Budget Planning Essentials for Your Self Storage Investment

Investing in self storage is a lucrative market for high-earners such as real estate professionals, developers, investment groups, or other high-net-worth individuals looking for passive income allowing self-storage owners to earn income from customers renting their units. Plus, if your self-storage facility comes in a variety of sizes, it can meet more diverse needs such as boat and RV storage, but that’s a story for another time.

In our experience, new investors have many questions about budgeting for their self storage investment. At StorageStudy, we help you make optimal investment decisions in self-storage based on our experience as owners, operators, investors, and developers. So in thiswe’ll put our 20+ years of experience to work for you and demystify budget planning in regard to your next self-storage investment.

Self Storage Investment Feasibility Study

One way that investors can prepare their income for a self storage investment is to seek out a feasibility study. While it’s great to have enough property set aside for a storage unit, getting professional and expert insights about how well a storage facility will do on that property reduces the risk of making a poor investment.

A feasibility study is an excellent first option for investors because it creates a roadmap for your self-storage project, which includes a financial plan and identification of growth opportunities. Feasibility studies utilize their report’s data to situate investors in an optimal position to achieve long-term success in this emerging market and beat the competition. On the one hand, you might look at the cost of our feasibility studies and think, “wow, that’s expensive.” But when you consider the reality that you could be risking the loss of millions of dollars, $10K is a drop in the bucket and a very important first step.

It’s like we always say, “If your baby is ugly, we’ll be the first to tell you!”

You simply cannot get a plot of land and start building. We won’t let you! So planning to include a feasibility study in your investment fund before building a self-storage unit on your property is an excellent strategy to reduce your overall risk. Every seasoned investor knows that this is your first stop on the self-storage train and it’s why our self-storage consultants spend more time here, than any other firm in the country. We want you to win. And we put our experience behind you.

Choose a Class of Self-Storage Unit To Invest In

For all our newcomers out there, an essential art of creating a self-storage investment fund is understanding the options available for self-storage units. Sometimes, we hear about folks looking to assume management of existing structures. That’s not really what we do or what we’d recommend. Your greatest ROI will come from ground-up construction, with a self storage facility that has 200+ units or more. Now, that said; There are three classes of self-storage to consider: A class, B class, and C class.

A-class self-storage facilities were developed within the last 10 to 15 years. These units offer customers plenty of amenities that enhance the self-storage experience and are located in more favorable areas for low turnover and high cash flow. Amenities can include climate control, advanced security and protection measures, and more. As a result, A-class units have significant competitive leverage due to end-user desirability.

B-class self-storage facilities are much older than A-class units, with their age extending past 15 years. Their age and selective amenities, often fewer than A-class, offering a attractive price for customers who need to store their property on a budget.

C-class self-storage facilities, are the oldest of the three classes. This asset type will cost customers the least to rent and have limited amenities compared to the A and B classes. Their locations are also not as ideal, but they’re still functional. Consider this a rough entry point to the self storage business, especially if you are the solopreneur with about $50K to invest.

With all three classes defined, investors can consider the available options to purchase or build themselves. This, combined with due diligence, securing a financial plan, and investing in property management techniques (we can help with that), will set up investors for self-storage success.

Research Financing Options for Your Self Storage Investment

Arguably, the most crucial aspect of budgeting for self-storage investment is financing. Some investors may raise the cash for their assets from their personal income, but other options may be more favorable. Those options include seeking a commercial loan, taking on a traditional mortgage, or investing in real estate investment trusts (REITs).

Commercial loans are debt-based funding arrangements that can be set up with a financial institution such as a bank. These loans are a popular option for businesses, as their amortization periods spread the payment period for a loan over a much longer, more manageable time frame compared to a regular loan. Another loan type that investors can pursue is a mortgage, which will require a good credit score but ultimately functions as an affordable payment throughout the mortgage’s life.

A third option for investors is REITs. These trust funds manage and rent storage facilities to customers and businesses, offering investors a greater profit margin and return on investment. Investors earn profit the same way they would through stock market trading, which makes for strong passive income. This is great for investors who want to dip their toes into investing in self-storage before committing and shopping for other options.

Do You Like Ugly Babies?

One thing you’ll learn about working with us is that we’re honest. And sure, all of God’s children are precious but when it comes to a quality investment, no one wants to recoil when they look at the plan. It’s our mission to arm you with our experience so that you can become more profitable, or, find another type of investment because storage facilities cost a lot and take a few good years to be profitable.

Now, that said, knowing what storage facility types are out there prepares investors for the look and feel of their new asset.The best way to determine a financial plan for investing in self-storage is to seek out self-storage experts who can help you become profitable (or at least give you the bad news up front with an ultrasound).