What if you, as a landlord, thought of yourself as an entrepreneurial land owner?
If you did, you might discover your potential to diversify your income by renting storage space to people who are not your tenants.
And diversification is good, yes?
Non-Tenant Storage Units
The mini storage business is so viable because, unlike dwellings, you are able to lock out non-paying customers, then sell their belongings to recover back rent.
The lien laws for storage rentals are much different than landlord-tenant laws, which is the major reason why you should rent storage units to people who are not your tenants. It’s better not to mix the two relationships.
Mini storage doesn’t necessarily mean a large centralized complex. You can develop your own 1, 2 or 4 unit set up with a few prefabricated containers.
What about Zoning?
There are ways to work around zoning road blocks.
One method is to place a storage container on gravel or build on a “pallet” so your storage unit can be deemed a temporary structure. Another tactic is to add-on space in chucks of 200 square feet (sf). Most states don’t require building permits for structures 200 sf and less.
Most states don’t require building permits for structures 200 sf and less.
Don’t let bureaucracy limit your income. Use your local zoning loopholes!
Breaking Down the Idea
Let’s drop this idea into the breakdown table.
|Renting Storage Units to Non-Tenants|
|What:||Add secure storage to your property for non-tenant use.|
|Why:||The storage industry is extremely lucrative. You can get the same price per square foot as your rental property, but your expenses are 20%-30%% less. No toilets, leaks, electricity or property taxes.|
|The Extreme Version:||Develop enough “temporary” mini units to cover the cost of residential mortgage.|
|Possible Clients for Your Hyper – Local Storage:||
|Nontangible Benefits:||If you place storage on your commercial property, the additional income that is backed by lease agreements, may increase your appraised value.|
|Steps to Implement/Test:||
Evaluate Your Potential
- Subscribe to Marcus and Millichap’s reports
- Download the Marcus and Millichap self-storage research for your area.
- Look closely at:
- How your area compares to the national averages. Is your area saturated with storage?
- Do you have a personal network of potential customers?
- Answer the following questions:
- What’s the expected vacancy rate?
- What’s the going rent per square foot?
- Is the demand for your area greater than the national average?
Windmills or Walls – Change is A’Comin’
Jeremiah Owyang, a collaborative economy thought leader, warns businesses that “people are empowered to get what they need from each other,” leaving them to figure out how to make themselves relevant.
The growing sharing economy is extending to the storage industry. Meaning, the trend is moving in favor of people wanting to rent from small businesses over the larger guys.
This is a time of opportunity for small landlords. If we can drop our self-imposed limitations, we can get in front of this trend. After all, renting space is renting space!
My Upcoming Experiment
I own a single family rental on a deep lot that backs up to an alley.
I’m considering placing a prefabricated two-unit storage container (two 10x10s) along the property line so the two roll up doors face the alley. These prefabricated units are exactly the same as what larger corporations use.
Then, I would market my storage space in our local coffee shops, on Craigslist, and within my network.
Realistically, this should produce an additional $200 per month ($2,047 annually after adjusting for my local 14.7% vacancy rate) for an asset that cost around $4,500.
Most landlords are happy if they clear $100 per month per unit. So, in landlord terms, this venture is equivalent to buying an extremely low maintenance duplex for only $4,500.
This idea does require some up front work. You will need to:
- Put some effort into marketing the storage space. This is not a passive activity.
- Learn the lien laws for your state.
- Learn how to properly lock out non-payers and sell off their belongings.
This idea illustrates that landlords can do business with the entire neighborhood and not merely with just their tenants.
There is a world of opportunity out there for forward thinking property owners and managers. Seize the opportunity!