How To Start A Self-Storage Unit Business And How Much Will It ...

IBIS World gives us a general insight into the $23 billion a year self-storage and warehouse leasing industry raging in the US. Over 182,000 businesses have opened nationwide to take their share of the pot. Increasing in both 2020 and 2021, despite the pandemic, profit is expected to reach the highest share of revenue since 2002 with a growth of 2.5% every year.

How Much Profit do Storage Unit Owners Make?

The average profit for a storage unit business owner is $184,500 annually. Of course the potential profit for any specific storage unit facility will depend on the size of the facility, the market rate for rent in the area, and the operating efficiency of the business. We estimated the annual profit of $184,500 by taking the average storage unit facility size of 50,000 square feet x the average annual rental rate of $9 per square foot = $450,000 in annual revenue. Then taking a profit margin of 41% gives us a forecasted annual profit of $184,500.

We will dive into the sources for these assumptions and the ranges in revenue and profit margins in the article below, and show you how to use our templates to create your own projections.  We have three templates that I will reference throughout the article:

1. Simple Self Storage Facility Template - best for smaller and existing storage facilities.
2. Self Storage Developer Template - best for developers looking to raise capital for new self storage facilities.
3. Self Storage Acquisition Template - best for investors that are buying, renovating and selling storage facilities.

Common Steps to Starting a Self-Storage Unit Business

Such promising revenue numbers beckon forward when it comes to making the decision to start such a business. Let’s review some of the most common steps needed for a successful and profitable business.

1. Budget for the business and determine the potential size
2. Determine the target market and perform market research in the area
3. Finance the business and purchase or rent space and equipment
4. Complete all required paperwork and form a legal entity
5. Obtain required permits and insurance to operate as a business in the area
6. Set up necessary accounting and banking
7. Start an advertising campaign
8. Complete any necessary renovations before opening the doors to the public

How Much Does It Cost to Start a Self-Storage Unit Business?

The average cost to start a self storage unit business is $2 million.

Three sources (Storable, LovetoKnow, MakoSteel) give us estimated startup costs of starting a new self-storage unit business. 

• Minimum startup cost for a self-storage business = $1.5 million
• Maximum startup cost for a self-storage business = $2.4 million
• Average startup costs for a self-storage business = $2.0 million

The majority of the expenses incurred during the startup process fall into the following categories:

• Land purchase
• Construction
• Permits and licenses
• Outfitting the premises

What is the Average Size of a Storage Unit Facility?

The average size of a storage unit facility in the US is 56,900 square feet according to Easy Storage Solutions.  For easy math throughout this article we will use a 50,000 square foot facility as an example. 

Self Storage Facility Layout

The layout of your storage facility is going to be determined based on the land that you have.  Details around road access, drainage, zoning, etc.  The cost of your land and location will also determine whether you are building a multi story storage facility or spreading out the units on the same level.  Obviously the construction cost per unit will be more expensive if you build a multi-story facility, but if the land is expensive or you are landlocked your only option may be to build up.  Ultimately the goal of your layout will be to maximize your rentable square feet of storage space.  

Once you have solidified your facility layout that will maximize your rentable square feet, next you need to determine what your self storage unit mix should be. 

How Many Storage Units Per Acre?

On average you can fit between 130 and 215 storage units per acre assuming a 10 ft x 10 ft “standard” unit.  

We were able to calculate this based on the following assumptions:

• There are 43,560 square feet in 1 acre
• Most storage unit facilities will cover between 30 and 50% of the parcel with units according to SelfStorageNinjas.
• This means there would be between 13,000 square feet and 21,750 square feet available per acre.  
• Since the “standard” storage unit is 100 square feet, we estimate that you can fit between 130 and 215 storage units per acre.    

Of course if your average storage unit is larger than 100 square feet you will be able to fit fewer units per acre.  

Average Number of Units per Storage Unit Facility

According to a survey of 10,000 storage unit facilities the average number of storage units per facility was 546.

Self Storage Unit Mix

There is not a one size fits all unit mix when it comes to self storage facilities.  Although you might be able to charge a higher rate per square foot if you had all very small units, the reality is that your customers will need a more diverse mix of storage units.  If your target market is in the city, and your customers are typically in small apartments, then you might need more small storage units.  If you are located in a suburban area where the average home is 4,000 square feet, you are likely going to have more customers that need a larger unit.  

