Are Storage Units a Good Investment? Pros And Cons

Written by Peter Keszegh

Have you ever wished you had a magic closet to store all your extra stuff? Maybe it's seasonal decorations, old sporting equipment, or simply boxes taking over after a move. While not quite magic, storage units offer a practical solution. 

But are storage units a good investment? Beyond being a haven for clutter, they could be a smart way to diversify your holdings. 

If you're looking for unique investment potential, storage units might be worth considering. Let's explore the reasons why they could be a savvy addition to your portfolio. 

Are Storage Units a Good Investment

10 pros of investing in storage units

Thinking of getting into real estate investing? Storage units might not be the first thing that comes to mind, but they offer some cool perks – let's take a look.

Convenience

Think about it: one of the best things about storage units is that your tenants can grab their stuff whenever they want. This makes your units super appealing to all kinds of people – folks decluttering, businesses with extra stuff, anyone needing a flexible storage option.

  1. 1
    No storage headaches: Need something ASAP while moving? No sweat! Tenants won't struggle to access their belongings. 
  2. 2
    Late-night access: Offering 24/7 hours or extended hours makes your units a lifesaver for those working on a tight schedule.
  3. 3
    Happy tenants = reliable income: The easier you make it for people to use your facility, the more likely they are to pick your place (and keep paying rent!).

When figuring out if storage units are a good investment, remember that it's not just about you. By making things super convenient for your tenants, you're practically setting yourself up for long-term success. 

Security

Let's be honest, when people rent a storage unit, they're trusting you to keep their belongings safe. That's why investing in solid security is a big part of making your storage business a success.

Good security isn't just about keeping things from getting stolen – it brings peace of mind to your tenants, and that translates into loyalty. 

Modern storage facilities go above and beyond to protect tenant property. Here's what you might find:

  1. 1
    Gated access with personalized codes: Keeps out unwanted visitors and lets you track who's coming and going.
  2. 2
    Security cameras galore: These aren't just for catching trouble, they act as a great deterrent in the first place. 
  3. 3
    Bright lighting: A well-lit facility is way less appealing to thieves.  
  4. 4
    On-site managers: Having someone around can provide an extra layer of vigilance. 

By creating a secure environment, people will feel way more comfortable renting from you. This sense of safety is a huge plus when deciding if storage units are a good investment. You'll attract more tenants and have fewer concerns about break-ins or damage. 

Flexibility

One of the coolest things about investing in storage units is that you're not stuck with a one-size-fits-all situation. You can tailor your facility to meet a whole range of needs, which opens doors to way more potential customers.

Here's where flexibility comes into play:

  1. 1
    Sizes for every situation: From tiny lockers to units big enough to park a car in, you can diversify your offerings.
  2. 2
    Climate-controlled options: These protect belongings from humidity and extreme temperatures, making them perfect for antiques, documents, or sensitive items.
  3. 3
    Drive-up or inside access: Cater to different tenant preferences with choices for how they load and unload their stuff.

This flexibility helps you attract a wider range of clients. Maybe someone's just downsizing their apartment and needs a small unit temporarily, or a business needs long-term, climate-controlled storage for inventory. By having options, you'll rarely find yourself turning people away due to a lack of suitable space.

Thinking about whether storage units are a good investment? The ability to customize your facility and serve all kinds of tenants makes them a surprisingly adaptable business! 

Potential for passive income

Potential for passive income

One of the biggest draws of storage unit investing is the potential for passive income. Think about it: once your facility is up and running, the day-to-day operations are pretty low-maintenance.

With a solid management plan (or by hiring a management company), you could be earning consistent income without a ton of active work.

Here's how it breaks down:

  1. 1
    Monthly rentals: Most storage facilities operate on a month-to-month lease. That means reliable, recurring income flowing in.
  2. 2
    Minimal upkeep: Unlike apartments, there's no fixing leaky faucets or repainting walls between tenants. 
  3. 3
    Potential for automation: Technology can streamline things like online rentals, payments, and even gate access.

Of course, no investment is truly "set it and forget it". You'll still need to handle marketing, occasional maintenance, and tenant issues. But compared to many other real estate investments, storage units offer a great opportunity to let your money work for you.

