Value-Add Opportunity: Vehicle Storage
Vehicle storage can increase a self-storage investor’s rental income while attracting new long-term tenants, but it may not work for everyone.
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Sales of leisure vehicles like RVs and boats have skyrocketed during the pandemic era, Reuters outlines. While this is a clear win for the leisure vehicle industry, it doesn't end there. Self-storage investors have a great opportunity to bring in tenants and boost revenue.
Boats, RVs, jet skis, trailers, campers, motorcycles, ATVs, and other recreational vehicles are fun to use. They often present a few spatial issues when they are not in use, though. Despite the growing popularity of these expensive vehicles, many homes don’t have enough storage space. Even if they did, many homeowners associations prohibit them outright. This may be hard news for thrill seekers, but it highlights the opportunity for offering space in a self-storage facility.
Vehicle storage options can be a profitable addition for self-storage investors. The income potential is often large enough to justify amending construction plans or adding it to an existing property. Let's break down some potential investment considerations.
Understanding the Self-Storage Market
Before diving into vehicle storage, it's a great idea to take a step back and analyze the market. Vehicle storage can be profitable, sure, but be sure your area isn’t already saturated. The best place to start is through competitor research. Check out the facilities that already offer this type of storage in your market. Understanding who you're competing against will be invaluable in your decision-making processes.
Location
It may seem obvious at first, but your facility’s location is a key consideration. Urban infill sites typically have higher land costs, so vehicle storage may not be viable. If demand is strong enough, though, adding space for vehicles could still make good sense.
The best opportunities for vehicle storage are at properties located close to recreational areas. If there's a campground, beach, state park, or lake in the area, it's a safe bet that there's at least some demand. After all, for many renters there's value in storing their leisure vehicles near prime vacation spots. A good location can help them save on gas and reduce excess wear and tear on their vehicles.
There is ample opportunity for facilities near condominiums or communities with strict homeowners associations. Many residents only lack the space or permission — not the resources nor the desire — to own RVs, boats, and other leisure vehicles.
Finally, sites near major highways tend to be great spots to offer vehicle storage. Many renters are willing to travel further to access this storage compared to a standard facility.
Types of Vehicle Storage
Vehicle storage means more than a secured or isolated parking lot. There are three main types of vehicle storage, each with unique characteristics.
Uncovered Outdoor Vehicle Storage
This type of storage is essentially a simple parking lot, usually enclosed within a fenced perimeter. As a value-add play, this option is the easiest to execute but harder to sell to potential tenants. Outdoor uncovered vehicle storage may have some security — a fence at the very least. That may offer little protection against the elements or motivated thieves and vandals.
Covered Outdoor Vehicle Storage
Offering slightly more protection from Mother Nature are outdoor covered vehicle parking layouts. These share the same features as a typical outdoor lot, only with the added bonus of a canopy. Adding a metal canopy adds protection against rain, hail, and sun damage. Even so, these structures aren't usually designed to handle heavy wind or flooding. This may be an important consideration for markets prone to such phenomena.
Enclosed Vehicle Storage
Increasingly popular among newer facilities, enclosed vehicle storage offers the best protection. Enclosed parking is a great opportunity for investors to boost revenues, but they are also far more complex than the previous options. It's generally more beneficial build these facilities instead of converting an existing property. This is especially true to ensure units are thoughtfully designed to house RVs, boats, and other large vehicles.
Vehicle Storage Revenue Considerations
Vehicle storage rates are generally much higher than those of traditional self storage. Depending on the market, rates can be anywhere from 25% to 40% higher. As an added bonus, many vehicle storage renters are reliable long-term tenants who tend to have higher levels of disposable income.
Even more opportunity lies with potential upgrades above standard vehicle storage. Most renters don’t mind paying higher rates for a few extra quality-of-life improvements. Some common upgrades that can lead to a boost in revenue include:
Electrical outlets
Wash and dump stations
Doors on each end of units
Upgraded security (personnel, keycard, gate code systems, etc.)
Smart locks
What are the benefits of investing in vehicle storage?
Investing in vehicle storage can be a great way to generate income and diversify your portfolio. Vehicle storage facilities offer a number of benefits, including:
- High demand: Vehicle storage facilities are in high demand, especially in urban areas where parking is limited. This means that you can charge higher rents and generate more income.
