Build Vs. Buy: Which Self-Storage Investment is Right For You?


There are a lot of things attractive about self-storage facilities. Financially, they’re one of the cheapest facilities to build with a high return on investment. For example, most self-storage facilities cost between $200,000-$500,000. These properties do well in a market that’s up and down. They’re loan friendly, because self-storage has a low rate of business failure.

Another very attractive feature of self-storage facilities is that there are a lot of options for loans. Qualifying for a commercial real estate loan in this niche isn’t as difficult as obtaining a loan in another niche. Let’s look into the pros and cons of buying a self-storage facility, and building a new one.

One of the most alluring factors of the self-storage industry is that you have a variety of ways you can become involved. There are two general ways that come to mind: buying an existing facility, or building a new facility. Each way has its perks and downsides, which is why it’s important to consider both.

Buying an existing self-storage facility predominantly gives the advantage of immediate cash flow. You won’t have to build your business from the ground up. There are a lot of “givens”, such as the current prices, expenses, and more. Being able to accurately predict and prepare for expenses is one of the key components of buying an existing self-storage facility. With that being said, it’s imperative to do a thorough pre-purchase inspection, much like you would with any other piece of real estate.

Like most properties and all real estate, self-storage facilities need to keep up their curb appeal. It’s curb appeal that attracts buyers or clients in the first place, because it’s the first impression of the facility. Often, renovation loans are an appropriate way to update the facility’s curb appeal.

Your facility needs to look like the things people store there will be taken care of, too. Especially because it’s likely people will store things of sentimental value there. Keep your clients walking through the door with a renovation loan that will help you boost the curb appeal of your facility. Updating and maintaining your facility’s curb appeal will not only allow your prices to be higher, but it’s basically advertising for your business. Potential patrons and clients would likely give their business to a facility that’s kept in tact, attractive, and well taken care of.

If you’re purchasing an existing facility, you need to keep in mind that you aren’t buying only the land. You’re also purchasing the tenants that come with the facility. That means there are a variety of customer issues you may be inheriting, contracts you’ll need to sort through, and gaps in your business you’ll need to explore.

While buying a facility in distress may seem like a great financial move, it’s important to realize you’ll be buying any internal issues the business may have had.

Buying or Building a New Facility

Buying or building a new facility has a certain allure to it, too. Everything is new, from the facility to the units. There aren’t any inherent maintenance issues to deal with while the facility likely features fresh security equipment and brand new internal procedures. The benefit, here, is that you can establish whatever precedents you’d like, and create operating procedures that suit you and your business. However, you are starting from scratch, which means there is no immediacy of cash flow.

It may take some time to break even, which is nerve wracking for any investor and business owner. There are project-cost risks that come alongside new facilities, such as building codes and unforeseen environmental hazards.

There are a few things to know if you are building a new self-storage facility. You must consider the location’s surrounding population, the daily traffic count which will help advertise your business, and the local median household income. Knowing what the local cost of self-storage is, too, will help you consider your competition and prospective location. This map, created by Life Storage, shows the average cost of both climate controlled and regular self-storage units around the country.

There’s no right or wrong answer, but by evaluating your opportunities and options, you’ll be able to find the right choice for you and your investment.


Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Leave a Comment


May the 4th Be with You: Star Wars Swag on Amazon

May the 4th Be With You: Star Wars Day Swag

It began as the punniest holiday ever but quickly grew into an earnest (if somewhat random) celebration of the long-running (and still... more →
People count the money to buy a house in future success.

Avoiding Mortgage Scams: Don’t Fall for Unreasonable Promises

If it sounds too good to be true, it probably is. That’s sound advice for almost all aspects of life, including the search for... more →
Eat for free for a whole month via the meal kit companies discounts for new customers.

How To Get a Month of Free Food: 9 Meal Kit Companies Offering Discounts to New Customers

Play your cards right and you might be able to line up a month’s worth of free meals if you were to try out all nine of the meal... more →
Generate extra cashflow -- here are 97 ways.

96 Awesome Ways to Generate Extra Cashflow

Who doesn’t want more money nowadays? We’ve got you covered on that front. Here comes a long list of different ideas on... more →
Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
Death Panels

Death Panels Phooey, Here Is How It Will Really Work

In 2009 Nancy Pelosi and Harry Reid performed the Healthcare Overhall Road Show to sell the very suspicious public, the Affordable... more →