If the idea of an investment that could provide income without demanding every hour of your day sounds appealing, figuring out whether storage units are a good investment might be worth your time!

Low maintenance costs

Compared to other real estate investments, storage units are a breeze when it comes to upkeep. This means more money in your pocket! Let's break down why they're so low-maintenance:

  1. 1
    Simple structures: Storage units are essentially just boxes. No fancy plumbing, complex electrical work, or regular repainting is needed.
  2. 2
    Short-term leases: Most tenants rent on a month-to-month basis. That means less hassle (and cost) when dealing with turnover.
  3. 3
    Minimal amenities: You won't need to budget for a gym, pool, or fancy landscaping like you might with an apartment building.
  4. 4
    Primed for tech: Online rentals and automated features reduce the need for staff, further lowering upkeep costs.

Of course, some maintenance is always needed. You'll have repairs, basic upkeep, and security, but overall the costs are significantly lower than other types of property. When deciding if storage units are a good investment, remember that lower overhead means a bigger chunk of that rental income goes straight to you! 

High return on investment (ROI)

When it comes down to it, a good investment is all about the potential return.  And storage units can seriously deliver in this department! Due to a combination of factors, they offer the potential for a substantial return on your initial investment. 

Here's why storage unit ROI could make you do a double-take:

  1. 1
    Steady rental income: With month-to-month leases, you have a consistent flow of revenue coming in. 
  2. 2
    Low overhead costs: We've talked about how maintenance costs are less intense, leaving more profit in your hands.
  3. 3
    Potential for price increases: If demand in your area is high, you might be able to gradually increase rental rates.

While specific numbers vary, experienced investors often see impressive returns on their storage unit investments. Of course, location, management, and market conditions all play a role. 

If you're considering investing in storage units, the potential for high ROI is absolutely one of the most compelling factors.

Recession resistance

Recession resistance

Nobody wants their investments to tank during a recession. The good news is, storage units hold their own surprisingly well, even when the economy is shaky. Here's why they're more resilient than you might think:

  1. 1
    Life events don't stop: Even in tough times, people still get divorced, move, or downsize their homes – all situations that create a need for storage.
  2. 2
    Businesses need flexibility too: During a recession, businesses might scale back and need places to store excess inventory or equipment.
  3. 3
    Short-term leases mean less risk: If a tenant struggles financially, they're more likely to give up a month-to-month storage unit than break a longer lease on an apartment, for example.
  4. 4
    A need for affordable solutions: When money's tight, people might opt to declutter and store belongings rather than upgrade to a bigger living space.

While storage units aren't completely recession-proof (reduced income and vacancies happen), their relative stability is a major win. When considering if storage units are a good investment, their ability to withstand economic downturns makes them less risky than some other real estate options. 

Potential for appreciation

Like most real estate investments, there's the potential for the value of your storage facility to appreciate over time. While this isn't a guarantee, the right facility in a good location could become a serious asset.

Here are some ways storage unit value might increase:

  1. 1
    Demand goes up: If your area experiences population growth or rising housing costs, more people (and businesses) will need storage solutions.
  2. 2
    The land itself appreciates: Prime real estate often becomes more desirable over time, increasing the value of your land even if nothing else changes.
  3. 3
    Strategic improvements: Adding popular features like climate control or covered parking could increase the value of your facility. 

Of course, location and market conditions play a huge role in appreciation. But, remember that with a storage unit investment, you're not just banking on rental income. You have a physical asset that, under the right circumstances, could grow significantly in value.  

If you're looking at storage units as a good investment, the potential for long-term appreciation is definitely a factor to keep in mind!

Scalability

Scalability

A cool thing about storage units is how easy they are to expand if your business is booming. Unlike complex construction projects, adding more units is a relatively straightforward way to boost your income potential.

Here's why scalability is a big advantage:

  1. 1
    Step-by-step growth: If you have available land, you can add new units in phases, adapting to demand as needed.
  2. 2
    Less risky expansion: Expanding gradually means less upfront investment and allows you to test the waters as you grow. 
  3. 3
    Meet diverse needs: Adding different types of units (climate-controlled, larger sizes) can attract new customers.
  4. 4
    Increased income potential: More units mean more rental income and a bigger bottom line. 

