Is rental income the only revenue stream available to a self storage facility?

Self storage facilities implement a large number of ancillary revenue streams. In addition to unit rentals, a facility can experience income from packing and moving supplies, lock sales, truck rentals, business center income, renters insurance commissions, vehicle parking, cell tower leases, billboard advertisements, and more.

What is the current demand for self-storage units?

The current demand for self-storage units varies depending on various factors such as location, market conditions, and economic trends. Generally, the self-storage industry has seen stable and consistent growth in recent years, driven by factors such as urbanization, lifestyle changes, and the growth of e-commerce. As of 2020, 10.6% of U.S households rent self storage. This is up from 9.4% in 2017. This provides a huge opportunity for growth since in theory, if we were to go from 1 in 10 households using self storage to 2 in 10 households, the national supply of storage facilities would need to potentially double. This sort of growth potential does not exist in many other real estate asset types.

What is the average rental rate for a self-storage unit?

The average rental rate for a self-storage unit varies greatly depending on factors such as location, unit size, and market conditions. On a national level, the average monthly rental rate for a standard 10x10 self-storage unit ranges from $50 to $200, with rates tending to be higher in urban areas and lower in rural areas. It is important to note that rental rates can fluctuate and can be affected by supply and demand, local economic conditions, and competition in the area.

According to Radius+, as of Q2 2022, historical national rental rates for non-temperature controlled units were as follows:

• $56.65 for 5’x5’

• $78.32 for 5’x10’

• $120.13 for 10’x10’

• $152.40 for 10’x15’

• $177.45 for 10’x20’

As of Q2 2022, historical national rental rates for temperature controlled units were as follows:

• $66.02 for 5’x5’

• $98.83 for 5’x10’

• $155.68 for 10’x10’

• $203.77 for 10’x15’

• $268.99 for 10’x20’

What is the typical size of a self-storage unit?

Self-storage units come in a range of sizes to accommodate different storage needs. The most common sizes for self-storage units are 5’x5’, 5’x10’, 10’x10’, 10’x15’, and 10’x20’, but larger units (such as 10’x30’ or larger) are also available. The size of the unit needed will depend on the amount and type of items being stored. Most self-storage facilities offer a variety of unit sizes to accommodate different storage needs, and many offer flexible month-to-month rental options to allow customers to adjust the size of their unit as their storage needs change.

According to the Self Storage Association 2020 Self Storage Demand Study, these are the percentages of various unit sizes rented:

• 15.6% 5’x5’

• 20% 5’x10’

• 24.4% 10’x10’

• 14.8% 10’x15’

• 12.5% 10’x20’

• 12.7% 10’x30’ or larger

What is the default rate for self-storage tenants?

The default rate for self-storage tenants, also known as the non-payment or delinquency rate, is a measure of the number of tenants who fail to pay their rent on time. The default rate for self-storage tenants can vary depending on a number of factors such as the economic climate, competition in the market, and the creditworthiness of tenants. On average, the default rate for self-storage tenants is low, typically less than 5%. This is because self-storage tenants are typically required to pay a deposit and provide credit or debit card information to secure their rental, which acts as a deterrent to default. In addition, self-storage operators often have processes in place to manage delinquent accounts and enforce payment, which helps to minimize the default rate. However, it is important to note that the default rate can fluctuate and can be affected by local economic conditions and the overall health of the self-storage market.

How is self-storage revenue generated?

Self-storage revenue is generated primarily through rental income from tenants. This rental income is typically collected on a monthly basis and is based on the size of the rental unit and the rental rate in the market. In addition to rental income, some self-storage facilities may generate revenue from additional services such as insurance, truck rentals, and retail sales of moving and storage supplies. Some facilities may also generate revenue from late fees, auction proceeds, and other charges related to delinquent accounts. Overall, self-storage revenue is a combination of rental income and income from ancillary services, and it can be influenced by factors such as occupancy rates, rental rates, competition in the market, and local economic conditions.

What is the typical revenue per square foot for a self-storage facility?

The typical revenue per square foot for a self-storage facility varies depending on a number of factors such as location, competition, occupancy rates, and the mix of unit sizes. On average, the revenue per square foot for self-storage facilities ranges from $10 to $25, but can be higher or lower depending on market conditions. Higher revenue per square foot typically indicates a more profitable facility, but there are many factors that can influence revenue per square foot, including rental rates, occupancy rates, competition, local economic conditions, and the cost of operating the facility. It is important to note that revenue per square foot is just one metric used to measure the performance of a self-storage facility, and a more comprehensive analysis of financial performance should consider factors such as operating expenses, occupancy rates, and cash flow.

