How to Invest in Storage Units: 2025 Ultimate Guide

Are you looking for a unique investment opportunity with the potential for decent returns? Investing in storage units might be the answer.

With a 7.7% CAGR between 2023 and 2024 and a $63.58 billion market cap in 2024, this often-overlooked real estate niche can provide steady cash flow and appreciation with relatively low maintenance.

Whether you’re a seasoned real estate investor or just starting, storage units offer an intriguing avenue to diversify your portfolio. In this guide, you’ll learn how to invest in storage units. We’ll also show you how to get the most from your investment using smart property management solutions.

Key Takeaways

• The self-storage market is projected to grow at a 7.53% CAGR through 2027, making it a lucrative investment opportunity with increasing demand.

• Storage units offer steady cash flow, low operational costs, and inflation-adjusted income through flexible lease agreements.

• Potential risks include market saturation and security concerns, so proper research and planning are essential for success.

• Investors can buy or build facilities, invest in REITs, or join syndicates to enter the market, depending on budget and expertise.

• High-density areas with growing populations are ideal for maximizing occupancy and return in the storage unit business.

• Smart management tools like automated billing and access systems improve efficiency and customer satisfaction.

The Prospect of Storage Unit Investment

Investing in storage units has become an increasingly popular option for those looking to diversify their investment portfolio. But is a storage unit a good investment? Let’s explore the potential of this unique real estate niche as well as certain considerations you should bear in mind before investing.

1. A Growing Industry

Investing in storage units has become an increasingly attractive option for investors seeking stable returns. The self-storage market is projected to grow at a compound annual growth rate (CAGR) of 7.53% through 2027, driven by urbanization, major life events, and the rise of home-based businesses. This robust growth makes storage units a compelling investment opportunity for those looking to diversify their portfolio.

2. The Benefits

Storage unit investments offer several advantages. According to industry experts, they provide low-risk, low-cost opportunities with high demand. Investors can enjoy passive, positive cash flow from rental income, reduced operational costs, and reliable tenants. Additionally, the flexibility of lease agreements allows investors to adjust rates when necessary, keeping pace with inflation.

3. The Challenges

While the prospects are promising, it’s essential to understand how to invest in storage units for beginners. Potential challenges include market saturation in certain areas and the need for robust security measures. Investors should carefully evaluate these aspects before deciding to invest. For the best advice, consider consulting with an expert.

4. The Future

As our society continues to evolve, the need for storage solutions is likely to persist. Technological advancements, such as automated access systems and online rental platforms, are shaping the future of the industry. Staying informed about these trends can help you make smart decisions and maximize your returns in the storage unit market.

Similarly, it’s essential to estimate your finances before entering the self-storage industry. Continue reading for some cost estimates to ensure you’re financially buoyant to invest in self-storage.

How Much Does It Cost to Invest in Storage Units?

Let’s break down the costs associated with investing in storage units, both from scratch and by purchasing an existing facility.

1. Building from Scratch

Of the two options, the cost of building a self-storage facility from scratch tends to be higher overall.

While total investment depends on location, size, and amenities, you can expect the following:

• Land Acquisition: This is largely determined by location, but you can expect to pay anything between $200,000 and $1,000,000 or more.

• Construction Costs: Construction typically costs between $25 and $70 per square foot.

• Permits and Zoning: The costs of zoning and all other permits are determined by your local law.

• Operational Equipment: This ranges from security systems, climate-controlled storage units, self-storage management software, and other essential items needed for operations. You’ll need to contact the nearest providers for an actual estimate.

• Marketing: Making your business known to the public is how you get customers in the door. Local SEO is particularly effective for this, as it helps your business appear in local search results, making it easier for nearby customers to find you. The cost of self-storage marketing varies widely depending on your goals and location.

Keep in mind that these figures are estimates and can fluctuate based on your specific project. The total cost to invest in storage units from the ground up typically ranges from $1.25 million to $2.5 million or more for a medium-sized facility.

2. Purchasing an Existing Facility

For those with a limited budget, buying an existing self-storage facility can be a more accessible entry point.

