self storage facilities - Posted by Jared

Posted by JT-IN on October 19, 2006 at 09:15:00:

RC:

The self storage business, like many businesses, is one that implements the economy of scale principle. I suppose if you had 500 units, you could and would need help with this business. At 100-200 units, there is little need for outside help, and if you use outside help at that size, there goes the neighborhood… (No profit). You are simply collecting rents and fees to then pay overhead.

I did have another retail business, located appx 5 miles from the storage facility, and the idea was to have that business field calls and handle contract/leases. The only problem was that by the time the storage was open and running, I had sold the other business… which left me plenty of time to handle storage rent-up.

All in all, it worked out well for us. However, there are many other (better) ways to make $$$ in the RE biz, which I wasn’t privy to at that time. Hence, I wouldn’t consider the self storage approach today, for me. That doesn’t make a bad idea, if it fits into one’s repoitore, then it can be a good thing. It is simply not a passive investment, but an active business operation.

Self storage business’s work best for land banking… Let’s say that one owns a comm’l property in a fringe area, that in todays mkt has x amount of value. The property owner adds storage units to the property to create income. The net income provides a reasonable cash on cash return on the underlying investment, which would otherwise be raw land, and have NO yield. Fast forward 10 or 20 years down the raod, and what was once fringe property is now prime real estate. The ultimate underlying vlaue eventually becomes worth more than the income stream from the storage units. Of course the seller may also get a higher price for the property at the time of sale, since it also has an income that they are losing, hence compensation for loss of the income… Not that the buyer will maintain any of that income, but it is a factor in determining value to the seller, and drives the price of the ultimate sale price, as opposed to vacant land with NO income.
Hope this helps the view of self storage.

Just the way that I view things…

JT-IN

self storage facilities - Posted by Jared

Posted by Jared on October 18, 2006 at 18:43:23:

Does anyone have any experience in mini self storage facilities? I am looking into it and am looking for someone with experience in it. Thanks

Re: self storage facilities - Posted by JT-IN

Posted by JT-IN on October 18, 2006 at 21:46:44:

Jared:

Yes, I have experience… I built one from scratch back in 1991-92… Had 100 units on 2 acs of land… with room to add another 200-250 units.

What I learned was it is NOT a passive investment activity, but a business, run with customers, and you actively must be near the phone and ready to meet potential clients. This is much more of an impulse buy than I would have guessed. Folks wake up in the morning and decide that day they are going to need the storage unit, and expect to get it NOW> If you aren’t available, they go to your competitor… simple as that.

I sold my units after filling them up and operating it for a couple of years. Made money on the deal… Would I do it again…? No. Is the guy doing well that bought mine…? Yes, he has added at least 150 more units, and assuming that he has a decent occupancy level, he is doing well. He runs them right.

What I would suggest is to contact Trachte Bldg Systems. They manufacture metal, modular storage buildings, and that is all they do… Their approach makes the most sense of any options available, IMO. They offer site planning, engineering, business insite, and can assist with your analysis of whether this works for you or not. I fortuantely had talked to an operator who had used their buildings for his facility, and I ended up using them for mine. The cost savings was tremendous and service was very good. If you can find better, so be it, but that was my experience with Trachte. You can access them on the web at:

http://www.trachte.com/

JT-IN

Re: self storage facilities - Posted by RC

Posted by RC on October 19, 2006 at 07:51:51:

Did you operate the business all by yourself or did you hire an employee?

I have been talking to an owner of a facility this week and it sounds like an active business activity.