According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average effective gross income per square foot for 2022 was $13.75.

What is the typical operating expense ratio for self-storage?

The typical operating expense ratio for self-storage facilities ranges from 30% to 55% of gross operating income. Operating expenses for self-storage facilities can include property taxes, insurance, utilities, maintenance and repairs, management fees, marketing and advertising, legal and professional fees, and payroll. The exact operating expense ratio for a self-storage facility will depend on a number of factors such as the size and location of the facility, local economic conditions, and competition in the market. In general, a lower operating expense ratio is desirable as it indicates that a larger portion of revenue is being retained as net income. It is important to note that the operating expense ratio is just one metric used to measure the financial performance of a self-storage facility, and a more comprehensive analysis should consider factors such as occupancy rates, rental rates, and cash flow.

According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average operating expense ratio for 2022 was 41.79%.

What is the impact of technology on the self-storage industry?

Technology is having a significant impact on the self-storage industry, with new innovations changing the way that customers interact with storage facilities, and the way that facilities are managed and operated. Some of the key ways that technology is impacting the self-storage industry include:

Online Rentals and Reservations: Customers can now easily find and rent storage units online, making the process of finding and reserving a unit more convenient and efficient. This has also made it easier for self-storage facilities to manage their occupancy levels and pricing.

Mobile Access and Control: With the advent of mobile apps and other technology, customers can now access and control their storage units remotely, without having to visit the facility in person. This has made self-storage even more convenient for customers who are on the go.

Smart Storage Units: Some self-storage facilities are now offering "smart storage" units that allow customers to remotely monitor temperature and humidity levels, as well as lock and unlock the unit from their mobile device.

Automated Payment and Billing: Self-storage facilities can now automate payment and billing processes, making it easier for both customers and facility managers to manage payments and invoices.

Inventory Management: Technology is also being used to improve inventory management and optimize occupancy levels. For example, some facilities are using data analytics and predictive algorithms to better forecast demand and set pricing.

In general, technology is making the self-storage industry more efficient, convenient, and customer-friendly, and is helping facilities better manage their operations and maximize profits.

What is the future outlook for the self-storage industry?

The future outlook for the self-storage industry is generally positive, as demand for storage space is expected to continue to grow. Some of the factors that are expected to drive growth in the self-storage industry in the coming years include:

Population Growth: As the population grows, demand for storage space is expected to increase, as people need more space to store their belongings. As of 2020, there is only 10.6% penetration meaning that 1 in 10 US households use self storage. There is an immense opportunity for that penetration rate to increase agnostic of population growth itself.

Urbanization: As cities become more densely populated, many people are downsizing their living spaces and turning to self-storage as a solution for their extra belongings.

E-commerce: The growth of e-commerce is expected to drive demand for self-storage, as more and more people order goods online and need somewhere to store them.

Innovations in Technology: Advances in technology are expected to continue to shape the self-storage industry, making it more convenient, efficient, and customer-friendly.

Investment Opportunities: The self-storage industry is seen as a relatively stable investment opportunity, with low default rates and predictable rental income. Self storage has the highest return on investment in comparison to any other real estate asset class. From 1994-2017, storage returned an annual average of 17.43%. Based on that annual average, $100,000 invested in 1994 would be over $4,000,000 today. Self storage is recession resilient. From 2007-2009, self-storage dropped -3.8% in comparison to the S&P’s -22.0%. This was the smallest drop of any real estate asset class. Self storage had some of its best performing years during the COVID-19 Pandemic when some other real estate asset classes performed poorly. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage.

While there are some challenges facing the self-storage industry, such as increased competition and changes in local zoning regulations, the overall outlook is positive. As long as demand for storage space continues to grow, the self-storage industry is expected to remain a thriving sector of the economy.

What is the typical insurance coverage for self-storage units?

The typical insurance coverage for self-storage units can vary depending on the specific facility and the type of insurance being offered. Some common types of insurance coverage for self-storage units include:

Liability Coverage: This type of insurance protects the self-storage facility against claims related to injury or damage to property that occurs on the facility's premises.

Fire and Natural Disaster Coverage: This type of insurance covers losses related to fires, earthquakes, hurricanes, and other natural disasters.

