Determining How Strong Your Self-Storage Market Is!

When you are considering investing in a new market, you want to start by doing some research. You are going to verify that the local population can afford self-storage; verify that you are not in a market that is oversaturated; and that you are in an area that gets enough rent to cashflow.

The first thing that you need to do is pull up data about the area you are considering. How many people live in the 3 miles surrounding your potential facility? How many other self-storage facilities are within 3 miles of yours? How many self-storage units are available to the potential renters in those 3 miles. You need to know if there are enough renters in your market to fill those units. Only about 10% of the population uses self-storage. This means that if 50,000 people live within those 3 miles, potentially there are 5000 renters who need a self-storage unit. If there are already more than 5000 units in that area, you have more supply than the demand needs. This means that you may have trouble keeping your occupancy levels up.

Once you know that there is demand for your self-storage units, you want to see if the population in that area can afford to rent self-storage. If you are in an area where the median household income is below $45,000 you are in an area that cannot afford self-storage. On the other hand, if the median household income is significantly higher than the median for your area, these people usually have enough room that they don’t need self-storage. You want to find that sweet spot where people can afford self-storage but don’t have quite enough room.

Finally, once you have established that you have renters who can afford to rent, you need to find out if the market is strong enough to keep your property cash flowing. Unfortunately, there are a lot of self-storage facility owners who have not raised their rents in the last decade. This means that they are keeping the market below where it should be. However, it is very difficult to charge more for the same thing and get renters. You want to find out what the average rent is for a facility in your area. You cannot charge substantially more than your competition and expect to stay occupied.

If you discover that the reason that the property you are looking at has such a low cash flow is because the market will not allow them to raise the rent, this may be a future issue you have to deal with. Make sure that the rent in your area will support the property.

Always do your research before you buy a property. You don’t want to buy in a market that is oversaturated, in a bad location, or cannot cashflow. You want to make sure that the properties you are looking at have a strong upside potential. You want to know that you can go in and make the property better and thereby increase the value of the facility. As always, happy investing.