A storage unit business is for people to come and rent storage units in your business to store personal items.
Due to the nature of the business, the risk of failure is extremely low, and it has proven to be an extremely lucrative business so far.
Considering the industry’s growth, annual revenue, and the low risk it brings as a business, a storage unit business could be a great idea.
If you are thinking about opening a storage unit business, the first thing you will wonder is how much does it cost to start one?
Though the answer is not easy to find because of many variables, you can still get an idea about the total expected costs to open a storage unit business.
This article will talk about the average cost of opening a storage unit business and all other details about the costs.
Average Cost to Start a Storage Unit Business
The average national cost to start a storage unit business is almost $2 million. However, depending on different factors, such as the location, it could be between $1.4 million and $2.4 million.
Within the expected costs, the majority of the cost goes to the land or the construction, or both at the same time, depending on your plot.
Almost all costs vary depending on your state and other choices you make for your business from day one.
These expected costs also include other operational costs such as licenses, permits, marketing, legal fees, and the cash capital you need to have. Here is a small breakdown of all expected costs and their average:
|Total Avg. Cost
|Avg. Cost Per Square Foot
|Builder’s Risk Insurance
The land of your business is where you will run your business and construct your storage units if you choose the construction path.
Either way, the land will be one of the most expensive costs in your journey to build your storage unit business. The major factor that affects the cost of your land is the area of your business.
Generally, urban areas are likely to be more expensive than suburban or rural areas as the overall land costs are higher.
This choice will also affect a big part of your ongoing costs later on when you start operating your business, as your rent or mortgage will depend on this choice.
Construction costs start from day one to get your land ready for development. The costs for this depend on how much work you need, like excavation, clearing, and draining of the land.
The expectation for this is generally between $4.25 to $8 per square foot. After the construction starts, there will be other costs that will change depending on your storage unit’s type.
Single-story units are cheaper and stand between $25 to $40 per square foot you want to build. Multi-story buildings are between $42 to $70 per square foot of building.
The average size of storage unit businesses is between 60,000 to 80,000 square feet. The unit’s types also affect the construction costs, whether you will have standard or climate control.
Like any other business, you should invest some in your marketing efforts even before you start operating.
The thing with marketing costs is that you spend a percentage rather than set dollars.
For example, the industry average for storage unit businesses is to spend 6 to 8 percent of your gross annual income on marketing.
When you are first starting to operate, you can make an estimation of your annual revenue and spend that much.
Later on, once you know your annual revenue after the first year, you can put it in concrete numbers.
Operating costs are not really a part of the startup costs of a storage unit business.
However, you still need to account for them because you will pay these operating costs from your pocket in the first few months of your opening since there will be no income. The average operating cost is between $2.75 to $3.25 per square foot.
Factors That Affect the Cost of Starting a Storage Unit Business
As we mentioned, there are several costs affecting each of your costs, and depending on these factors, you might be way out of the average cost range.
Knowing these factors might allow you to make better decisions and protect yourself from overspending on unnecessary things.
Type and quality of storage units
One of the biggest factors is which type of storage unit you will go for. Its quality also plays a role along with its type.
For example, a climate-controlled unit bought from an expensive brand will increase your total costs by a lot, whereas getting a cheaper but still quality brand will lower it.
Location of the land
Whether you are going to build from scratch or buy an existing storage unit business, you are going to pay for the land.
This could be either renting or buying it with a mortgage, but either way, you will make some sort of payment in advance.
If you buy the land in an expensive place, your rent or the buying price will be more than the average, costing you a lot more than you expect.
Number of employees
The bigger the size of your unit gets, the more employees you are going to need, increasing your labor cost.
Labor cost is one of the most expensive costs, and it could go out of hand quickly. Especially if you are in a state where the taxes on salaries are high, you will pay a lot more taxes.
Getting Financing for Storage Unit Business
Starting a storage unit business requires a heft capital in the beginning, up to $2.5 million, depending on various factors.
Most people can’t pay this amount in cash, and most of the time, you are going to need financing.
The good thing is that since storage unit businesses are way less risky than other types of businesses, it’s fairly easier to get financing.
You have many financing options, including traditional bank loans, Small Business Administration, also known as SBA loans, partnership investments with real estate investment trusts, and crowdfunding.
Each of these financing options comes with various ups and downs. The best option will depend on your situation, your network, and the amount you need.
To make the best decision, you need to talk about each of these options and decide based on your situation. Generally, SBA loans have the lowest interest rates and easier-paying options.
How Much Does a Storage Unit Business Make?
The national average for storage unit business owner income is $184,500 annually.
This means that if you own 100% of the business as a storage unit business, the average amount you can expect to make in net profit is $184,500 annually. Of course, this number changes drastically depending on the size, location, and type of storage unit business.
Before you make any of the expenses and taxes, generally, the average revenue is $450,000 annually. Depending on your exact profit margin as a business, this number could vary.
The industry standard for storage unit businesses as a profit margin is about 41%, and you get $184,500 with this profit margin off of the average national annual revenue.
A storage unit business is one of the most concrete businesses you can open because the failure rate is lower than 10% overall.
That’s why the storage unit business is a great opportunity. However, you are going to need a lot of capital to start a storage unit business because the average cost is about $2 million.
Depending on your location, the number of employees, the type and quality of storage units, and the cost of your financing, this could be higher or lower than $2 million.
Once you get the business running, the expected annual net profit is $184,500 with about a 41% profit margin.
Overall, storage unit businesses could be extremely lucrative and easy to run and are generally great choices for opening a business. However, if you are considering owning a franchise, then you must look into the 10 best storage unit franchises.
Can everyone open a storage unit business?
Technically, if you get the necessary permits and licenses and have the financing for it, you can.
However, a storage unit business is a business like any other and requires operational and managerial experience. If you don’t have these, you might open it, but you will likely fail.
Do I have to build a storage unit, or can I buy an existing building?
You can do both. It all boils down to your choice and what you want to do. Building from scratch is harder, takes longer, and is more expensive, but it gives you the flexibility of doing it however you want.
Buying an existing building might be cheaper and is definitely faster. But you might have to do some extra construction work to fit it to your needs.
Do different types of storage units affect the costs?
Yes. Climate-controlled storage units are far more expensive to buy and run than classic storage units.
Though climate-controlled storage units might attract more customers, you will need to increase your prices to accommodate the ongoing costs.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.