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Before we delve into the specifics of how to start a storage business and the pros and cons of owning storage units, let's start with a definition.

Storage businesses are a subset of the commercial real estate market. It's an industry that exists to serve both individuals and companies with short or long-term storage solutions. Storage businesses often refer to themselves as self-storage or storage container businesses.

Storage businesses provide a secure place to store items ranging from everyday household needs to high-value personal and business assets. Some storage providers offer additional services, such as packaging and moving services, climate-controlled units, and access to specialized storage solutions. Most storage businesses charge a monthly fee and aim to maximize occupancy to generate the most profit.

"The self-storage sector has caught the eye of many investors — big institutional players as well as comparatively small family offices — who are looking to make prudent investments in real estate."

-Self-storage Report: Analyzing a “Recession-Resistant” Sector, Trepp

Why Start a Storage Business?

There are countless incentives to start a self-storage business, but they all boil down to the same thing: storage businesses have the potential to be very lucrative.

North America is the largest market for self-storage, and growth is forecast to continue for the foreseeable future. Smaller urban living spaces, downsized offices, and an increase in renting have led to around one in 10 U.S. homes renting storage spaces and an industry that records USD 39 billion in annual revenue. 
Storage businesses are also well-positioned to benefit from the growing number of people living in assisted living facilities. Many people in this group need space to store their treasured possessions.

Other benefits of starting a self-storage business include:
  • Lower start-up costs: Starting a self-storage business is typically much cheaper than the high upfront costs associated with more traditional real estate rental businesses.
  • Low breakeven point: Storage businesses usually profit from a far lower occupancy rate than other types of rentals, with many owners seeing gains at around 40-45% occupancy.
  • Higher rental rates: Storage units tend to have higher rental rates per square foot than other types of rental properties, such as multifamily dwellings.
  • Higher occupancy rates: The average occupancy rate of U.S. self-storage businesses is just under 85%, meaning ample profits.

How Much Does It Cost To Start A Self Storage Business?

If the idea of launching a self-storage business has been playing on your mind, you've almost certainly wondered, "How much does it cost to start a self-storage business?"

When it comes to startup costs for a self-storage business, the most significant factors are usually:

  • Property size, age, and condition
  • Geographic location
  • Staffing and security needs
  • Registration, licensing, and legal fees
  • Equipment and finishing costs
  • Surrounding infrastructure

How Much Does it Cost to Construct a Storage Unit Facility?

Experts in self-storage construction say to anticipate self-storage construction costs of $25 to $70 per square foot. The average size storage unit facility in the U.S. is 56,900 square feet, so building a facility of this size from the ground up will likely cost between $1,422,500 and $3,983,000. Keep in mind that these figures don't include land or site improvement costs.

How Much Does It Cost to Buy a Storage Unit Facility Property?

The cost of purchasing a property for a self-storage business depends heavily on the variables mentioned above. Unless the property was previously used in the same way, you'd also need to account for the costs of converting it into a storage unit facility.

In many cases, it can be more cost-effective in the long run to have a new facility constructed to meet your specific needs. Although if luck is on your side, you might be able to find an existing property that needs little to no conversion.

How Much Does It Cost to Acquire an Existing Storage Unit Business?

Buying an existing self-storage business is usually the quickest way to generate positive cash flow. This can be a great way for those with limited time to enter the market, although even an existing facility will likely require some modification. The cost of acquiring an existing storage business can range widely from tens of thousands to millions of dollars.

How to Start a Storage Unit Business Without Money

A lack of capital doesn't have to stop you from achieving your dreams. The most common methods of funding businesses without existing funds are taking out a business loan or finding investors. As mentioned above, the storage industry is highly regarded by financial institutions and private investors — financing your venture is more achievable than you might think.

Storage Business Franchise

Buying a storage business franchise can be an excellent way to enter the self-storage industry. The benefits of buying a franchise include the use of an established brand, guidance in buying and setting up your facility, and support with marketing and operations.

The process of buying a storage business franchise involves the following steps:

Research: Investigate the franchise opportunities available and the market for self-storage in your region.

Apply to the franchisor: Processes vary depending on the franchisor but typically involve an initial application followed by an interview and credit checks.

Sign the franchise agreement: Once you're accepted, you'll have to sign a franchise agreement, which will outline the terms of your relationship with the franchisor.

Financing: Discuss financing options and apply for business loans or meet with potential investors if necessary.

Find a location: Secure a suitable location for your self-storage business and get planning permission if required.

Develop the Facility: Equip and furnish your facility according to the franchisor's specifications and set up all the necessary systems.

Fulfill legal obligations: Obtain all relevant permits, follow zoning regulations, take out adequate insurance, and adhere to other legal obligations.

Hire Staff: Even if you plan to manage the facility yourself, you'll need to establish a team of staff to help you with the day-to-day operations.

Market your business: Set up a website and promote the opening of your storage business to let people know who you are and what you offer.

Open: Start welcoming customers and continue your marketing efforts to ensure growth.

Annual Income Owning Storage Units

Here's an example for those wondering, "Is owning a storage unit business profitable?"

The average size of a storage unit facility in the U.S. is 56,900 square feet, and the standard storage unit is 100 square feet. So let's say you acquire a 55,000-square-foot facility with 550 units, to simplify the math.

You charge $125 a month for each unit, which is about the average, and your operating costs run $3 per square foot with utilities — right in the middle of the average $2.75-$3.50. With a 75% occupancy rate, you can expect to bring in $453,750. This is on the lower end of the average earnings of $350,000 - $800,000 a year, so the annual income for owning storage units is attractive.

How to Maximize Self-Storage Business Profits

The key to maximizing self-storage business profits is marketing. A website will give you an online presence, but without a marketing strategy behind it, it may not bring in the customers you need to reach your goals.

Nine times out of ten, the most effective way to generate awareness of your business is through PPC advertising that targets your local area. Digital advertising campaigns can seem daunting to those new to the industry, but when done right, they beat old-school marketing techniques hands down.

Self-Storage Business Costs

Before you decide to invest in a storage unit business, it's essential to first get a strong understanding of the operational costs involved. The ongoing costs associated with operating your business will be a mix of variable and fixed expenditures that may fluctuate throughout the year. Common operational costs associated with running a self-storage facility include:

  • Utilities
  • Wages
  • Facility maintenance
  • Taxes and insurance
  • Advertising and marketing
  • Other technology-related expenses

Many factors can influence self-storage business costs — the size and scale of the facility is the most prominent factor. As you can imagine, it's not easy to predict exact figures. However, obtaining a reliable estimate of ongoing operational costs helps mitigate the risks of investing in self-storage.

Using a Storage Unit Income Calculator

Using a storage unit income calculator can help you determine how much money you can make owning a storage facility. It does this by factoring in projected operational costs alongside the estimated self-storage business profits, occupancy rates, and other key metrics.

You could, of course, manually calculate the operational costs, but using an income calculator greatly reduces the risk of human error skewing the results. It eliminates the need to spend hours on calculations and is also handy for deepening your insight into potential business costs.

Armed with a full understanding of the expenses related to owning and operating your business, as well as an estimate of potential profits, business owners can confidently decide whether starting up a storage unit company is right for them.