Self storage Units - a low risk low hassle way to create passive income

Humans are hoarders by nature at self storage units are an ideal way for people to store their stuff. You can generate passive income by taking advantage of this innate human trait.

Millions of families relocate every week and often find that they have too much stuff and are forced to use store their goods.

This asset requires perhaps one employee to manage the facility. If the rent does not pay for his or her unit you are entitled to sell the content.

Another major advantage is that as an investment it will perform well even in a stagnant economy.

Here are some of the key advantages:

Development Costs

The development cost are one-third to one-half that of multi-family, office, or retail properties.

Operating Costs

Real estate properties must continually maintain grounds, appliances, plumbing, electrical fixtures, etc., which usually require a maintenance staff. Operating costs are a fraction of other real estate properties.

Break-Even Occupancy Rates

When you own a rental property, you must rent a certain amount of space to be profitable. The break-even point is considerably lower than other real estate ventures.

Failure Rate Comparison

Compared to other real estate investments, this investment has the ability to absorb economic fluctuations, maintaining value during both good and bad economic times.

How they produce passive income: Depending on the size of the storage unit needed in the self storage facility, the monthly rents for each rental unit fall between $50.00 for small 5'x5' units, to $275.00 for 10'x30' units. Expenses for self storage facilities are extremely low.

How to create this asset: Creating a facility is no easy task. It involves a lot of research and a lot of work. It all pays off though after the facility is created, because they are very easy to manage. The first step in creating a self storage facility in your area is to research the market.

You must find out if there is a need for a self storage facility in your area. If not, where is there a need that you can fulfill? Also, you must research prospective places in which you can build a self storage facility, and if you'll have to compete with other self storage facilities. Call self storage facilities in the area where you plan to place one and see what they charge for units. This will give you a good idea of current rental prices per unit, so you can decide how much you can charge per unit.

In order for you to acquire finance for this project, you will have two to a feasible business plan. You may want to use a financial calculator to assess the viability of your project.

After securing financing and purchasing the land you'll need, it is time to get the facility built. There are many different companies out there that build pre-engineered self storage units

Hire a lawyer to write up different contracts for your facility. Each person that rents a unit should be required to sign the contract. This is to protect you from any lawsuits, and it also would give you the right to sell the persons belongings if he or she does not pay the rent for his or her unit.

The information of the customers should be kept in a database on a computer, such as Microsoft access. Some software companies have designed software specifically for the use in these facilities.

If you don't have the time to manage your facility, then hire a couple of managers. The managers would work during business hours (typically 9:00 a.m. to 5:00 p.m.). They assist customers in renting a unit, entering the customer's information into the database, bill the customers that need to be billed, and also sell the belongings of the delinquent renters.

The Bottom line

• Most owners entering this area have an annual household income of $80-$100K and a net worth of $300K

• It usually takes 8-18 months to achieve 90% occupancy, depending on size and location

• Most owners realize a profit after the third year

• 70% of the appraised value is standard to secure financing

• Cash-on-cash return is about 8.5% for larger facilities, and 11% for smaller facilities

• The gross revenues in 2006 of primary self-storage facilities were approximately $22.6 billion. That's a national average of $441,208 per facility or $11.27 of gross revenue per occupied sq. ft.

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