- Low operational costs: Vehicle storage facilities are relatively easy to manage and maintain, and they don't require a lot of staff or resources. This means that you can keep your operational costs low and maximize your profits.
- Recession-resistant: Vehicle storage facilities are also relatively recession-resistant, meaning that they won't be dramatically impacted by economic downturns or market fluctuations. This makes them a reliable asset class and an attractive option for investors who are looking to safeguard their investments over the long term.
If you're looking for financing for a vehicle storage facility, Commercial Real Estate Loans can help. We offer competitive loan products with flexible terms and competitive rates. Contact us today to learn more.
What are the risks associated with vehicle storage investments?
Investing in vehicle storage can be a lucrative venture, but there are some risks to consider. The most common risks associated with vehicle storage investments include:
- Theft or vandalism of vehicles
- Damage to vehicles due to weather or other environmental factors
- Liability for accidents or injuries that occur on the property
- Competition from other vehicle storage facilities in the area
It's important to do your research and understand the local market conditions before investing in vehicle storage. Make sure to consider the population and job growth in the area, as well as the number of homeowners and renters. Additionally, look into the security measures in place at the facility, such as surveillance cameras and gated access, to help protect against theft and vandalism.
What are the most important factors to consider when investing in vehicle storage?
When investing in vehicle storage, it is important to consider the local market conditions, such as population and job growth, the ratio of homeowners to renters, and the proximity to university campuses, residential areas, and businesses. It is also important to consider the availability of trailer parking, as trailers are often laden with valuable products. It may be beneficial to prioritize investments in assets with secured truck courts or trailer parking, depending on the property’s location.
For more information, please see the following sources:
What are the best strategies for maximizing returns on vehicle storage investments?
When investing in vehicle storage, it's important to consider the local market conditions, competition, and saturation level. It's best to look at these metrics within a 3- to 5-mile radius of a facility. Analyzing the competition in the area can help you determine whether there are any facilities under construction or in the planning stages, as those can affect your property in the future. The saturation level of an area is measured by the gross square feet of storage space available per person. Currently, the average self-storage inventory per capita across the country is around 7 to 8 net square feet. A market with a per-capita inventory above the U.S. average is usually considered oversupplied, whereas anything below is undersupplied.
In addition to researching the local market conditions, it's also important to consider the type of vehicle storage you are investing in. For example, if you are investing in a facility that offers both indoor and outdoor storage, you may want to focus on the indoor storage as it typically offers higher returns. Additionally, you may want to consider investing in a facility that offers additional services such as car detailing, car washing, and car repair services. These services can help you maximize your returns.
Finally, it's important to consider the financing options available for your vehicle storage investment. There are a variety of loan products available for commercial real estate investments, including traditional bank loans, SBA loans, and private financing. Each loan product has its own set of terms and conditions, so it's important to do your research and find the loan product that best fits your needs.
What are the most common mistakes investors make when investing in vehicle storage?
Investors often make the mistake of not doing enough research on the local market conditions when investing in vehicle storage. It's important to look at the population and job growth, the number of homeowners and renters in the area, and the proximity to university campuses, residential areas, and businesses. Additionally, investors should analyze the competition within the market radius to get a better understanding of the saturation level of the market. The saturation level of an area is measured by the gross square feet of storage space available per person, with the average self-storage inventory per capita across the country being around 7 to 8 net square feet. A market with a per-capita inventory above the U.S. average is usually considered oversupplied, whereas anything below is undersupplied. This article provides more information on emerging self-storage markets.
What are the most important legal considerations for investing in vehicle storage?
When investing in vehicle storage, it is important to consider the legal requirements for the area. Depending on the location, there may be zoning restrictions, building codes, and other regulations that must be followed. Additionally, it is important to consider the liability associated with storing vehicles. It is recommended to have a comprehensive insurance policy in place to protect against any potential damages or losses.
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Final Thoughts
There's no denying the potential that vehicle storage offers to investors. As a value-add opportunity, vehicle storage could give your facility a serious edge over your competitors. It can also help attract a new set of customers. Better still, investors can use these facilities to earn substantially higher rental income. So long as the market isn’t oversaturated, vehicle storage can usher in some exciting returns for self storage investors.