 and 100,000 square feet.
- The typical self-storage facility has 46,000 square feet of net leasable space.
- Typically, a facility takes up 2.5 to 5 acres.
Self-storage Franchise Cost
ICTSD wrote that according to Mako Steel, which specializes in producing steel facilities for self-storage establishments, you can typically expect to pay $25 to $70 per square foot for the construction of a self-storage facility.
There is a wide variety within that. For instance, the price of steel could change at any time, or there could be a labor shortage in the region where you're developing the plant.
Additionally, expenditures in a big city will undoubtedly be higher than they are in a small town.
However, starting a self storage franchise typically costs less. This is because there are a lot of things that you don’t need to pay for when you don’t build your self storage business from the ground up.
It costs between $50,000 to $300,000 to start a self storage franchise, depending on so many factors like location, size, and so on (please note that this is just a ballpark figure/rough estimate).
Research and Planning Before Starting A Self-storage Franchise
It's time to conduct some research after you've given your self-storage business startup some serious thought.
All of that information will be used to create a feasibility study, which will, as the name implies, inform you of the viability of the company's idea.
Although you might be able to complete this study on your own, employing a self-storage expert would be preferable.
Whichever path you choose, you must respond to the following crucial query:
- Will you be able to make a profit after investing money in a self-storage facility and still cover your debt service and operational costs?
- Researching the market is essential. You can use this practice to determine the characteristics of the clientele within a one- to a five-mile range of the facility.
- The normal market radius for a self-storage facility is three to five miles.
- You should determine the market area's median income. Along with being older than average, self-storage tenants frequently fall into the middle- and upper-middle-income ranges.
- Tenants of self-storage facilities tend to be between the ages of 20 and 50.
Do You Need A Self-storage Feasibility Study For A Franchise?
The short answer is yes. Regardless of if you’re building your self storage business from the scratch or starting with already made structures, feasibility studies are essential.
A feasibility study helps you know your market and subsequently generate revenue for your self-storage business. Your facility's viability can be assessed using the research in a feasibility study.
You could definitely carry out this research on your own, but it would be a good idea to work with a self-storage professional.
This analysis should assist you in determining whether your self-storage business will generate enough revenue to turn a profit once debt and operational costs have been paid.
Financing a Self-Storage Facility
Self-storage has certain harsh realities, just like any other industry, regardless of whether the facility is recently built or just acquired.
You'll need money to start and maintain your firm, for starters.
As we've already discussed, location and a host of other factors dramatically influence how much money you invest in a facility.
However, before you spend a penny, you must determine how you'll finance an acquisition or a new project.
Four factors are necessary to be eligible for a self-storage loan:
- A minimum credit score of 680.
- A credit history that is free of recent defaults, bankruptcies, and tax liens.
- A cash down payment of at least 10%
- A minimum of a three-year company track record.
Perhaps you have sufficient liquid funds to purchase or construct a facility without the requirement for a loan.
Do you, however, have enough cash to keep the facility running? You shouldn't use all of your savings and investments to start your self-storage business.
Or you may think about joining forces with other investors (partnership) to establish your self storage business.
Best Self-storage Franchises
Storage Authority’s franchise program, which specializes in consumer-level self storage is available for interested investors.
Based on the region and size, the total investment may change. However, the minimal up-front expenditure is ordinarily close to $400,000.
Established company owners who want to add the U-Haul brand to their moving and storage services have a special opportunity.
Across all of U-product Haul's lines, you can sign up as a dealer to make roughly 21% commission.
With branches across the country, Smartbox provides moving services as well as storage containers.
The initial franchise price can change based on the size of the territory you want. But the price generally begins at around $40,000.
Using Property Management Systems For Self-Storage Franchise Management
Self Storage Property Management Systems are available to you whether your goals are simply raising the value of your properties, obtaining better financing, or creating an exit strategy.
When you have a third-party management relationship with self storage PMS, you may benefit greatly from the experience.
As a leader in the property management industry, Booking Ninjas Self Storage Management Solutions offers you the special advantage of automating the management tasks for your business.
By concentrating on the essentials of marketing, pricing, cost management, and property maintenance, you can have faith in our ability to manage your properties.
Take advantage of remote access, ticketing and POS systems, online customer acquisition, and many more with a one-stop system.
Ultimately, starting a self-storage franchise will require time, effort, and money. However, in a sector that is always expanding, the rewards might be significant.
In summary, self-storage offers a variety of justifications for why buying an existing facility might lead to lucrative investment profits.
Investing in a self storage franchise requires little capital investment or upkeep. Their property taxes are cheap, and net purchases in that sector have skyrocketed.
To learn more about our services, Schedule A Call with us now!