Thread: Investing in Storage Units

How about PODS.

I don't think your money will increase while sitting in a storage unit. That's the same idea as keeping your money under your mattress. Might as well put it in a 5% savings account rather than leaving it sitting in some storage unit.

Originally Posted by Show-me

How about PODS.

PODS or storage containers are also a big business. I don’t use them because they don’t appreciate in value like a regular steel building. I have seen storage containers placed next to each other to create a storage complex. They normally come in sixes of 8X20 or 8X40. If an investor was considering starting a storage business in an area where there was not one, thus he would not know the vacancy rate or market, he could obtain a few storage containers and rent them out to test the water. Around here a 8X20 runs for $1000 and up depending on the age/condition, the closer one is to a port, the lower the price generally.

Originally Posted by VirginiaBob

I don't think your money will increase while sitting in a storage unit. That's the same idea as keeping your money under your mattress. Might as well put it in a 5% savings account rather than leaving it sitting in some storage unit.

Bob,
That is funny but sad at the same time. A storage business can pay for itself in as little as 3 years if everything falls into place. Some renters actually store money in the units, like jars of coins. One unit that we auctioned off this year had several old coins located in it. One bidder told me that at another auction she won a bid of $10 for a unit that had a jar containing over $30 worth of coins.

Just to give you an idea of what kind of money we are talking about, lets say that a storage complex has 100 units and the average unit rents for $100 per month. Thats $10,000 each month or $120,000 a year.

The main reasons that I like the storage business over other rental property are:

No toilets to unstop.

No leaky faucets.

No complaints about wild parties going on, or loud music.

No evictions, if they don’t pay, their stuff gets auctioned off per state law.

No or very little utilities, maybe a security light.

Taxes and insurance are lower.

No broken windows to replace.

Metal on steel buildings is warranted for 35+ years so there is no painting.

But keep in mind that this isn't the be-all end-all of investments. The market that I am in is saturated with storage units (military town) businesses, and due to this I see many storage unit yards closing and going out of business. In short, if thier aren't many other storage unit businesses around you, houses in your area aren't typically equipped with thier own storage (such as being in high water areas without basements) and it seems that the demand would be high, it might be a good business to start.

Originally Posted by VirginiaBob

But keep in mind that this isn't the be-all end-all of investments. The market that I am in is saturated with storage units (military town) businesses, and due to this I see many storage unit yards closing and going out of business. In short, if thier aren't many other storage unit businesses around you, houses in your area aren't typically equipped with thier own storage (such as being in high water areas without basements) and it seems that the demand would be high, it might be a good business to start.

VB, No investment is all that it can be. It is up to the individual to make that decision and determination before starting off an investment venture. What you pointed out are some things that must be taken into consideration prior to opening this business. This is called due dilligence. You do have good points and it is definitely something to be aware about...;-)

Originally Posted by VirginiaBob

But keep in mind that this isn't the be-all end-all of investments. The market that I am in is saturated with storage units (military town) businesses, and due to this I see many storage unit yards closing and going out of business. In short, if thier aren't many other storage unit businesses around you, houses in your area aren't typically equipped with thier own storage (such as being in high water areas without basements) and it seems that the demand would be high, it might be a good business to start.

VirginaBob,
storage units, like real estate is a regional or even a local thing. The real estate market here is still hot as well as the demand for storage units, just rented another one out yesterday. Military base communities, from my observations, are crowded with 18 to 25 year olds who haven’t accumulated very much belongings that would require storage. The types of business that I have seen flourish around these areas are fast food restaurants, pawn shops, used car lots that sell those “Fast and Furious” cars, etc. One of the sayings that I like is. “If life hands you a lemon, make lemonade out of it.” If someone had a storage complex in an area that was not preforming well he could make a few changes; I’ve seen units turned into small offices, into traders markets (flea markets), if it has good highway frontage, one could take the units down next to the highway and put in consignment car sales. The possibilities are endless.

In the small town that we have are units in there are 3 other complexes. I personally know owners of two of them and I know that they are full and have no vacancy. If I didn’t know any of the owners, I could have just picked up the phone and asked if they had a large unit for rent, if they did I would get the sizes and rates then says something like that sounds like too much money, and ask them how much are the smaller units. Of course if they are full, they should tell you that there is no vacancy at the present time and offer to place you on a waiting list. Sometimes I have seen “No Vacancy” signs in front of these places.

I have a relative in Houston that just retired and bought a class A motor home(RV). He had sold his 3/2 house and downsized to a town house and didn’t have anywhere to park the RV. He had a difficult time finding a fully enclosed unit to accommodate his RV. He called every storage complex in Houston, a city of over 4 million, and none of them had a storage unit big enough(a 12'w X 40'l X 14'h). He finally found one several miles away in a suburb, I think he said it cost him $225 a month. With more baby boomers retiring in the next few years, this is an area that I’m looking into. Some complexes have open storage or even a shed that is open on one side that they rent out for these RVs.

Originally Posted by pyriel

VB, No investment is all that it can be. It is up to the individual to make that decision and determination before starting off an investment venture. What you pointed out are some things that must be taken into consideration prior to opening this business. This is called due dilligence. You do have good points and it is definitely something to be aware about...;-)

Pyriel,
Have you seen storage complexes is other countries like we have in the US?

"Military base communities, from my observations, are crowded with 18 to 25 year olds who haven’t accumulated very much belongings that would require storage. The types of business that I have seen flourish around these areas are fast food restaurants, pawn shops, used car lots that sell those “Fast and Furious” cars, etc."

Hehehe, the funny this is that that is an exact description of my community.