Theft Coverage: This type of insurance covers losses due to theft or damage to stored property. Much of the liability lies with the renters in regards to their belongings as the leases can limit the value of items stored and require renters insurance.

Business Interruption Coverage: This type of insurance covers losses related to the interruption of business operations, such as those that may occur as a result of a fire or other disaster.

It is important for self-storage facilities to carefully review their insurance coverage and make sure that they have adequate protection against the specific risks they face. Some facilities may also require their tenants to purchase insurance coverage for their stored property, in order to provide additional protection. Tenants should be aware of the coverage that is included with their rental agreement, and should consider purchasing additional insurance if necessary to fully protect their belongings.

What are the typical security features for self-storage facilities?

The typical security features for self-storage facilities can vary depending on the size and location of the facility, as well as the perceived risk of theft and vandalism. Some common security features for self-storage facilities include:

Controlled Access: This may include gated access, keypad or keycard entry systems, and on-site security personnel.

Surveillance Cameras: This may include both interior and exterior cameras, which can be monitored remotely or recorded for later review.

Lighting: This may include well-lit aisles and areas around the facility, and motion-activated lighting in certain areas.

Alarm Systems: This may include alarm systems that are connected to an alarm-monitoring company or the local police department.

Locks: This may include individual locks for each storage unit, or master locks that allow access to multiple units.

Fences: This may include perimeter fencing around the facility, as well as individual fencing around individual units.

Management Presence: This may include on-site management or staff members who are available during business hours, or who live on the premises.

It is important for self-storage facilities to have a comprehensive security plan in place, and to regularly review and update this plan as necessary. The specific security features that are required will depend on the location and size of the facility, as well as the specific risks that are faced. In addition, facilities should educate their tenants about the importance of securing their units, and should provide information about recommended locks and other security measures.

What is the typical maintenance and upkeep for self-storage facilities?

The typical maintenance and upkeep for self-storage facilities can vary depending on the size and age of the facility, as well as the specific needs of the tenants. Some common maintenance and upkeep tasks for self-storage facilities include:

Building Maintenance: This may include regular cleaning, painting, and repairs to the buildings and structures on the property. The roof is the most important item to maintain at a self storage facility. Renters are interested in storing their items safely and securely. While the renter is responsible for securing their unit with a lock, the integrity of the roof (i.e. no leaks) is crucial for the safety of the renter’s items.

Unit Maintenance: This may include regular cleaning, repairs, and upgrades to the individual storage units.

Landscaping: This may include regular lawn care, tree trimming, and other landscaping tasks to keep the property looking well-maintained and attractive.

Electrical and Plumbing: This may include regular inspections, repairs, and upgrades to the electrical and plumbing systems within the buildings and units.

Fencing and Gates: This may include regular inspections, repairs, and upgrades to the fencing and gates that surround the property and provide security.

Pest Control: This may include regular pest control treatments to prevent infestations of insects, rodents, or other pests that can cause damage to stored items.

It is important for self-storage facilities to have a comprehensive maintenance plan in place, and to regularly review and update this plan as necessary. In addition, facilities should educate their tenants about the importance of maintaining their units, and should provide information about recommended cleaning and maintenance practices. By investing in regular maintenance and upkeep, self-storage facilities can help to maintain the safety and security of their tenants' stored items, and can also improve the overall value and appeal of the property.

What is the typical customer base for self-storage facilities?

The typical customer base for self-storage facilities is quite diverse and can include:

Residential Customers: These customers use self-storage for personal items such as furniture, household goods, seasonal items, and recreational equipment. According to the 2023 Self Storage Almanac by MiniCo Insurance Agency, 79% of tenants are residential.

Business Customers: Small businesses often use self-storage to store excess inventory, equipment, and supplies. According to the 2023 Self Storage Almanac by MiniCo Insurance Agency, 14% of tenants are businesses.

Students: Many students use self-storage during the summer or when moving in or out of the dorms. According to the 2023 Self Storage Almanac by MiniCo Insurance Agency, 3% of tenants are students.

Military Personnel: Military personnel often use self-storage during deployments or when moving to new assignments. According to the 2023 Self Storage Almanac by MiniCo Insurance Agency, 4% of tenants are military.

Seniors: Seniors may use self-storage to downsize from a larger home or to store seasonal items. This is a sub-category of residential customers.