It's important to note that you shouldn't expand just for the sake of it – do your market research first. But if demand is there, storage units offer a great pathway to grow your business.

When considering if storage units are a good investment, remember that the ability to scale upwards means your earnings potential doesn't have to be limited by how much you build initially. 

Minimal regulation

Compared to operating apartments, restaurants, or various other businesses, storage units face less complicated regulations. This translates to a smoother path to getting your business up and running and fewer hoops to jump through along the way.

Here's a quick look at why red-tape is less of a factor:

  1. 1
    Simplified zoning: Storage facilities often fall under commercial or industrial zoning, which can be more straightforward than dealing with residential restrictions.
  2. 2
    No complex tenant laws: While you'll still need contracts, you won't deal with the intricacies of long-term residential leases.
  3. 3
    Fewer inspections: While safety and fire code compliance are important, storage units generally don't need the same level of scrutiny as habitable buildings.

Of course, some regulations will apply to your storage business.  Zoning restrictions, building codes, and safety standards all come into play. However, the regulatory burden is typically much lighter compared to other types of real estate investments. 

If you're looking for an investment that doesn't have a ton of red tape to battle, considering whether storage units are a good investment could be a smart move! 

cons of investing in storage units

10 cons of investing in storage units

Like any investment, storage units come with risks and downsides.  Let's take a realistic look at some of the potential drawbacks.

Ongoing costs

Okay, storage units aren't a magic money machine. While storage units have lower maintenance costs, they still cost some money that you’ll need to keep spending for it to run. Here's what you'll be paying for besides the upfront investment:
  1. 1
    Taxes and insurance: The boring but necessary stuff. You gotta protect your investment (and yourself from trouble!).
  2. 2
    Maintenance and repairs: Even simple buildings need some TLC. Roofs leak, fences get holes, things break – it happens.
  3. 3
    Utilities and staff: Electricity bills exist, and bigger storage places might need employees to manage things.
  4. 4
    Marketing and vacancy costs: To keep cash flowing,  you'll need to advertise. Plus, deals to attract new renters can cut into your profits.

These aren't deal-breakers, but storage units aren't exactly a "set it and forget it" investment. Be realistic about the ongoing costs when deciding if this investment is right for you. 

Competitive market

Let's be real – storage units are a popular investment, which means you'll likely have some competition.  The more saturated the market is in your area, the tougher it'll be to attract customers.

Here's where a competitive market can get tricky:

  1. 1
    Price wars: You might end up having to lower rental rates to stay competitive, which eats into your profits.
  2. 2
    Standing out from the crowd: If everyone offers the same thing, finding ways to make your facility more attractive is key.
  3. 3
    Vacancies during slow times: When competition is high, it's harder to fill empty units, meaning lost income.
  4. 4
    The need for strong marketing: Getting noticed will take effort and a good marketing budget.

It's important to research your local market thoroughly before diving into a storage unit investment. Is there high demand to meet the existing supply? Can you offer something unique compared to the competition? Taking these factors into account is crucial for success.

Management responsibilities

Management responsibilities

While storage units are simpler to manage than many other investments, they're not completely hands-off.  Be prepared to put in some work, or factor in the cost of hiring a management company.

Here's a quick rundown of some ongoing tasks:

  1. 1
    Tenant stuff: You'll deal with late payments, occasional disputes, and sometimes the need to auction abandoned units.
  2. 2
    Maintenance calls: Even if they're rare, things break.  You (or someone you hire) needs to handle those repairs. 
  3. 3
    Marketing and outreach: Consistent marketing keeps units full, but it takes time and effort to develop a good strategy. 
  4. 4
    Staying on top of laws: Regulations around storage units can change, so you'll need to keep yourself updated.

The amount of time you'll spend will depend on the size of your facility and how hands-on you want to be. But, it's definitely a factor to consider when deciding if storage units are a good investment for your lifestyle!

Vulnerability to economic downturns

While storage units are relatively recession-resistant, a severe economic downturn can still make things difficult.  It's important to be realistic about how a serious recession could affect your business. 