Gilligan,

Here are some generalized strategies you might find useful.

First focus on properties that are distressed (brownfields for example). What you want is a property that has some environmental liability that you can use to devalue the property and negotiate a better purchase price. The contamination must be fairly limited and any remediation can be achieved through encapsulation and bioremediation (aka natural attenuation). Avoid properties contaminated with heavy metals (lead, arsenic etc) and asbestos since these will not attenuate in-situ. The advantage to self storage in this scenario is that only one or two people will be working at the site in an administrative setting (no exposure to the contamination since the whole property will be paved - no pathway), so EPA and state equivalents are more willing to negotiate a natural attenuation remediation solution. Other then the initial evaluation, there is no cost as opposed to mechanical or chemical remediation, but you can use the remediation costs as a negotation tool during the purchase (don't let the seller know you intentions). Use a reliable environmental consultant - don't try and make these decisions yourself. Depending on your state, you may be able to recoup all of the environmental consulting costs and get some excellent tax breaks by redeveloping a brownfield property.

The second factor is geographic location relative to future growth. Look at conceptual plans of the department of transportation, hospitals, airports, universities, shopping malls, etc. Your looking for property that some large governement or quasi-government agency will have to purchase in order to accomodate future growth. Future highway ramps are great for this. You want something that is just outside restrictive urban develoopment codes. Since the property will be generating income, it helps to protect/compensate you from eminent domain.

Now you have a property that has the right zoning and can sit for twenty years generating an income while you depreciate the structures (which require minimal maintenance as you mentioned). A piece of property that is already fully developed and can be redeveloped inexpensively (low demo costs) is very attractive to future buyers because they will often be able to avoid the restrictive development codes (open space requirements, stormwater etc...) that come hand in hand with building in areas of urban sprawl.

Originally Posted by Griffin

Gilligan,

Here are some generalized strategies you might find useful.

First focus on properties that are distressed (brownfields for example). What you want is a property that has some environmental liability that you can use to devalue the property and negotiate a better purchase price. The contamination must be fairly limited and any remediation can be achieved through encapsulation and bioremediation (aka natural attenuation). Avoid properties contaminated with heavy metals (lead, arsenic etc) and asbestos since these will not attenuate in-situ. The advantage to self storage in this scenario is that only one or two people will be working at the site in an administrative setting (no exposure to the contamination since the whole property will be paved - no pathway), so EPA and state equivalents are more willing to negotiate a natural attenuation remediation solution. Other then the initial evaluation, there is no cost as opposed to mechanical or chemical remediation, but you can use the remediation costs as a negotation tool during the purchase (don't let the seller know you intentions). Use a reliable environmental consultant - don't try and make these decisions yourself. Depending on your state, you may be able to recoup all of the environmental consulting costs and get some excellent tax breaks by redeveloping a brownfield property.

The second factor is geographic location relative to future growth. Look at conceptual plans of the department of transportation, hospitals, airports, universities, shopping malls, etc. Your looking for property that some large governement or quasi-government agency will have to purchase in order to accomodate future growth. Future highway ramps are great for this. You want something that is just outside restrictive urban develoopment codes. Since the property will be generating income, it helps to protect/compensate you from eminent domain.

Now you have a property that has the right zoning and can sit for twenty years generating an income while you depreciate the structures (which require minimal maintenance as you mentioned). A piece of property that is already fully developed and can be redeveloped inexpensively (low demo costs) is very attractive to future buyers because they will often be able to avoid the restrictive development codes (open space requirements, stormwater etc...) that come hand in hand with building in areas of urban sprawl.

Griffin,
thats a good tip about finding places in the line of urban sprawl. They say the 3 most important things when starting a business is location, location and location. About 70% of the population in the U.S. lives on 2% of the land. That 2% appreciates faster than the other 98%.

Storage complexes are most successful next to a main highway near high dense residential areas like townhouses, condos, apartments, mobile home parks, subdivisions with restrictions against storage buildings.

As far as contaminated property, I would be very careful. Yesterday a coworker and I were discussing a case he took to the EPA due to chemicals being dumped into a creek and several of the area kids coming down with cancer. Now I wouldn’t mind buying an old gas station and removing the underground metal tanks. One storage complex that I helped construct was built on the site of a restaurant that burned to the ground. We got that land for pennies on the dollar, rented a 40 yard roll off dumpster to clean up the mess. That storage complex is currently 100% full.

Gilligan

Exactly, do NOT buy a future superfund site - avoid any exoctic contaminants, but petroleum is what you want and is the most common. A gas station is a perfect example. I dealt with hundreds of underground storage tank removals and I have only seen a few that didn't leak. Have a quick investigation done, consult your local DNR and see if they will except a no pathway natural attenuation model. Then, you get a mechanical clean up cost (standard hog and haul to your local dirt oven) take that estimate to the seller.

When I did this type of work for a commercial developer we had a whole section that did nothing but self storage for redevelopment. There is definitely long term money in this, but it takes a lot of cash up front. We didn't just focus on property to turn over, we often looked for property that would eventually be converted to strip malls or office space, but that takes a generational approach and the owner came from old money and has his great grand children in mind.

Originally Posted by Gilligan

As far as contaminated property, I would be very careful. Yesterday a coworker and I were discussing a case he took to the EPA due to chemicals being dumped into a creek and several of the area kids coming down with cancer. Now I wouldn’t mind buying an old gas station and removing the underground metal tanks. One storage complex that I helped construct was built on the site of a restaurant that burned to the ground. We got that land for pennies on the dollar, rented a 40 yard roll off dumpster to clean up the mess. That storage complex is currently 100% full.

Gilligan