Do you want to hire storage units and you are wondering if owning storage units are profitable or a total waste of money? If YES, here is everything you need to know. No real estate venture offers an easier way for entry-level investors to get into the game than a self-storage facility. This is because operating a self-storage facility is easier, safer, and more profitable than many other start-up businesses.
As of March 2020, the average annual revenue for the self-storage industry was $39 billion, with 9.4 percent of all households renting a storage space. There is a demand for storage space, which will likely grow as generations transition to their next stage of life.
For many real estate investors, self-storage is an enticing asset class because it has large income potential with low overhead, fewer construction costs than other commercial real estates (CRE) sectors, and relatively low ongoing management.
A small to mid-size self-storage business can be nearly self-sufficient, requiring only part-time management. In addition, since tenants do not reside on the property, there is less emotional equity and fewer building components that can go wrong. Leases are month to month, allowing owners to capture rental rate increases faster.
According to reports, independent operators own a whopping 75 percent of all self-storage businesses. However, many self-storage franchise opportunities also exist. In a franchise operation, the company handles the marketing. That exempts the owner of one major responsibility. But on the down side, the franchise company also requires royalties for the use of their name and system.
Finally, unlike residential real estate ventures, well-built steel self-storage facilities demand very little upkeep and maintenance. Naturally, no business promises a risk-free ride, but with self-storage, the odds are in your favor. According to reports, mini warehouse businesses reap an average 11 percent profit margin.
Note that Americans’ reluctance to jettison their stuff is legendary. Consequently, the self-storage market continues to grow at an astounding rate. The self-storage business is practically recession-proof and according to the SSA, 85 million Americans now rent storage space.
USA Today says 14 percent of all Americans move each year. Many movers rent extra space to store the overflow and experts expect the self-storage market to enjoy a 5 percent per year growth rate through at least 2023.
Table of Content
- Are Storage Units a Waste of Money?
- Why Storage Units Are A Waste Of Money For Most People
Are Storage Units a Waste of Money?
The biggest downside to renting a storage unit is that you are throwing away money on stuff that isn’t contributing to your life in any positive way. According to reports, storage units can range from $60 to $225 per month, depending on the size, location, and other features.
If you spent $100 each month on a storage unit, that’s $1,200 a year. Howbeit, if you invest that money and earn 6 percent interest rather than spending $100 on a storage unit, at the end of 10 years, you’d have a significant savings account of $16,247.34.
Why Storage Units Are A Waste Of Money For Most People
A good number of people rent or buy storage units because they have too many items in their homes. Unfortunately, the first items that get boxed up to go into storage are the unnecessary, rarely used items. There is a good probability that you have a lot of unneeded clutter and are storing items you will never use again. Therefore, you are more or less paying to store useless items and you are better off selling them.
Storage units might be hard to break into, but that doesn’t mean it doesn’t happen. Have it in mind that a good number of people store incredibly valuable items in storage units. Most storage companies claim that they are not liable for items that are stolen or lost. If your storage unit is broken into and your items were stolen, you lose out on that money.
When You Can Store With a Friend or Family Member
Indeed, storing your items with a friend or family member only works if you actually have a friend or family member who’ll concur to storing your items. If you do, this doesn’t entail that you should overdo it and store everything there. But if you need temporary storage for a couple of months, see if they’ll take some boxes or furniture. You will end up storing for free than paying costly monthly fees.
Depending on where you rent, you could face increasing fees each month or year. Note that some companies have a “special” deal when you first start renting but will increase fees as more time passes. Some other companies also charge more if you are only renting for a short time period. Even if you shop around at decent rates, be careful of how much extra you might be charged after the fact. Always read the contract to look for hidden fee increases.
Replacing Items is Less Expensive
If, for instance, you are storing furniture or appliances for a long period of time (because of traveling, deployment, or college, for instance), it might be cheaper to just sell those items and buy them again when you need them. Note that the fees you pay for long term storage will probably be more than what the item is really worth. Before you rent a storage unit, look over your items and calculate their worth.
Losing Your Items if You Miss a Payment
Owing to the recent reality shows about storage units, most people now know that if you miss a payment, you are prone to lose all your items. Note that storage companies can make a lot of money from selling items in your storage unit. Most interestingly, they are not lenient about missing or late payments.
You are usually granted a very small time period to pay back the money. You don’t want to risk losing your items, do you? Even if you are only storing clutter, you are still losing out if your items end up in someone else’s hands.
Storage units that claim that they are not liable for the stolen property are more or less the same companies that won’t compensate you for weather damage. If you end up renting a storage unit that has mold or water damage, your property will be ruined, and therefore useless. These weather hazards are most times concealed when you are first shown the unit, so you might not even know they exist.
The reason most people choose to rent a storage unit is that they no longer have space in their homes. If you are moving to a smaller house or apartment, your aim should be on actually downsizing your belongings, not storing them away. If you don’t have room in your new home, why pay for a storage unit? If your true goal is downsizing, there won’t be any further need to waste money by putting things in storage.
Unless you have an extremely large amount of items to store, you are definitely going to be wasting space. Note that one of the easiest ways for storage companies to make money is by renting large units to people who don’t maximize the space. If you have only a few pieces of furniture, then consider all that empty space in your storage unit that you are still paying for. Don’t pay for the space you are not using.
Not Maximizing Space in Your Home
There is probably space in your home you are not using that could be used for storage. So instead of paying exorbitant rates for a storage unit, you can decide to get creative with storing items at home. You can build shelves on your walls or in your closets. Store things under your bed, or buy furniture that doubles as a storage unit. With a little ingenuity, you can find some new places to store your items.