Here's where things get risky:

  1. 1
    People have less to spend: When money gets tight, people prioritize essentials. They may downsize their storage unit or give it up entirely.
  2. 2
    Increased delinquencies: If people are struggling financially, more tenants might fall behind on their rent.
  3. 3
    Lower rental rates: In tough times, you might have to drop your prices to attract new tenants, impacting your income.
  4. 4
    Slower market during a downturn: If the economy is bad, it might be harder to sell your facility if you decide to get out of the business.

Now, this isn't to say storage units will completely tank during a recession. But, they're not immune to tougher economic conditions. Understanding this risk factor will help you make an informed decision about whether storage units are a good investment for you. 

Location sensitivity

Storage units are all about location, location, location! The wrong spot can seriously hinder your success, making it one of the biggest factors to consider. Here's how a bad location can hurt your business:
  1. 1
    Visibility: If your facility is tucked away where no one sees it, how will people know to rent from you?
  2. 2
    Accessibility: Is it easy for tenants to get in and out? Bad access can make people choose a different place.
  3. 3
    Local demand: Is there actually a need for storage in the area? Misjudging this can lead to empty units.
  4. 4
    Competition: Building in an oversaturated area means fighting for scraps, and might force you to lower prices.

Thorough market research is absolutely essential before investing in storage units. Picking the right location can make or break your business. A facility in a high-demand area with great visibility will attract way more customers (and can sustain higher rents) than one in a less desirable place. 

Tenant issues

Like any rental situation, you'll occasionally have to deal with less-than-ideal tenants in a storage facility. It's just the reality of the business.  Here's a taste of what you might encounter:

  1. 1
    Late payments or non-payment: Chasing down rent is nobody's idea of fun and ultimately impacts your bottom line.
  2. 2
    Auctioning units: When tenants abandon their stuff, it falls on you to deal with the contents in a legal and potentially messy manner.
  3. 3
    Property damage: Sometimes things get damaged, whether accidentally or on purpose, leading to repairs and potential disputes.
  4. 4
    Odd storage choices: You never know quite what people will stash in units – some items can be unpleasant surprises or even safety hazards.

While most tenants won't cause problems, it's good to be mentally prepared to deal with occasional issues. Having clear contracts, solid procedures, and perhaps even a good lawyer on speed dial will make any tenant trouble easier to handle. 

Should you decide storage units are a good investment, factor this occasional annoyance into your planning!

Insurance

Insurance

Insurance might not be the most exciting part of owning storage units, but it's a necessary expense. Getting the right coverage is crucial to protect your investment (and potentially yourself from legal trouble).  

Here's a quick look at the types of insurance you'll probably need:

  1. 1
    Property insurance: This covers the facility itself from fire, weather damage, and other disasters.
  2. 2
    Liability insurance: Protects you if someone gets hurt on your property and decides to sue.
  3. 3
    Tenant's belongings insurance: While most facilities encourage tenants to get their own insurance, some offer additional coverage options.

Insurance costs can vary depending on your location, the size of your facility, and the types of coverage you get. It's a good idea to shop around and factor these expenses into your calculations when figuring out whether storage units are a good investment. 

Skimping on insurance is a risky move that could end up costing you way more in the long run.

Upfront capital

Getting into the storage unit business isn't exactly cheap. Before you see any income rolling in, you need to put serious money down. Here's where a big chunk of your initial investment will likely go:

  1. 1
    Land purchase or lease: Unless you already own suitable property, you'll be buying or leasing land to build on.
  2. 2
    Construction costs: Even the simplest storage units cost money to build. You’ll be spending on things like materials, labor, and permits.
  3. 3
    Getting up to code: Your facility needs to meet zoning, fire, and safety regulations, which could mean additional expenses.
  4. 4
    Marketing and early expenses: You'll need to advertise your new facility and potentially cover overhead costs while units are filling up.

The exact amount of upfront capital needed for a storage unit investment varies greatly depending on your location, project size, etc. But be prepared – it's not an undertaking for those tight on cash.

Potential environmental hazards

Unfortunately, not all land is created equal. Investing in storage units means taking on the risk of lurking environmental hazards that could end up costing you a fortune. 

