12 Ways to Make SERIOUS Money in Self Storage
No doubt about it… Owning a self-storage facility is awesome!
The income is steady and if you run your facility right you should have plenty of tenants.
To us, owning self-storage facilities sure beats wholesaling or fixing and flipping single-family houses, where you have to find the off-market properties and then either have to find a buyer really fast to earn your fee as a wholesaler or rehab the property and find work very hard to earn a profit as a flipper.
In either scenario, you’ve bought yourself a job, because you have to keep finding and flipping properties to earn an income. While the checks can be good, each deal is a one-time hit before you’re off to the races again to repeat the process.
While we certainly understand other forms of investing and have done other types of deals ourselves, self-storage is our absolute favorite cashflow-creation play. Heck, it even beats buying traditional rental properties… including those in the multifamily space!
So why are we telling you this?
Because we want you to educate yourself on all options in investing in real estate… not just traditional housing paths.
Did you know that self-storage has been around for literally thousands of years?
When we were doing our research, we learned that people in China were doing it as far back as 6,000 years ago… but in the United States we didn’t get a clue that self-storage is a really great thing to offer till the 1960s!
If that historical fact isn’t interesting enough, let’s talk numbers.
Self-storage happens to be one of the highest-yielding investments in real estate you can make.
- ¥ There aren’t typically a lot of repair costs if you keep your facility in good working order (a.k.a., take the regular maintenance seriously);
- ¥ Solid returns are proven in both an up or down economy (because self-storage will always be needed when people move, divorce or downsize); and
- ¥ Collections are pretty darned easy if you think about it. After all, if a renter doesn’t pay, you lock them out and can auction their belongings if they never pay.
But those are just basic facts that you may already know. Truth is that there are lots of ways to earn income owning a self-storage facility, including the following:
- Charge Rents –We know this one is obvious, but we had to add it to our list because you can earn serious cashflow month after month renting out your storage units. There are different sizes of units, which means you can charge more for the larger units. Just like a 3-bedroom apartment commands much higher rent than a studio apartment ever will, when it comes to self-storage, you earn more as the square footage goes up.
You can also consider the door type when calculating rents. For example, let’s say you have two units and each offer the same square footage. One has a standard entry door (that opens inward and eats valuable storage space) and the other has a roll-up door. Which unit do you think you could charge more for?
- Offer Tenant Insurance–Some of your renters will have great insurance policies that actually extend to cover the stuff being stored in their self-storage unit, but moreover they won’t. However, their stuff needs to be covered by some sort of renter’s insurance policy. That way if damage were to occur to their belongings due to a leak or some other unexpected event they’re covered. So why not offer them that insurance for an extra $10 or $15 a month? As the owner of the facility you can offer your renters that peace of mind… and they won’t mind paying a little extra for the coverage.
- Hold Auctions–This is really more a means by which you get to recoup loss of rent (PLUS late fees and other related charges) that result from tenants who stop paying rent. However, it is not a means by which you get to profit right off the bat. If you’ve given the tenant ample time in accordance with his/her contract and he/she still hasn’t paid for the storage space, you can auction the contents of that storage unit off to the highest bidders. There’s nothing like a good old-fashioned storage auction. But you don’t get to keep all the money. That’s the part of Storage Warspeople don’t talk about. You get to keep only the money from the sale that covers the renter’s arrears (plus all the late fees). If, however, the tenant doesn’t show up within a specified time frame to claim his/her portion of the earnings you are allowed to keep the rest. Just note that auctioning rules are governed by the city and state in which the property resides.
- Create Auxiliary Sales Opportunities–Now that you’ve rented a few of your storage units, perhaps your tenants could use some extras that would make their move-in and storage experience better. Why not offer locks, boxes, tape, permanent markers and other items they can use? You can buy these items in bulk wholesale and sell them to renters at full retail. In fact, some storage facilities insist that renters purchase special locks for units that are only available on site at the storage facility. This ensures uniformity in the look of your facility, and it ensures that tenants will be a bit more responsible when it comes to locking up their units each visit.