The costs here are generally more straightforward but can still vary significantly as follows:

• Purchase Price: Purchase Price: Usually calculated at 10 times the annual net operating income. According to Storeganise, prices for a small facility with around 10,000 square feet might range from $250,000 to $420,000. Medium-sized facilities of about 50,000 square feet could cost between $1.25 million and $2.1 million, while larger facilities over 100,000 square feet might range from $2.5 million to over $4.2 million, depending on location.

• Closing Costs: 2–5% of the purchase price.

• Renovation or Upgrades: Variable, depending on the facility’s condition.

Overall, expect to spend anywhere from a few hundred thousand to several million dollars, depending on the size and location of the facility.

Additional Considerations

Regardless of which route you choose, there are ongoing costs to factor in, including:

• Property taxes

• Insurance

• Repair and maintenance costs

• Staff salaries (if not self-managed)

• Marketing expenses

These recurring costs can add up to 35-45% of your gross income, so it’s crucial to account for them in your investment planning.

Is a Storage Unit a Good Investment?

While the initial costs may seem daunting, many investors find that storage units are a good investment. The self-storage industry has shown steady growth and resilience, even during economic downturns. With proper management and strategic location selection, storage units can provide a reliable passive income stream.

So, how do you get started with self-storage investing? We’ll provide you with some tips below and round off with strategies for making the most of your investment.

4 Ways to Invest in Storage Units

While we’ve been discussing buying and building a self-storage from scratch, there are many more ways to get started investing.

Let’s explore the four main strategies to help you get started:

1. Buy a self-storage facility

2. Build a self-storage facility

3. Invest in a self-storage REIT

4. Invest in a self-storage syndicate

1. Buy a Self-Storage Facility

One of the most direct ways to invest in storage space is to purchase an existing facility. This approach allows you to hit the ground running with an established customer base and immediate cash flow. However, it’s crucial to conduct thorough due diligence before making such a significant investment.

Consider the following tips when searching for the best storage unit:

• Research the local market demand and competition

• Analyze the facility’s financial statements and occupancy rates

• Inspect the property’s condition and assess potential renovation costs

• Consider hiring a professional management company if you’re new to the industry

Buying a storage facility can be a substantial investment, so it’s essential to understand how much it costs to invest in storage units before taking the plunge. We’ve covered most of the financials early on in this post.

2. Build a Self-Storage Facility

For those with a more entrepreneurial spirit, building a new storage facility from the ground up can be an exciting option. This approach allows you to customize the facility to meet current market demands and incorporate modern amenities that can set you apart from competitors.

Consider the following tips when building a self-storage facility from scratch:

• Identify a suitable location with high demand and limited competition

• Obtain necessary permits and zoning approvals

• Design a layout that maximizes rentable space

• Implement cutting-edge security features and management systems

While building a new facility requires a significant upfront investment, it can lead to higher long-term returns if executed correctly.

3. Invest in Self-Storage REITs

If you’re wondering how to invest in storage units for beginners without the hassle of direct ownership, consider investing in self-storage Real Estate Investment Trusts (REITs). These publicly traded companies own and operate multiple storage facilities, allowing you to benefit from the industry’s growth without hands-on management responsibilities.

Here are helpful tips to consider when searching for the right self-storage REIT to invest in:

• Research different self-storage REITs and their performance history

• Diversify your investment across multiple REITs to spread risk

• Monitor industry trends and economic factors that may impact REIT performance

• Reinvest dividends to compound your returns over time

Overall, investing in REITs can be a more accessible and liquid option for those looking to enter the storage unit market.

4. Invest in a Self-Storage Syndicate

Another way to invest in storage units without direct ownership is through a self-storage syndicate. These investment groups pool capital from multiple investors to acquire and manage storage facilities, often offering higher potential returns than REITs but with less liquidity.

This investment option isn’t without its risks, so consider these tips before investing:

• Research reputable syndicates with proven track records

• Understand the syndicate’s investment strategy and target markets

• Review the terms of the investment, including minimum buy-in and projected returns

• Consider the exit strategy and timeline for realizing your investment gains

Participating in a syndicate can be an excellent middle ground between passive REIT investing and active facility ownership. But before committing to any of these options, you should understand some fundamental strategies for success and maximizing your investment potential.

