My old man and I have 8 acres in north east Austin we are considering developing as opposed to selling, and one idea that came up was self storage. We own other metal buildings on the same road that house both our company and we lease the other half of the buildings to commercial tenants so we are familiar with leasing to tenants like cabinet shops, etc.

Does anyone here have any experience in the self storage market as far as some fundamental positives and negatives that go along with it? Pitfalls or things to watch out for that aren't entirely obvious from the outside looking in?

Thanks in advance. Gathering as much preliminary information as we can before deciding on a direction to go with this investment.

I don't have any personal experience but i'm friends with a guy who owns several around Bastrop and let's just say he does quite well for himself. If you have a good location, understand business and have enough capital to get you through the negative cash flow months I wouldn't hesitate to go into that business.

Self storage REIT's are some pretty solid earners.

any in particular?

In no particular order, Cube (YSI), Public Storage (PS?), and Uncle Bob' (can't remember the ticker)

It looks like public storage has 2.

http://www.investopedia.com/articles/markets/121715/top-5-reits-2016-psb-psa-eqr-spg-hta.asp

Thanks for the replies. Nothing negative so far really it sounds like. My only major concern is our location and not being on a main street so to speak. We had development plans drawn up for it years ago and we should be able to get around 80k sqft built when it's fully developed, though we would likely go little by little to keep the capital investment reasonable.

If you need some help on the engineering/site development or even feasibility, let me know. Things can be pretty tricky in Austin. Brian.williams.ce@gmail.com

What kind of locations best support self-storage units? Any place where lots of people are moving to, older parts of town with smaller houses, maybe low-to-middle-income communities? My area has more storage units than I think would be sustainable, but I guess they have been successful because there are still more being built.

Have a good friend that does steel building construction and has done several storage units before. PM me and I'll get you his info.

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What kind of locations best support self-storage units? Any place where lots of people are moving to, older parts of town with smaller houses, maybe low-to-middle-income communities? My area has more storage units than I think would be sustainable, but I guess they have been successful because there are still more being built.

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They work better near middle-upper income areas. People who have lots of stuff, but have run out of room to store it. Boats, rv's, etc.

I ran one for 3 years at a property management firm I worked for right out of college. Biggest negative is staying on top of your invoicing and once someone is late starting the eviction process. Everything is based on specific rules. Ie has to be published in a paper so long ten published again so long after a notice mailed for so long.

Join the Texas self storage association and their gold book walks you through everything.

AgSoccer - I own a small private equity firm that invests in cash flowing RE such as apartments, mobile home parks and self storage. We own ~1,500 self storage units across 3 facilities in FL and are looking at buying a 4 facility portfolio in northern AL. We really like the asset class as it hasn't had the run up in pricing that multifamily has (although it's getting pretty hot) and you can still find good value add deals that help lower the risk profile (plus they cash flow nicely which our investors love of course).

However, a caveat that we have never developed a facility as we'd rather buy existing deals that need a little TLC vs. take on the risk of development. Location is obviously very important and you should do an exhaustive supply study, including trying to determine building permits within your sub-market. Not sure what you intend to build, but to compete now, it needs to be more at the REIT level vs. just some metal buildings (unless you are just doing this to land bank your property, then maybe you can get by with less). Finally, a good mgmt company is imperative if you want to run this properly.

Happy to chat or email more, so feel free to send me a message: hbox@boxwilson.com

My family owns and runs 2 self storage unit facilities in east Texas. Our facilities are mostly for individuals, not businesses. However, some businesses are run out of our facilities (e-bay/junk sellers, delivery companies, etc).

Collecting money - As one post said, keeping on top of your invoicing/collecting money is the hardest part. We have a program that I think others do as well, which is to give a discount to people that setup an auto draft from a card, therefore we don't have to run down.

Security - We have our facilities fenced in, with gated access and specific hours/access rules. We also have camera's to monitor the gate and a security service that checks on the place a couple of times per night.

Variety of units - consider climatized vs non-climatized and having some of both. You will be able to charge more for climatized. Personally, I think there is a good market to have a small office/warehouse section within a facility that allows you to charge a premium. Also, having parking storage for boats, rv, etc is good to have as well. If you are on a busy road, you may want to consider a front park-and-sell lot. People can rent a space for relatively cheap to sell a used vehicle (not gated to allow buyers access to see the vehicle).

Location - middle to higher income areas are probably better because people typically do not want to travel far to get to their storage, and as one post said, they have stuff but not enough room. Just like any other brick and mortar store, high traffic/visibility is key. Also easy of access will have an impact.

Thanks guys those are some very informative and thought out responses. I appreciate you taking the time to give such thorough thoughts.

AgSoccer

We are currently working on a project for RV and Boat storage (I'm a civil). It's a fascinating business model. I think he will be cash flowing about $10,000 per month and his construction cost will be less than 1/2 million. He is purchasing the land and wants to develop it later but will be using the storage as a short term hold (10 years).

The effort he describes:
Once it's full, he goes by once per week. He thinks it will take him 6 months to fill. The customers sign up on-line and are issued a code, a map and a parking space. He is pretty hands off with direct contact. He has to maintain the pavement which is just a base material and he has a yard crew. He also has a 10X10 conditioned building for his security system and basic storage.

I have recently done work at Lazyridge and Howard. Let me know if you need a civil firm. I know the city site plan permit process as well as most.

Good luck!