Homeowners and Renters: Homeowners and renters may use self-storage during renovations, moving, or to store items they do not have space for in their homes. This is a sub-category of residential customers.

Car and RV Owners: These customers use self-storage to park their vehicles in a secure and convenient location. This is a sub-category of residential customers.

Overall, the customer base for self-storage facilities is made up of people and businesses who need extra space to store their belongings, and are willing to pay for a convenient, secure, and accessible storage solution. The customer base can vary depending on the location, market conditions, and competition, but by understanding the needs and preferences of the target market, self-storage facilities can effectively target and attract the right customers for their facility.

What is the typical operating structure for self-storage facilities?

The typical operating structure for self-storage facilities is as follows:

On-site Manager: Some self-storage facilities have an on-site manager who is responsible for day-to-day operations, including customer service, rent collection, and maintenance.

Owner/Operator: Some self-storage facilities are owned and operated by individuals or small companies. These owners are responsible for all aspects of the business, from marketing and leasing to maintenance and bookkeeping.

Third-Party Management Company: Some self-storage facilities are owned by investors and managed by third-party companies that specialize in self-storage management. This structure allows the owners to focus on investment and financing, while the management company handles the day-to-day operations of the facility.

Publicly Traded Companies: Some self-storage facilities are owned by large publicly traded companies that operate multiple facilities across the country. This structure allows for economies of scale and the ability to leverage best practices across multiple locations.

The operating structure of a self-storage facility will vary based on the size, ownership structure, and location of the facility. The most important factors in determining the operating structure are the owner's goals, available resources, and the level of management experience and expertise they have in the self-storage industry.

What are the most important factors in selling a self-storage facility?

The most important factors in selling a self-storage facility are:

Occupancy and Rent Rates: High occupancy and rent rates are crucial in attracting potential buyers. A well-maintained facility with high occupancy and rent rates will be more appealing to potential buyers and will likely command a higher sale price.

Physical Condition: The physical condition of the facility is also an important factor in attracting potential buyers. A well-maintained facility with modern security features and a clean and attractive appearance will be more appealing to potential buyers.

Location: The location of the self-storage facility is a crucial factor in attracting potential buyers. A facility in a high-density, growing population area with a strong local economy will be more attractive to potential buyers.

Financial Performance: The financial performance of the self-storage facility is critical in attracting potential buyers. A facility with a solid history of profitability, with consistently high occupancy and rent rates, will be more attractive to potential buyers.

Market Conditions: The market conditions for self-storage facilities can impact the sale of a facility. Understanding the current market conditions and the outlook for the self-storage industry is crucial in determining the sale price of a facility.

Legal and Regulatory Environment: The legal and regulatory environment of the self-storage industry can impact the sale of a facility. Understanding any local zoning, permitting, and licensing requirements is crucial in determining the sale price and attracting potential buyers.

Marketing Strategy: A well-designed marketing strategy that effectively showcases the strengths of the self-storage facility can be critical in attracting potential buyers. Utilizing online and offline marketing techniques to reach a wide audience can increase the chances of a successful sale.

Representation: Engaging a knowledgeable real estate broker with experience in the self-storage industry can be very helpful. An experienced broker can help market the facility, negotiate the sale price, and handle the legal and regulatory aspects of the sale process. Alternatively, selling direct to buyer can avoid the need for a broker, save money, save time, and be even more convenient than working with a broker.

What is the difference between a limited partner (LP) and a general partner (GP) in real estate syndications?

In a real estate syndication, the limited partner (LP) and the general partner (GP) are two distinct roles that are critical to the structure and operation of the investment.

Limited Partner (LP): The limited partner is an investor in the syndication who provides capital to the investment. They have limited liability, meaning they are only responsible for the amount they invested and are not responsible for the day-to-day operations of the investment. They receive a share of the profits and distributions, but they do not have a say in the decision-making or management of the investment.

General Partner (GP): The general partner is responsible for the day-to-day management and operation of the investment. They have unlimited liability, meaning they are responsible for any debts or obligations incurred by the investment. They are also entitled to receive a portion of the profits and distributions, but their primary role is to manage the investment and make decisions on behalf of the limited partners.

In a typical real estate syndication, the GP is usually a professional real estate developer or management company that has the expertise and experience to manage the investment effectively. The LP is usually made up of individual investors who want to invest in real estate but do not have the expertise or experience to manage the investment themselves. The GP and LP work together to achieve the investment goals and maximize returns for the limited partners.