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Financing Self Storage Investments

BANKS LOVE IT

With a 93% success rate for new startups, it is no wonder why banks love self-storage investment. Currently, in many instances, banks are loaning investors as much as 90% on these types of projects.

IN DEMAND

The demand by consumers for self-storage is growing exponentially. It is estimated that by year 2025, all single family dwellings will have some form of satellite storage.  The commercial consumer demand is equally great.  All types of businesses require storage for inventory, documents, etc.  The industry is seeing the biggest increase in commercial demand with climate control self-storage.

ADVANTAGEOUS COST OF DEVELOPMENT

As for real estate investment, the cost of development for self-storage facilities is advantageously low.  Prices for land/site location obviously vary.  However, concrete for building foundation and drive space, building materials, and erection labor will cost between $12 - $17 per square foot.  That is turnkey construction.  Development costs for other variables, i.e., HVAC for climate control facilities, security, kiosk, electrical, etc., will increase investment amount by 15% - 30%.

NOMINAL OPERATING OVERHEAD

In addition to low development costs, so are the costs related to the operation of a self-storage facility.  The days of full time onsite managers are becoming a thing of the past.  Smart facility owners are employing full service electronic kiosks.  These allow customers 24/7 convenience to rent a storage unit, access their property, and pay a bill.  Furthermore, the kiosks enable the facility owner to control and track entry while providing customers a most user friendly experience.  Keep in mind, this is achieved without the cost of a full time onsite manager.

AMAZING RETURN ON INVESTMENT

Return on investment is best demonstrated with an example of a common start up scenario.  The following projections are averaged based on recent actual new start-ups with comparable market conditions.  Example:  A 10,000 rent-able square foot regular dry storage facility.  Three buildings:  
(2) 25’ x 125’ buildings and (1) 30’ x 125’ building with varying sizes of popular storage units.  Keep in mind, a facility of this size would require approximately one half acre of land.  Total cost for development is $198,000 (cost for land/site location not included).  Total revenue for first three years is $180,280.  Virtual ROI in just 39 months.

(More lucrative configurations, i.e., climate control self-storage)