There are all kinds of sayings when it comes to money, spending money, and making money. A penny saved is a penny earned; time is money; money is the root of all evil; money can’t buy happiness (but it can buy a better class of enemy); a fool and his money are easily parted; money can’t buy love; money makes the world go round; and so many more.
One that is applicable and hotly debated in the business world is that you have to spend money to make money. The idea behind business, self storage or otherwise, is to make money, not spend it. However, if you don’t spend any it is nearly impossible to make some. So then the question becomes how much do you spend in order to get your business going (and keep it going)?
One of, if not the largest, expenditures in the self storage industry has to be the facility itself. Constructing one of your own will make it more likely that you’ll be able to get more life out of the facility rather than if you bought a pre-existing one. However, in the time that it takes to construct a facility you can be losing business to other facilities.
The good thing is that you don’t get into a business like the self storage industry for one wave of customers and that is it. If you miss out on some during construction, chances are strong that there will be plenty other opportunities.
With the ‘time is money’ argument now debunked, should you buy or build?
While a poor economy does make buying up existing real estate cheaper than ever, a number of benefits also exist for building anew.
One of the reasons is because real estate is cheap. You need land to build your new facility on, right? Just like you here about people buying houses at ridiculous prices thanks to the market, the same can be said for the commercial market where prices have dropped anywhere from 20-45 percent.
To aid in your real estate purchase are some of the lowest interest rates new businesses have seen in many years. Ask anyone that has had a loan for anything, and they will tell you that it is the interest, not the principle, that kills you.
Along with making it easier and cheaper to pick up real estate comes an easier process for getting a project approved. Whether it is a local, state, or federal bureaucrat, they all need money and they know that construction projects like yours are good for the country. The quicker they can approve your project, the sooner you’ll have to pay them fees.
Finally, and likely the best reason to go ahead and construct rather than buy, is that it has simply become cheap to do so. With the economy in shambles businesses of all sorts are doing everything they can to get customers, especially dropping prices. Since materials are cheap and labor even cheaper, construction seems to be the smart choice.
The only thing that can hold you back and make buying an existing self storage facility more of an option is your patience (or lack thereof)!
Sources Used:
"Four Benefits of Building Commercial Real Estate in a Bad Economy." Inside Self Storage; 29 March 2011.
"Investor Interest in Self Storage Niche Grows as Returns Hold Strong." Self Storage Industry News; 04 April 2011.
AllGreatQuotes.com