3 Strategies for Successful Storage Unit Investing

Investing in storage units can be a lucrative venture, but success requires careful planning and smart strategies. Whether you’re a beginner or an experienced investor looking to expand your portfolio, these key strategies will help you maximize your returns and minimize risks:

1. Target high-density population areas

2. Implement effective management strategies

3. Partner with experts and pursue value-added acquisitions

1. Target High-Density Population Areas

When learning how to invest in storage units, it’s important to understand the key role location plays in your investment success. Recent reports indicated that urban areas have seen a significant increase in storage demand due to population growth and limited living space, leading to higher occupancy rates. Data from the World Bank suggests that the percentage of the global population residing in urban areas will increase from 56% to 70% between 2023 and 2050.

The following checklist can guide you toward selecting a location with good demand for self-storage:

• Look for areas with growing populations and new housing developments

• Research local zoning laws and future development plans

• Consider proximity to apartment complexes, universities, and military bases

By focusing on densely populated areas, you can ensure a steady stream of potential customers and higher occupancy rates for your storage units.

2. Implement Effective Management Strategies

Robust management strategies are crucial to minimizing risks in storage unit investing. Effective management can help reduce costs, increase revenue, and improve customer satisfaction.

Here are best practices to consider for efficient self-storage management:

• Utilize self-storage technology from Unwired Storage for automated billing and access control

• Implement a strong marketing strategy to attract and retain customers

• Regularly maintain and upgrade facilities to stay competitive

• Offer value-added services like climate control or 24/7 access

Remember, the success of your investment often hinges on how well the facility is managed. We recommend working with self-storage consultants to help you identify the best management strategies and technology.

3. Partner with Experts and Pursue Value-Adding Acquisitions

For those looking to invest in storage units on a larger scale, partnering with industry experts and pursuing strategic acquisitions can be game-changing strategies.

Here’s how you can ensure success with partnerships:

• Collaborate with experienced storage unit operators or management companies

• Consider joining a real estate investment trust (REIT) specializing in storage units

• Look for underperforming facilities that can be improved through renovations or better management

By leveraging expertise and pursuing smart acquisitions, you can rapidly expand your storage unit portfolio while minimizing risk.

At Unwired Storage, we offer a comprehensive solution to help you kickstart your self-storage investment journey. We help you integrate technology into your operation to get the best results. Contact us to learn more.

Frequently Asked Questions

Can You Buy a Storage Unit Instead of Renting?

Yes, you can purchase a self-storage unit instead of renting. Self-storage units can be a very profitable business venture due to their high profit margin of 11%. Additionally, they don’t require 100% occupancy to generate income, making them a viable investment option.

How to Buy a Storage Unit with Stuff in It?

To buy a storage unit with items in it, you can participate in auctions for abandoned storage units. Two major auction sites where you can find such opportunities are Storage Auctions and Storage Treasures. Simply visit either site and sign up as a buyer to start bidding on available units.

Does Self-Storage Do Well in a Recession?

Yes, the self-storage sector is considered one of the most reliable types of real estate investments, especially during economic downturns. It has consistently outperformed other commercial real estate assets for over 26 years, demonstrating superior performance and resilience during recessions.

How to Start a Storage Rental Business?

Follow these steps to start a storage rental business:

• Research your target market and location, secure funding, and acquire property

• Develop a solid business plan, obtain necessary permits, and set up secure storage units

• Implement effective marketing strategies to attract customers

• Establish efficient management systems to ensure smooth operations and customer satisfaction

Conclusion

Starting a self-storage business can be an exciting challenge, but remember that success requires thorough research, smart property selection, and effective management.

Learn how to invest in storage units the right way as outlined in this guide—start small and gradually expand your portfolio. Stay updated on market trends and local regulations to make informed decisions. Don’t forget to network with other investors and industry professionals to gain valuable insights.

Lastly, technology is essential for optimizing your operation and achieving optimal results. Contact Unwired Storage for a custom solution today!