We are in a self storage boom right now and every body is jumping in. Reminds me of our recent multi family boom that is now over built. Study some market reports and make sure there are enough roof tops and apartments nearby to absorb what you want to bring to market. People will pay for convenience (location, access, and payments), security (of belongings), and safety (while on site).

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What kind of locations best support self-storage units? Any place where lots of people are moving to, older parts of town with smaller houses, maybe low-to-middle-income communities? My area has more storage units than I think would be sustainable, but I guess they have been successful because there are still more being built.

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They work better near middle-upper income areas. People who have lots of stuff, but have run out of room to store it. Boats, rv's, etc.

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Boats and RVs storage. One near my home, there isn't even an office.Just a parcel of land covered in rock with a gate around it. There is a phone number on the gate if you are interested in storing, and the guy shows up in 5 minutes. If you already store your item there, you have a gate code to get in.

Absolutely zero overhead for this guy outside of the cost of the land. He's got to be making a killing. I estimate about 100-150 boats/ rvs, and they are all about $100 a month? Seems like easy money.

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Boats and RVs storage. One near my home, there isn't even an office.Just a parcel of land covered in rock with a gate around it. There is a phone number on the gate if you are interested in storing, and the guy shows up in 5 minutes. If you already store your item there, you have a gate code to get in.

Absolutely zero overhead for this guy outside of the cost of the land. He's got to be making a killing. I estimate about 100-150 boats/ rvs, and they are all about $100 a month? Seems like easy money.

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62strat,

That's interesting and good information, as all of the Boat/RV yards that I've seen have some type of cheap carport-type shelters on them, which, if you're just parking some speculative commercial land for a few years, means you've got construction and eventual demolition costs to figure in. This concept might side step that.

Forgive me for asking a couple of questions --

1. Is there any security lighting on the premises that you've noticed?

2. Is the 'facility' within the city limits?


And, for you fellows who are familiar the industry, may i ask what type/limits/rate costing of General Liability insurance policy would be used to cover this type of risk, and, for municipal zoning purposes, what type of use would this structureless operation be considered?

Schedule E 'rental' income?. Nah, we shouldn't push our luck. :-)

BTW, there's been some damn good information in this thread. Thanks.

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Things I learned in a Texags jungle ... were things they never taught me in a classroom.

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If you are interested in selling the land please contact me; we are always looking for Austin land for storage. We develop and build it in house. We currently have three under construction and four sites under contract in Austin.

Cessna at Aggie network dot com

I've been thinking about storage too

My thought was maybe use shipping containers on a gravel lot plus open shelter for RV/Boat storage then you get the best of both worlds with limited tear down afterwards

One of the lots by us allows containers but they don't provide them

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Boats and RVs storage. One near my home, there isn't even an office.Just a parcel of land covered in rock with a gate around it. There is a phone number on the gate if you are interested in storing, and the guy shows up in 5 minutes. If you already store your item there, you have a gate code to get in.

Absolutely zero overhead for this guy outside of the cost of the land. He's got to be making a killing. I estimate about 100-150 boats/ rvs, and they are all about $100 a month? Seems like easy money.

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62strat,

That's interesting and good information, as all of the Boat/RV yards that I've seen have some type of cheap carport-type shelters on them, which, if you're just parking some speculative commercial land for a few years, means you've got construction and eventual demolition costs to figure in. This concept might side step that.

Forgive me for asking a couple of questions --

1. Is there any security lighting on the premises that you've noticed?

2. Is the 'facility' within the city limits?

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There are no carports on this land. (this is denver metro.. very little precip)
I didn't notice, but yeh I'd imagine there is security lighting. That would be a tougher sell to the customers without it.
Looking at google maps, it is appears to be out of town limits, but completely surrounded by town limits, so it may be unincorporated.

https://www.google.com/maps/place/Parker,+CO/@39.5031774,-104.7823053,744m/data=!3m1!1e3!4m5!3m4!1s0x876c91ce239a3d55:0xd49aeed43d2e2426!8m2!3d39.5186002!4d-104.7613633

I totally underestimated the volume.. Quick count shows ~500 vehicles. At $100 a pop that is $50K a month.. unbelievable.

The land looks to be about 2000'x300 or 400', so about 16 acres. Population in Parker was like 1000 in 1990 (50K+ today), so not sure if this owner just had the land from way back and held on which means he paid hardly nothing for it.. but either way $600K in annual revenue can pay for a lot of land.

I'm not sure about Colorado, but most open lots down here in the Houston area with no cover go from $29 to $60 per slot, not $100.

Open lots in north texas suburbs is $50-$65

I took SG09's advice and checked out the Texas Self Storage Association, and I'm glad I did.

In the latest issue of their 'Self Storage News' Magazine they've got a nice little article entitled "Development: Do It Right or Go Home".


pageturnpro.com/Texas-Self-Storage-Association/72147-Self-Storage-News-Magazine-MayJune-2016/index.html#10


There's some great info there, much of which would apply to any commercial development project, and it answered quite a few questions for me.

I did come away from that realizing that you've really got to man up and put on your thick skin when you deal with all the red tape accompanying medium and large city bureaucracies. And, from the magazine as a whole, I got the impression that some in the industry are legitimately concerned about potential oversupply in certain areas.

Sounds like work ... maybe it's time to hit the buffet.

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I'm not sure about Colorado, but most open lots down here in the Houston area with no cover go from $29 to $60 per slot, not $100.

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$100 was a complete guess on my part.. so it's $50.. still $25k a month, with costs being only land/taxes and very little overhead.

It just seems too easy.