One of the most attractive things about the self-storage industry is that it’s necessary in every market. In every town or city across the United States, there’s a need for self-storage. According to Sparefoot, approximately “11.1% of people across the US rent a self-storage unit.”
Today self-storage businesses are often new construction with thought given to the way people will use self-storage. Amenities like 24/7 access, security systems, lighting, and smart locks are more common. The self-storage business continues to grow and provide a steady return on investment.
As a business owner, there are always common mistakes that occur along the way. At Coastal Storage, we work with investors to avoid the common mistakes of the self-storage industry to ensure the success of our clients.
- Overlooking existing demand for planned demand
- Ignoring environmental factors
- Permitted land use
- Misunderstanding of accounts receivable
- Ignoring market competition
Overlooking existing demand for planned demand
It’s tempting to see new housing developments appear all over and think that planned housing equates to high demand for self-storage. While this thought process isn’t entirely incorrect, it’s necessary to consider that the current demand should drive development decisions. Can the current demand in a market support another self-storage business? Rather than basing decisions on the 10,000 homes projected in the next 3-5 years, base the decision on the current occupied homes. The current economic market is unpredictable, and it is unwise to develop based on projections alone if the current demand can’t sustain the project.
Ignoring environmental factors
Site selection is important for several reasons. One factor to assess is the prior use of the land. If a piece of land has a low price tag because it used to be toxic waste storage, it might not be the best place to consider building a new business. When researching locations for a self-storage site, it’s vital to know what the land was used for before now. It may be necessary to get government offices involved to test and determine if the land is suitable for frequent customer traffic or if contamination has occurred and is dangerous for a business. Avoid this costly mistake.
Permitted land use
Developers are excellent at locating land for projects, but a land use attorney will ensure that the land is permitted for self-storage. It is reckless and unwise to purchase land without knowing if self-storage is one of the permitted uses of the property. Currently in Florida, with some municipalities seeking to limit the number of self-storage businesses, it is wise to consult a land use attorney before proceeding with acquisition and development.
Misunderstanding accounts receivable
Accounts receivable is the money owed to a business as rent or other receivables for services rendered. Accounts receivable is money owed to a business currently. With many customers seeking contactless options for self-storage, accounts receivable should be around 3% for your business. Accepting credit cards as the preferred method of payment or only option for payment is helpful to keep accounts receivable at or below 3%.
Eviction scares many self-storage operators; however, the help of a self-storage attorney is invaluable when situations arise and eviction is warranted.
Ignoring market competition
It’s important to research market competitors before deciding on a purchase or development. Know the competition. Self-storage is a numbers game. How many self-storage businesses are located in the area divided by the number of people who live there will give information on the sustainability of another business. Contact the city planning department to learn if other entities are seeking permits in your area.
Keep in mind that occupancy over time is important, but so is the ability to raise rent when needed. If there are too many businesses located in a small vicinity, it becomes difficult to raise rent with too much competition.
Self-storage is a great investment. The industry remains strong despite tumultuous economic conditions. Our team of experts at Coastal Storage would love to work with you to add self-storage to your portfolio or to grow your investments with another location. Call us today at a904-591-0140 to find your next self-storage business.