Welcome to Part 5 of “Making More Money,” our series on how to earn more from your properties. Our previous article was an overview of how managing capital improvements for your clients can earn you substantial project management fees and increase the value of their properties. This time, we look at one of the most cost-effective ways to boost a property’s earning power: adding storage space for rent for your tenants. As with any project in this series, research your market before beginning.
Most single-family homes have basements and attics to store possessions. Apartment buildings and communities, though, usually don’t associate these storage places with individual units in their leases. Regardless of their living arrangements, tenants need somewhere to store their stuff, which presents another golden opportunity for you to make more money, either through charging monthly fees or higher rents.
Building storage units provide an excellent return on investment, because when renovations have been completed, maintenance costs are minimal.
“For a couple hundred dollars per unit, you can have your maintenance person or general contractor build a secure space with wire mesh and wood,” David Last, developer and the principal at Last2Development, says. “Or you can go higher-end and subdivide a basement into small rooms with electronic key fobs for added security, tile floors, air conditioning, heat, and bike racks mounted on the wall.”
Higher-end storage rooms can cost up to a few thousand dollars per unit, so it’s important to research your market and find out just how much security tenants are willing to pay for. Again, once constructed, the cost of maintaining storage space is small.
The Benefits of Creating Storage Spaces in Rental Properties
“Adding storage is an excellent way to make more money without breaking the bank,” Last says.
#1: Charge Higher Rent
How much you can make depends on supply and demand, but in a congested urban area where storage space is scarce, you can charge $100 per month for a storage rental—or more. In the case of less expensively built storage areas, they can pay for themselves in under a year, sometimes within a few months. For the more secure, high-tech options, it may take longer to break even, but you also could rent your units faster.
#2: Fill Vacancies Faster & Keep Great Tenants
In areas where rent per-square-foot is high, there usually aren’t any inexpensive storage facilities. Even if they do exist, most tenants like to have their possessions close by. It’s much easier to pull out the summer wardrobe or the holiday decorations when they’re in the same building or community instead of at an offsite storage facility.
In urban environments like Washington D.C., Los Angeles, or New York City, Last says a clean, convenient area with storage lockers and bike mounts is a highly sought-after amenity.
3 Tips for Creating Storage Space in Rental Properties
For good measure, you’ll want to do a little housekeeping before you begin building storage units.
#1: Review Your Insurance Policy & Update It If Necessary
Besides doing your due diligence to gauge supply and demand in your market, account for potential liability. Make sure your building’s insurance policy covers losses from theft and vandalism, as well as fires, floods, and other disasters. Additionally it’s an excellent idea to require your tenants to carry renters insurance, which decreases your clients’ liability, Last says. He also recommends attaching a storage indemnification addendum to every lease to mitigate liability even more.
#2: Hire a Building Inspector to Review the Space First
You want to ensure an area like a basement won’t accumulate mold or be subject to flooding that could result in water damage or other issues.
#3: Keep the Space Clean & Inviting
Manage your storage space just as you would other common areas like lobbies, hallways, and elevators. Simple things like regular cleaning, a paint touch-up now and then, and reliable lighting fixtures will go a long way toward creating a welcoming space.
Pro-Tip: Install Bike Racks
Add a rack capable of storing 20 bikes in the lobby or next to the rental office. If you charge a monthly fee of $5 per bike, that’s $1,200 in annual revenue you’ll pocket (and with virtually no maintenance costs). Depending on your market, it may make sense to offer bike racks as an amenity to lure tenants away from competing properties.Read more on Maintenance & Improvements