Average Unit Mix for Self Storage

According to Inside Self Storage the average unit mix for self storage is as follows:

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Cost to Construct a Storage Unit Facility

The average cost to construct a storage unit facility can range from $1.25 million to $3.5 million.  We estimate this range based on an average size 50,000 square foot facility and a construction cost of $25 to $70 per square foot based on information provided by Storable. This does not include the cost of the land or other operational startup costs.  

Self Storage Construction Budget

Our self storage developer template will allow you to build a construction budget for your self storage facility as seen below:

Acquiring a Storage Unit Business

Rather than spending $1.25 to $3.5 million to build a new storage unit facility, you might want to consider acquiring an existing storage facility.  Although an existing facility would be older and might require some additional repairs and maintenance, if the facility is already fully operational and leased up with tenants, you will be able generate positive cash flow faster.  It can take 2 to 4 years to reach a stabilized occupancy rate for a new 50,000 square foot storage unit facility, so acquiring an existing facility with tenants can really speed things along.

You can find hundreds of self storage facilities for sale on LoopNet.  

Acquiring vs. Constructing a Self Storage Facility

One of the great things about our self storage financial models is that they will allow you to easily compare the differences between acquiring an existing facility versus constructing a new storage facility.  You can enter assumptions about the purchase price or construction price into the model, details about financing, and the number of units available to rent.  

Bonus Video Content - How to Acquire a Storage Unit Facility.

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How Much Can a Self-Storage Unit Business Make in Sales?

The potential revenue for any business varies due to a number of factors. The size of the self-storage facility, whether it’s one or two floors, the market need for storage in the area, and how many units are likely to get rented at any time. 

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How to Set the Price of One Unit?

The price of each unit is the key to running a successful business and making a profit. The revenue potential is held within this business element. There are two approaches to setting the right price. 

Market-Based Pricing

A quick and simple approach to setting a price is completing market research. Staying competitive in the market can make all the difference and it’s not time-consuming. Search engines provide quite a bit of information on prices in the same area. 

Target Based Pricing

This approach will require more work than the first, but it has an end goal in mind. Rather than setting the price to match those of competitors, you work to set the price of potential gross profit margin. 

The typical profit margin of a self-storage business, according to Storable, is around 41%. Target-based pricing means setting the price in such a way that you’ll meet that goal. According to QT Business Solutions, there are around $3 in operating expenses for every raw square footage of the facility.

Calculating the amount to charge per storage unit will depend on a couple of factors. For example, you’ll need the exact amount of square footage of the facility and the sizes of the units, and their number. Once you have the information, you can double any potential expenses to get to the required revenue to meet at least the 41% profit, unless you are aiming higher. 

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Self Storage Rent per Square Foot

The average rent per square foot for self storage space in the US was $1.28 in 2022 according to Statista.  Although this is the average, the rate that you will be able to charge is going to differ based on your location.  Additionally, the rate per square foot for self storage units is related to the size of the units that you are renting.  You can check out SpareFoot for the most up to date rent per square foot data.  As of February 2023 you can see their estimates and the major differences in rent per square foot for small vs. large units. 

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How full will the facility get?

Self-storage unit businesses run year-round which alleviates one potential worry. However, estimating revenue will depend on how many renters there will be. QT Business Solutions explains that most facilities see an occupancy rate sitting at around 90% in today’s market. 

Though most businesses in the industry will shoot for occupancy of around 80% to 90%, Storable tells us that 65% of occupancy will at least cover the operating and debt expenses of the business. 

With the current trend in downsizing homes and apartment versus home rentals, self-storage units are a popular choice among millennials. 2020 showed an occupancy average of 91.7%, and those numbers have been holding steady, if not growing. 

Of course, those who own a self-storage unit business should not shoot for anything higher than around 90% so that there is always storage to rent. You do not want to find yourself shooting for 100% occupancy and have nothing left for new customers.

Self-storage unit business revenue potential

The revenue potential for a self-storage unit business is quickly calculated once you have all the right information on hand. 

To start with our example, let’s say we are using a facility the size of 50,000 square feet -- the average for these types of businesses. To cover the expenses required to run the business, Truic advises setting the price at around $9 per square foot, per year. 

This estimates the yearly revenue around $450,000, or $37,500 monthly. Of course, this number is for 100% occupancy, which means we need to deduct vacancies of at least 10%. This brings us to a total of $405,000 a year before any other expenses are taken into account.