- Partner with U-Haul–Okay, it doesn’t have to be U-Haul, but that’s the first rental company that comes to mind when thinking of DIY moving and hauling. By partnering with one of these companies, you add convenience to your tenants’ lives, plus make a little extra income by renting moving vehicles and trailers. Your facility will be convenient and top of mind when it comes time for passersby to move. They’ll see that you have trucks and vans available, and that you have a nice, clean storage facility. That’s what we call a win-win.
- Create Vehicle Storage–We can’t stress this one enough. Too many times we’ve walked storage facilities that have a whole lot of extra land and the owners are doing nothing with it. With today’s Baby Boomers hitting the road in greater numbers than ever before, would it really surprise you to think they might need a place to store their RVs, boats, trailers or extra cars when there is either not enough room in their driveway? Or how about people that live in an HOA-governed community with stringent parking restrictions? There are also businesses that need to park their semi trucks, tractors, construction vehicles and food trucks (yep, we’ve got them all!)
If you consider that the average rent for an RV space or marina slip can run upwards of $300 a month… we’ll let you do the math. Bottom line is that if you can put a strong fence and cameras around the parking lot, you can make a really good extra income stream renting out all that extra land!
- Add Vending Machines–This one doesn’t only apply to storage facilities; vending machines are an excellent addition to any business where you have the space and foot traffic. You don’t have to pay full price for a brand new vending machine either! There are plenty online for less than half the price of a new one. For example, browse Craigslist. Some of the sellers will even deliver the machine to your location for an additional fee.
There are different types of vending machines, so make sure to at minimum buy one for soda and water, and another for snacks. It’s an excellent idea to also have a gumball or loose candy vending machine for the kids… and another for stickers and/or little toys. Stocking them takes little upfront cost; once again, buy wholesale and sell retail. In this case you can sell higher than retail, because people will pay more for candy and soda from a vending machine than they would anywhere else. Just make sure to find yourself a good maintenance person to service all your machines.
- Rent Billboard Space–If you have the room on your street-facing walls or on top of your building(s) or at the front of your property, and you are allowed to sell the ad space in the form of signs and billboards, go for it. What you charge is up to you, but be reasonable. There are lots of little caveats you will want to know – and of course you’ll need to stay compliant with local laws.
- Add a Cell Phone Tower–Hey, don’t laugh. You can place a cell tower on top of your building(s). Cell phone service providers are always looking to expand their coverage. There are forms and processes involved that can make you tear your hair out, but it is possible that you can get a cell tower placed on your property and receive a good-sized check every month from the service providers. Do your research; contact the different companies… even the little guys.
- Offer Mail Boxes–It’s great to have a real street address when you’re between homes or running a business. A lot of your tenants may be in transition, so why not offer them the street address by having a number of postal boxes? If you don’t want to run that business, there are plenty of people who would. You can let someone set up his/her postal business on your location. That type of partnership can only benefit you both. Plus, the business owner has to pay you rent; you are his/her landlord.
- Offer Business Spaces–Maybe a post office box service isn’t the only business you can create on site to service entrepreneurs and small business owners. Maybe someone out there needs space to run his/her eBay business or other small business that require storing inventory. Use your imagination. For example, do you know anyone who creates gift baskets and could run their business out of a designated space in your location?
- Add a Small Business Center–If you have great WIFI, why not set up a small business center in the corner of your front area, for example, in the front office near the registration desk? You can create a small yet effective workspace for those who need to check their email, do a little business on the go, use your printer or fax machine, etc. Just like in hotels, there is always a need for on-the-go business centers. Why not add that convenience for your tenants and earn a little extra income at the same time? (You bill by the page for printing and faxing, and by the minute for computer time.)
These 12 ways to earn extra money in self-storage were off the tops of our heads. There are more ways, but we’ll save those for another helpful article. (At least we hope you found this helpful.)
The long and short of this tale is that if you’re looking into other types of investing and hadn’t really ever considered owning a self-storage facility, you might want to start. This article gives your 12 good reasons why it’s a great idea!
This article courtesy of By Terri Garner and Alia Ottof Investors in Action. www.investorsinaction.com