Self-storage is a booming industry, with demand steadily climbing across the country. Whether you’re a seasoned investor or a first-time entrepreneur, entering this market can be a smart move. But before jumping in, you must face a crucial question: should you build your first self-storage facility from the ground up, or should you buy an existing one?
This blog will explore the advantages of self-storage, the pros and cons of each approach, and expert tips to guide your decision, ensuring you get the most value out of your investment.
The Benefits of Self-Storage
Self-storage has become a vital solution for individuals and businesses alike, offering unparalleled convenience and flexibility. For individuals, self-storage provides a secure space to keep belongings during life transitions, such as moving, downsizing, or renovating a home. Businesses, on the other hand, benefit from additional storage to manage excess inventory, seasonal equipment, or important documents without the need to invest in larger office spaces. Another advantage is the accessibility of units, with most facilities offering extended hours or 24/7 access.
Additionally, modern facilities often include features like climate control and advanced security systems, giving customers peace of mind that their valuables are well-protected. Overall, self-storage meets a growing demand for adaptable and cost-effective space solutions in today’s fast-paced world.
Common Uses of Self-Storage Facilities
Self-storage facilities cater to a variety of customers and needs:
• Personal storage: Individuals use self-storage units to store household items, seasonal decorations, furniture, and personal belongings during moves, renovations, or decluttering.
• Business storage: Small businesses and entrepreneurs often rent storage units for inventory, equipment, records, or seasonal stock to free up space in their primary workplace.
• Vehicle storage: Many facilities offer dedicated spaces for storing vehicles such as cars, motorcycles, boats, or RVs when they’re not in use.
• Temporary storage: Events such as relocating, downsizing, or dealing with estate sales often necessitate temporary storage solutions.
• Hobby and collectible storage: Enthusiasts store collectibles, tools, hobby supplies, or large equipment to keep their homes organized and free of clutter.
• Archiving: Individuals and businesses use storage units to archive important documents and files.
Knowing the common uses of self-storage facilities in your target market can help you tailor your facility’s features and marketing efforts to attract these customers.
Factors To Consider Before Deciding on Building or Buying
There are several key factors to consider before deciding whether to build or buy your first self-storage facility.
Initial Costs and Budget
Evaluate your budget and the upfront costs involved. Building from scratch may require significant investment in construction, permits, and planning, while purchasing an existing facility may involve a higher initial price.
Timeframe for Completion
Determine how quickly you want to see a return on your investment. Building a facility can take months or even years, while buying an existing one allows for near-immediate operation.
Facility Condition and Features
Inspect existing facilities for wear and tear, outdated features, and any necessary upgrades. For new builds, ensure you’re incorporating modern amenities and security systems to attract tenants.
Zoning and Regulations
Check local zoning laws and regulations. Building may require navigating permits or meeting land-use requirements, while purchasing an existing facility often avoids such hurdles.
Long-Term Profitability
Consider the long-term potential of your investment. Evaluate factors like market trends, maintenance costs, and the facility’s scalability to ensure sustainable profitability.
Pros and Cons of Building a Self-Storage Facility
If you’re thinking of building your own self-storage facility from the ground up, here are some things you should consider:
Pros
• Customization: You have full control over the design, layout, and features of the facility to meet your specific vision and market demand.
• Modern amenities: The opportunity to include updated features such as climate control, advanced security systems, and energy-efficient designs.
• Location advantage: You can choose a prime location based on market research to attract more customers.
• New infrastructure: Starting with new construction reduces the need for immediate major repairs or upgrades, lowering maintenance costs in the short term.
Cons
• High initial costs: Building a facility from scratch requires significant upfront investment, including construction, permits, and zoning compliance.
• Time-consuming: The process of planning, obtaining approvals, and completing construction can take considerable time before generating revenue.
• Market uncertainty: There’s a risk of overestimating demand in a chosen location, leading to prolonged vacancy rates.
• Potential delays: Construction projects are often subject to unforeseen delays due to weather, labor shortages, or supply chain issues.
Pros and Cons of Buying an Existing Self-Storage Facility
For those opting to purchase a pre-existing structure, there are still some important factors to account for:
Pros
• Immediate cash flow: Purchasing an existing facility often allows for immediate revenue generation, as the property is already operational and may have an established customer base.
• Reduced startup time: Since the facility is already functioning, there’s no need to invest time in construction or securing permits.
• Proven market demand: The occupancy rates and financial records of the facility can provide insight into market demand and the potential for successful operations.
• Easier financing: Lenders may view an established facility as less risky compared to new construction, making it easier to secure financing.
Cons
• Higher initial cost: The upfront cost of purchasing an established facility may be higher, especially for a well-performing property.
• Potential for hidden issues: Existing properties may come with deferred maintenance, outdated systems, or operational inefficiencies that require additional investment.
• Limited customization: The layout and features of the facility are pre-existing, which may limit opportunities to implement new designs or technology.
• Competition: If the facility is in a competitive market, it may require increased efforts in marketing and customer retention to maintain profitability.
Once you’ve addressed these questions, create a step-by-step action plan. Evaluate potential properties, connect with industry experts, and always leave room for adaptability as opportunities arise.
Finding Experts To Help You Build or Buy
Both building and buying require expert guidance to avoid common pitfalls. Here are ways to find the right support.
Real Estate Agents Specializing in Commercial Properties
Look for agents with experience in self-storage properties for insights into market trends and pricing.
Architects and Construction Teams
For those building new units, hiring architects and contractors familiar with storage facilities is critical for maximizing efficiency and adhering to regulations.
Consultants
Self-storage consultants can help you streamline operations, evaluate business plans, and avoid costly mistakes during the decision-making process.
Legal Advisers
Enlist a lawyer to review all zoning laws and real estate contracts.
Experienced Investors
Join self-storage forums or LinkedIn groups to connect with seasoned investors who can share valuable real-world advice.
Build or Buy: Make the Choice That Works for You
Building and buying both have their unique benefits and challenges. With a new building, you get flexibility, higher control, and modernization opportunities, while buying a used one provides quick cash flow and established operations. At the end of the day, whether you should build or buy your first self-storage facility will depend on factors like your budget, goals, and risk tolerance.
Getting into the self-storage industry is a smart move, but be prepared first. If you’re looking for self-storage consulting services you can depend on, the experts at Box Pro are here to help. See how our team can help you make the right decisions from the start!