Here's why this is a potential headache:

  1. 1
    Past uses of the land: If the property was used for industrial purposes, there's a chance of contamination from chemicals or waste.
  2. 2
    Neighboring properties: Even if your land is clean, contamination from nearby industrial sites could still pose a risk. 
  3. 3
    Expensive cleanup: Environmental testing and remediation (if necessary) can be incredibly costly.
  4. 4
    Legal liability: Under some laws, you could be held responsible for cleanup even if you didn't cause the contamination.

Before buying land for storage units, thorough due diligence is critical. This includes environmental testing and checking the history of the property and surrounding areas. If red flags pop up, it might be wise to walk away and find a less risky site for your investment. 

Dealing with unexpected disasters

Dealing with unexpected disasters

Even with the best planning, sometimes things go completely off the rails.  Your storage unit business could be hit by disasters outside of your control causing major disruption and expense.

Here's a glimpse at some unpleasant surprises:

  1. 1
    Weather woes: Hurricanes, tornadoes, flooding, and severe storms can seriously damage your facility.
  2. 2
    Fire: Even with precautions, accidents happen. A fire could cause extensive damage or even destroy units completely.
  3. 3
    Crime: Theft and vandalism are potential risks, despite your security efforts.
  4. 4
    Loss of income: When disaster strikes, repairs take time, and during that period, you'll face empty units and lost rental income.

While insurance will mitigate some of the financial risks, disasters are still a major hassle. Repairs, potential tenant disputes, and dealing with downtime can add major stress. When considering if storage units are a good investment, it's vital to have a plan for how you'd survive unexpected setbacks. 

Reflections: Are storage units a good investment?

Reflections: Are storage units a good investment?

While I've never personally owned a storage facility,  the idea's always been in the back of my mind. There's a real appeal to the potential for steady income and the relatively low-maintenance aspect compared to other real estate investments.

But, after talking to folks in the industry and doing my own research, I've gained valuable insights that have shaped my perspective.

Location is everything

This came up consistently. A well-located facility in a visible, easily-accessible area will attract far more customers and potentially command higher rents,  outperforming a cheaper alternative in a tucked-away spot. Choosing the right place is more important than a bargain price on the land itself.

It's not 100% passive income

Storage units might be easier to manage than many properties, but there's still a management aspect. To maximize earnings, you'll need to fill vacancies quickly, handle tenant questions, and potentially deal with the occasional delinquency.

A hands-off approach likely means hiring a management company, which cuts into your profits.

Do your due diligence

This is especially crucial if buying an existing facility.  Request detailed financials, maintenance history, and thoroughly research the local market.  Don't let excitement cloud your judgment – carefully vetting a potential investment is non-negotiable. 

Unexpected costs can pop up

Even with the best planning, things like sudden tax increases, needed upgrades, or dealing with unforeseen repairs can happen. Having a financial buffer is key to avoid getting blindsided if expenses suddenly spike.

My advice for those considering storage units

Here's the advice I'd give to someone thinking about taking the plunge:

  1. 1
    Be realistic: Storage units can be lucrative, but it takes work and there are risks involved. Temper your expectations.
  2. 2
    Start small (maybe): If you're new to the game, gaining experience with a smaller facility can be smart. It teaches you the ropes before you commit to something larger.
  3. 3
    Network with the pros: There's no substitute for knowledge from those doing it successfully. Reach out to experienced storage unit owners for tips and potential pitfalls to watch out for.
  4. 4
    Consider your location's demographics: Is your area growing? What's the mix of residential/business that could provide diverse tenant needs? This impacts the type of facility that'll thrive.
  5. 5
    Think beyond the basics: Are there add-on services your area lacks that you could offer? Climate control, RV storage, or partnerships with moving companies could set you apart in your location.

Ultimately, I believe storage units can be a savvy investment with the right approach. But like any venture, success comes down to research, planning, and a good understanding of both the potential rewards and the risks involved.

Are storage units a good investment? Consider these

Takeaways: Are storage units a good investment?

So, are storage units a good investment? The answer is... maybe, but a strong maybe!

Look, storage units aren't a get-rich-quick scheme, but they could be a solid way to build wealth. You get the potential for steady income without the constant headaches of some other rental properties. That said, it's not all sunshine and roses.  

A bad location can tank your business, and you'll still need to be somewhat hands-on. Bottom line: if you choose wisely and put in the effort, storage units could be a really smart move for your money.

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