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Operating expenses of a self-storage facility are about 50% less than other commercial property types such as multifamily and office. The extra net operating income that self-storage properties produce compared to other investments can generate some pretty impressive returns for the passive income investor.
And it can be a lucrative business, at that. By one estimate, the typical profit margin of a self-storage business in the U.S. is 11%. Thats well above the profit margins for many other types of small businesses; for example, the typical profit margin of a restaurant ranges from 3% to 5%.
You can sit down and work from your storage unit, but you cant run a business from it. It is illegal to live in a storage unit, even if its only for a short period of time. You can set up your storage unit as a personal gym, but other people arent permitted to use it.
While self storage units are convenient and affordable, they cannot legally function as true office space. Thats because they have not been approved for occupancy, so you cant exactly set up your desk or meet clients there. They can, however, be extremely useful in other ways for your business!
In the financial model provided in Table 1, an investment of $397,615 has generated positive cashflow of $117,761 or a 29.6 percent cash-on-cash return on investment. This is a typical ROI for self storage investors, which is one of the main reasons for the industrys tremendous growth over the last 25 years.
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Profit margin of a self-storage business In many cases, someone may use the word profit as a proxy for financial success. For instance, one self-storage business owner might measure profitability based on the profit margin. According to one estimate, a self-storage facility generates a typical profit margin of 41%.
While self storage units are convenient and affordable, they cannot legally function as true office space. Thats because they have not been approved for occupancy, so you cant exactly set up your desk or meet clients there.
Self-storage investments may carry the potential for strong returns during boom cycles as well. Buyers of second homes invest in self-storage space to house possessions during transitional periods; entrepreneurial or artistic tenants may use self-storage space for creative endeavors, or for product warehousing.
For self-storage investors, its a profitable, recession-proof option, with lower overhead and less hands-on management than many other commercial real estate investment opportunities. Heres what you need to know before you get started with your self-storage business.
But remember, unless you rent an office, retail or commercial space specifically, youre not allowed to work or conduct business inside a storage unit. Units that are not permitted for occupancy and business activity are usually limited to storage and order fulfillment only.

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